A detailed discussionThis item generally discusses our 2023 results compared to our 2022 results. Discussions of the fiscal 2020 year-over-year changesour 2022 results compared to our 2021 results can be found below and a detailed discussionwithin Part II, Item 7 of fiscal 2019 year-over-year changes can be found in Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019.2022.

We pursue consistent and sustainable growth in revenue, earnings, and cash flow by emphasizingenabling continuous improvement in the operating performance of our existing businesses and by acquiring other carefully selected businesses. Our acquisitions have represented both new strategic platformsbusinesses that offer high value-added software, services, technology-enabled products and additions to existing businesses.solutions that we believe are capable of achieving growth and maintaining high margins.

Our Consolidated Financial Statements are prepared in conformity with generally accepted accounting principles in the United States (“GAAP”). A discussion of our significant accounting policies can also be found in the notesNotes to our Consolidated Financial Statements for the year ended December 31, 20202023 included in this Annual Report.

GAAP offers acceptable alternative methods for accounting for certain issues affecting our financial results, such as determining inventory cost, depreciating long-lived assets and recognizing revenue. WeOther than the changes as further described in Note 10 of our Notes to Consolidated Financial Statements with respect to the methodology used to value our equity investment in Indicor, we have not changed the application of acceptable accounting methods or the significant estimates affecting the application of these principles in the last three years in a manner that had a material effect on our Consolidated Financial Statements.

The preparation of financial statements in accordance with GAAP requires the use of estimates, assumptions, judgments, and interpretations that can affect the reported amounts of assets, liabilities, revenues and expenses, the disclosure of contingent assets and liabilities, and other supplemental disclosures.

The development of accounting estimates is the responsibility of our management. Our management discusses those areas that require significant judgments with the Audit Committee of our Board of Directors. The Audit Committee has reviewed all financial disclosures in our annual filings with the SEC. Although we believe the positions we have taken with regard to uncertainties are reasonable, others might reach different conclusions and our positions can change over time as more information becomes available. If an accounting estimate changes, its effects are accounted for prospectively or through a cumulative catch upcatch-up adjustment.

Our most significant accounting uncertainties are encountered in the areas of accounts receivable collectibility, inventory valuation, future warranty obligations, revenue recognition, income taxes, valuation of other intangible assets, and goodwill and other indefinite-lived intangibles impairment analyses.analyses, and valuation of our equity interest in Indicor. Estimates are considered to be significant if they meet both of the following criteria: (1) the estimate requires assumptions about matters that are uncertain at the time the estimate is made, and (2) changes in the estimate are reasonably likely to have a material financial impact from period-to-period.

Income taxes can be affected by estimates of whether and within which jurisdictions future earnings will occur and if, how, and when cash is repatriated to the U.S., combined with other aspects of an overall income tax strategy. Additionally, taxing jurisdictions could retroactively disagree with our tax treatment of certain items, and some historical transactions have income tax effects going forward. Accounting rules require these future effects to be evaluated using current laws, rules and regulations, each of which can change at any time and in an unpredictable manner. If there is a material change in the actual effective tax rates, the time period within which the underlying temporary differences become taxable or deductible, or if the tax law changes are unfavorable, there could be a resulting increase to income tax expense and the effective tax rate.

We account for goodwill in a purchase business combination as the excess purchase price over the fair value of the net identifiable assets acquired. Goodwill, which is not amortized, is tested for impairment on an annual basis in conjunction with our annual forecast process during the fourth quarter (or an interim basis if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value).

When testing goodwill for impairment, we have the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the estimated fair value of a reporting unit is less than its carrying amount. If we elect to perform a qualitative assessment and determine that an impairment is more likely than not, we are then required to perform the quantitative impairment test; otherwise, no further analysis is required. Under the qualitative assessment, we consider various qualitative factors, including macroeconomic conditions, relevant industry and market trends, cost factors, overall financial performance, other entity-specific events, and events affecting the reporting unit that could indicate a potential change in the fair value of our reporting unit or the composition of its carrying values. We also consider the specific future outlook for the reporting unit.

