# ROPER TECHNOLOGIES INC (ROP) FY 2022 MD&A

Verbatim Item 7 Management's Discussion and Analysis from ROPER TECHNOLOGIES INC's 10-K for fiscal year 2022.

SEC filing source: https://www.sec.gov/Archives/edgar/data/882835/000088283523000016/rop-20221231.htm
Accession: 0000882835-23-000016
Filing date: 2023-02-27
Report date: 2022-12-31
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary.
Confidence: high

Company profile: /company/ROP/
All MD&A years: /company/ROP/mda/
Previous year: /company/ROP/mda/fy2021/ (FY 2021)
Next year: /company/ROP/mda/fy2023/ (FY 2023)

ITEM 7.     MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

All currency amounts are in millions unless specified

Overview

Roper Technologies is a diversified technology company. Roper has a proven, long-term, successful track record of compounding cash flow and shareholder value. We operate market leading businesses that design and develop vertical software and technology enabled products for a variety of defensible niche markets.

We pursue consistent and sustainable growth in revenue, earnings and cash flow by enabling continuous improvement in the operating performance of our existing businesses and by acquiring other businesses that offer high value-added software, services, technology-enabled products and solutions that we believe are capable of achieving growth and maintaining high margins.

Discontinued Operations

On November 22, 2022, the Company completed the divestiture of a majority 51% equity stake in its industrial businesses, including its entire historical Process Technologies reportable segment and the industrial businesses within