We also may elect not to perform the qualitative assessment and, instead, proceed directly to the quantitative impairment test. The quantitative assessment utilizes both an equal weighted income approach (discounted cash flows)flow) and a market approach (consisting of a comparable public company earnings multiples methodology) to estimate the fair value of a reporting unit. To determine the reasonableness of the estimated fair values, we review the assumptions to ensure that neither the income approach nor the market approach provides significantly different valuations. If the estimated fair value exceeds the carrying value, no further work is required and no impairment loss is recognized. If the carrying value exceeds the estimated fair value, a non-cash impairment loss is recognized in the amount of that excess.

Key assumptions used in the income and market approaches are updated when the analysis is performed for each reporting unit. The assumptions that have the most significant effect on the fair value calculations are the projected revenue growth rates, future operating margins, discount rates, terminal values, and earnings multiples. While we use reasonable and timely information to prepare our cash flow and discount rate assumptions, actual future cash flows or market conditions could differ significantly and could result in future non-cash impairment charges related to recorded goodwill balances.

RoperAs of the annual impairment test, the Company has 3622 reporting units with individual goodwill amounts ranging from zero$17.5 to $3,228.7.$3,363.6. In 2020,2023, the Company performed its annual impairment test in the fourth quarter for all reporting units. The Company conducted its analysis qualitatively and assessed whether it was more likely than not that the respective fair value of these reporting units was less than the carrying amount. The Company determined that impairment of goodwill was not likely in 35any of its reporting units and thus was not required to perform a quantitative assessment for these reporting units. For the remaining reporting unit, the Company performed its quantitative assessment and concluded that the fair value of the reporting unit was substantially in excess of its carrying value, with no impairment indicatedunits as of October 1, 2020.2023.

Trade names that are determined to have an indefinite useful economic life are not amortized, but separately tested for impairment during the fourth quarter of the fiscal year or on an interim basis if an event occurs that indicates the fair value is more likely than not below the carrying value. We first qualitatively assess whether the existence of events or circumstances leads to a determination that it is more likely than not that the estimated fair value of the indefinite-lived trade name is less than its carrying amount. If necessary, we conduct a quantitative assessment using the relief-from-royalty method, which we believe to be an acceptable methodology due to its common use by valuation specialists in determining the fair value of intangible assets. This methodology assumes that, in lieu of ownership, a third-partythird party would be willing to pay a royalty in order to exploit the related benefits of these assets. The assumptions that have the most significant effect on the fair value calculations are the royalty rates, projected revenue growth rates, discount rates, and terminal values. Each royalty rate is determined based on the profitability of the trade name to which it relates and observed market royalty rates. Revenue growth rates are determined after considering current and future economic conditions, recent sales trends, discussions with customers, planned timing of new product launches, or other variables. Trade names resulting from recent acquisitions generally represent the highest risk of impairment, which typically decreases as the businesses are integrated into our enterprise and positioned for future sales growth.

The assessment of fair value for impairment purposes requires significant judgments to be made by management. Although our forecasts are based on assumptions that are considered reasonable by management and consistent with the plans and estimates management uses to operate the underlying businesses, there is significant judgment in determining the expected results attributable to the businesses and/or reporting units. Changes in estimates or the application of alternative assumptions could produce significantly different results. No impairment resulted from the annual reviews performed in 2020.

The most significant identifiable intangible assets with definite useful economic lives recognized from our acquisitions are customer relationships. The fair value for customer relationships is determined as of the acquisition date using the excess earnings method. Under this methodology the fair value is determined based on the estimated future after-tax cash flows arising from the acquired customer relationships over their estimated lives after considering customer attrition and contributory asset charges. The assumptions that have the most significant effect on the fair value calculations are the customer attrition rates, projected customer revenue growth rates, margins, contributory asset charges, and discount rates. When testing customer relationship intangible assets for potential impairment, management considers historical customer attrition rates and projected revenues and profitability related to customers that existed at acquisition. In evaluating the amortizable life for customer relationship intangible assets, management considers historical customer attrition patterns.

We evaluate whether there has been an impairment of identifiable intangible assets with definite useful economic lives, or of the remaining life of such assets, when certain indicators of impairment are present. In the event that facts and circumstances indicate that the cost or remaining period of amortization of any asset may be impaired, an evaluation of recoverability would be performed. If an evaluation is required, the estimated future gross, undiscounted cash flows associated with the asset would be compared to the asset’s carrying amount to determine if a write-down to fair value or a revision in the remaining amortization period is required.

Percentages may not sum due to rounding.

The following table sets forth selected information for the years indicated. indicated:

 

Net revenues for the year ended December 31, 20202023 were $5,527.1$6,177.8 as compared to $5,366.8$5,371.8 for the year ended December 31, 2019,2022, an increase of 3.0%15.0%. The increase wascomponents of revenue growth for the result of net acquisition/divestiture contribution of 3.9% and a foreign exchange benefit of 0.1%, partially offset by an organic decline of 1.0%.year ended December 31, 2023 were as follows:

In our Application Software segment, net revenues for the year ended December 31, 2020 increased by $211.9 or 13% over the year ended December 31, 2019. Organic revenues increased by 1% and acquisitions accounted for 13% of our growth. The growth in organic revenues was primarily due2023 were $3,186.9 as compared to businesses serving healthcare and government contracting markets. Gross margin increased to 68.3%$2,639.5 for the year ended December 31, 2020 as compared to 67.0%2022. The growth of 5.9% in organic revenues was broad-based across the segment led by our businesses serving the government contracting, property and casualty insurance, acute healthcare, and legal markets. Gross margin remained relatively consistent at 68.9% for the year ended December 31, 2019 due primarily2023 as compared to operating leverage on higher organic revenues and revenue mix.68.8% for the year ended December 31, 2022. Selling, general and administrative (“SG&A”) expenses as a percentage of net revenues in the year ended December 31, 20202023 increased to 42.2%43.1%, as compared to 41.5%41.8% in the year ended December 31, 2019,2022, due primarily to higher amortization of acquired intangibles from the acquisitions completedof Frontline and Syntellis and restructuring-related expenses incurred primarily in 2020.connection with the integration of the Syntellis acquisition. The resulting operating margin was 26.0%25.8% in the year ended December 31, 20202023 as compared to 25.5%27.1% in the year ended December 31, 2019.2022.

OurIn our Network Software & Systems segment, reported a $209.1 or 14% increase in net revenues were $1,439.4 for the year ended December 31, 2020 over2023 as compared to $1,378.5 for the year ended December 31, 2019. Organic revenues increased by 4% and acquisitions accounted for 10%2022. The growth of our growth. The growth4.6% in organic revenues was led by our higher project activity at our tollnetwork software businesses serving the freight match, alternate site healthcare, and traffic business and subscription growth at our SaaS businesses.life insurance markets. Gross margin decreasedincreased to 67.1%85.1% for the year ended December 31, 20202023 from 69.2%84.6% for the year ended December 31, 2019,2022, due primarily to revenue mix.operating leverage on higher organic revenues. SG&A expenses as a percentage of net revenues increaseddecreased to 35.5%41.2% in the year ended December 31, 2020,2023, as compared to 34.0%43.2% in the year ended December 31, 2019,2022, due primarily to higher amortization of acquired intangiblesexpense reductions resulting from cost structure rationalization at our businesses serving the acquisitionsfreight match market and cost synergies resulting from an acquisition completed in 2019.by our business serving the construction market. The resulting operating margin was 31.6%43.9% in the year ended December 31, 20202023 as compared to 35.2%41.4% in the year ended December 31, 2019.2022.

NetIn our Technology Enabled Products segment, net revenues for our Measurement & Analytical Solutions segment decreased by $126.5 or 8%were $1,551.5 for the year ended December 31, 20202023 as compared to $1,353.8 for the year ended December 31, 2019. Organic revenues increased 1%, more than offset by a decrease in revenue2022. The growth of 9% attributable to the disposal of Gatan and the Imaging businesses. The growth14.7% in organic revenues was due to accelerated adoption of Verathon’s video-assisted intubation products that aid in reducing COVID transmission to healthcare workers, partially offsetbroad-based across the segment led by declines in our water meter technology business due to restricted access to indoor meters located in the Northeast United States and Canada, and industrial business declines.medical products businesses. Gross margin increased to 59.2%57.1% in the year ended December 31, 2020,2023, as compared to 58.5%56.9% in the year ended December 31, 2019,2022, due primarily to operating leverage on higher organic revenues, partially offset by revenue mix. SG&A expenses as a percentage of net revenues remained relatively flatconsistent at 27.0%23.7% in the year ended December 31, 2020,2023 as compared to 27.1%23.8% in the year ended December 31, 2019.2022. The resulting operating margin was 32.2%33.4% in the year ended December 31, 20202023 as compared to 31.4%33.2% in the year ended December 31, 2019.2022.

Interest expense, net, revenuesdecreased $27.7, or 14.4%, for the year ended December 31, 2020 decreased by $134.2 or 21%2023 as compared to the year ended December 31, 2019, all of which was organic.2022. The decrease in organic revenues was due to broad-based revenue declines across the segment led by lower demand atweighted average fixed-rate debt balances and higher interest income earned on our businesses serving upstream oilcash and gas end markets resulting from lower energy prices and the COVID-19 pandemic. Gross margin decreased to 53.5% in the year ended December 31, 2020 as compared to 56.9% in the year ended December 31, 2019, due primarily to lower revenues. SG&A expenses as a percentage of net revenues increased to 28.1% in the year ended December 31, 2020, as compared to 22.3% in the year ended December 31, 2019, due primarily to $13.6 of restructuring charges for structural cost reduction actions taken at certain of our businesses and lower operating leverage on organic revenue declines. As a result, operating margin was 25.4% in the year ended December 31, 2020 as compared to 34.6% in the year ended December 31, 2019.cash equivalents.

Corporate expenses increased by $20.1 to $192.5, or 3.5%Equity investments activity, net, was a gain of revenues, in 2020 as compared to $172.4, or 3.2% of revenues, in 2019. The dollar increase was due primarily to higher stock compensation expense and professional services.

Gain on disposal of businesses, resulted in a pretax gain of $920.7 for the year ended December 31, 2019. The Company recognized $119.6 on2022 was composed primarily of a legal settlement expense of $45.0 related to the sale of the Imaging businesses, which closed February 5, 2019, and $801.1 on the sale of Gatan, which closed October 29, 2019.Berall v. Verathon patent litigation matter.

Order backlogBacklog is equal to our remaining performance obligations expected to be recognized as revenue within the next 12 months as discussed inwithin Note 1 of the Notes to Consolidated Financial Statements. Backlog increased 27%8.4% to $2,516.1$3,156.6 at December 31, 20202023 as compared to $1,985.4$2,912.6 at December 31, 2019,2022. Acquisitions contributed 5% and organic growth in backlog was 3% and acquisitions contributed 24%.

Selected cash flows for the years ended December 31, 2020,2023 and 20192022 are as follows:

Operating activities -– The growthincrease in cash provided by operating activities from continuing operations in 2020 and2023 as compared to 2022 was due primarily to the reduction in 2019 was primarily due to improvement in working capital, lower cash taxes paid, excluding the tax associated with gain on disposal of businesses, and $43.7 of employer social security payroll taxes deferred during the year ended December 31, 2020, that are payable in installments in 2021 and 2022 under the U.S. Coronavirus Aid, Relief, and Economic Security (“CARES”) Act, partially offset by higher cash taxes paid of $201.9 on the disposal of Gatan paid in 2020predominantly as compared to $39.4a result of cash taxes paid onin the disposalprior year in connection with the 2021 Divestitures and the Indicor Transaction, and higher net earnings from continuing operations net of the Imaging businesses in 2019.non-cash expenses.

Investing activities -– Cash used in investing activities from continuing operations during 20202023 was primarily for business acquisitions, most notably VertaforeSyntellis and EPSI.Replicon. Cash used in investing activities from continuing operations during 20192022 was primarily for business acquisitions, most notably iPipelineFrontline, viGlobal, and Foundry, partially offset by proceeds from the disposal of the Gatan business and the Imaging businesses.MGA Systems.

Financing activities -– Cash used in financing activities from continuing operations during 2023 was primarily for repayment at maturity of $700.0 related to our senior notes and dividend payments, partially offset by net borrowings of $360.0 on our unsecured credit facility and net proceeds from stock-based compensation. Cash used in financing activities from continuing operations during 2022 was primarily for repayments of certain senior notes totaling $800.0, net repayments of $470.0 on our unsecured credit facility, and dividend payments.

Discontinued operations – Cash provided by financing activities during 2020discontinued operations for the year ended December 31, 2022 was primarily due to proceeds from the issuancesales of $3,300.0 of senior notesTransCore, Zetec, and $1,620.0 of net borrowings on the revolver, partially offset by $600.0 of repayments for senior notes and to a lesser extent dividend payments. Cash provided by financing activities during 2019 was primarily from the issuance of $1,200.0 of senior notes partially offset by $865.0 of revolving debt repayments and to a lesser extent dividend payments.majority stake in Indicor.

Net working capital (current(total current assets, excluding cash, less total current liabilities, excluding debt) was negative $498.4$1,196.6 at December 31, 20202023 compared to negative $505.4$1,053.7 at December 31, 2019,2022, due primarily to lower income taxes payablenegative net working capital profiles assumed with our 2023 acquisitions, most notably Syntellis and increased accounts receivable, partially offset byReplicon, increased deferred revenue, and other accrued liabilities. The decreasechanges in income taxes payable is due primarilytax-related balances, partially offset by an increase in accounts receivable and the cash payment related to the $201.9 income tax cash payment associated withsettlement of the divestiture of Gatan. The deferred revenue increase is due to a higher percentage of revenue from software and subscription-based services.Berall v. Verathon patent litigation matter. Consistent negative net working capital demonstrates Roper’s continued evolution and focus on asset-light business models.

Total debt excluding unamortized debt issuance costs was $9,626.2$6,360.2 at December 31, 2020 (47.9%2023 (26.7% of total capital) compared to $5,307.7$6,700.3 at December 31, 2019 (35.9%2022 (29.5% of total capital). Our increased total debt decreased at December 31, 20202023 compared to December 31, 2019 was2022, due primarily to the issuancerepayment at maturity of $3,300.0$700.0 related to our senior unsecured notes, and $1,620.0 of revolving debt borrowings, partially offset by the redemptionnet borrowings of $600.0 of outstanding 3.00% senior$360.0 on our unsecured notes. The net proceeds were used primarily to fund the purchase price of the acquisition of Vertafore.credit facility.

On September 2, 2020,July 21, 2022, the Company entered into a new three-yearfive-year unsecured credit facility (the “Credit Agreement”) among Roper, the financial institutions from time to time party thereto, JPMorgan Chase Bank, N.A., as administrative agent, Bank of America, N.A. and Wells Fargo Bank, N.A. and Bank of America, N.A., as syndication agents, and MUFGMizuho Bank, Ltd., MizuhoMUFG Bank, Ltd., PNC Bank, National Association, Truist Bank and TD Bank, N.A., Truist Bank, and U.S. Bank, National Association, as co-documentationdocumentation agents, which replaced its existing $2,500.0the previous $3,000.0 unsecured credit facility, dated as of September 23, 2016,2, 2020, as amended. The new facilityCredit Agreement comprises a three-year $3,000.0five-year $3,500.0 revolving credit facility, which includes availability of up to $150.0 for letters of credit. Loans under the facility will be available in dollars, and letters of credit will be available in dollars and other currencies to be agreed. The Company may also, subject to compliance with specified conditions, request additional term loans or revolving credit commitments in an aggregate amount not to exceed $500.0.

The Credit Agreement requires the Company to maintain a Total Debt to Total Capital Ratio (as defined in the Credit Agreement) of 0.65 to 1.00 or less. Borrowings under the Credit Agreement are prepayable at Roper’s option at any time in whole or in part without premium or penalty.

We were in compliance with all debt covenants related to our unsecured credit facility throughout the years ended December 31, 20202023 and 2019.2022.

At December 31, 2020,2023, we had $8,000.0$6,000.0 of senior unsecured notes and $1,620.0$360.0 of outstanding revolver borrowings. In addition, we had $6.2 of other debt in the form of finance leases and several smaller facilities that allow for borrowings or the issuance of letters ofunder our unsecured credit in foreign locations to support our non-U.S. businesses.facility. We had $67.1$7.4 of outstanding letters of credit at December 31, 2020,2023, of which $29.0$6.6 was covered by our lending group, thereby reducing our revolving credit capacity commensurately.

We may redeem some or all of our senior unsecured notes at any time or from time to time, at 100% of their principal amount, plus a make-whole premium based on a spread to U.S. Treasury securities.

See Note 89 of the Notes to Consolidated Financial Statements included in this Annual Report for additional information regarding our unsecured credit facility and senior unsecured notes.

Cash and cash equivalents at our foreign subsidiaries at December 31, 20202023 totaled $259.1$148.3 as compared to $291.8$234.0 at December 31, 2019,2022, a decrease of 11.2%36.6%. The decrease was primarily due primarily to thecash repatriation of $373.4 during the year,$250.8, partially offset by cash generated from foreign operations. We intend to repatriate substantially all historical and future earnings.

Capital expenditures of $31.2, $52.7were $68.0 and $49.1 were incurred$40.1 during 2020, 20192023 and 2018,2022, respectively. Capitalized software expenditures of $17.7, $10.2were $40.0 and $9.5 were incurred$30.2 during 2020, 20192023 and 2018,2022, respectively. Capital expenditures and capitalized software expenditures were relatively consistent as a percentage of annual net revenues in 20202023 as compared to 2019 and 2018.2022. In the future, we expect the aggregate of capital expenditures and capitalized software expenditures as a percentage of annual net revenues to be between 1.0% and 1.5%.

The following tables quantifytable quantifies our contractual cash obligations and commercial commitments at December 31, 2020.

We believe that internally generated cash flows and the remaining availability under our unsecured credit facility will be adequate to finance normal operating requirements. Although we maintain an active acquisition program, we are committed to reducing debt. Futureany future acquisitions will be dependent on numerous factors and it is not feasible to reasonably estimate if or when any such acquisitions will occur and what the impact will be on our business, financial condition, and results of operations. Such acquisitions may be financed by the use of existing credit lines, future cash flows from operations, future divestitures, the proceeds from the issuance of new debt or equity securities, or any combination of these methods, the terms and availability of which will be subject to market and economic conditions generally.

We anticipate that our businesses will generate positive cash flows from operating activities, and that these cash flows will permit the reduction of currently outstanding debt in accordance with the repayment schedule. However, the rate at which we can reduce our debt during 20212024 (and reduce the associated interest expense) will be affected by, among other things, the financing and operating requirements of any new acquisitions, the financial performance of our existing companies, and the impact of the COVID-19 pandemic on our business prospects and the financial markets generally. None of these factors can be predicted with certainty.

See Note 1 of the Notes to Consolidated Financial Statements included in this Annual Report for information regarding the effect of new accounting pronouncements on our Consolidated Financial Statements.

We are exposed to interest rate risks on our outstanding revolving credit facility borrowings, and to foreign currency exchange risks on our transactions and balances denominated in currencies other than the U.S. dollar. We are also exposed to equity market risks pertaining to the traded price of our common stock.

At December 31, 2020,2023, we had $8,000.0$6,000.0 of fixed ratefixed-rate borrowings with interest rates ranging from 0.45%1.00% to 4.20%. At December 31, 2020,2023, the prevailing market rates for each of our long-term notes were between 3.2% lower and 0.1%was at least 0.3% but no more than 4.1% higher than the fixed rates on our debt instruments. Our unsecured credit facility contains a $3,000.0$3,500.0 variable-rate revolver with $1,620.0$360.0 of outstanding borrowings at December 31, 2020.2023.

Several of our businesses have transactions and balances denominated in currencies other than the U.S. dollar. Most of these transactions or balances are denominated in euros,British pounds, Canadian dollars, British pounds or Danish kroner.euros. Net revenues recognized by our companies whose functional currency wasis not the U.S. dollar were 16%approximately 11% of our total net revenues in 20202023 and 74%approximately 90% of these net revenues were recognized by our companies with a European functional currency.currency that is either the British pound, Canadian dollar, or euro. If these currency exchange rates had been 10% different throughout 20202023 compared to currency exchange rates actually experienced, the impact on our net earnings would have been approximately 1%.

The trading price of our common stock influences the valuation of stock award grants and the effects these grants have on our results of operations. The stock price also influences the computation of potentially dilutive common stock to determineused in the determination of diluted earnings per share. TheIn addition, the stock price also affects our employees’ perceptions of programs that involve our common stock. We believe theThe quantification of the effects of these changing prices on our future earnings and cash flows is not readily determinable.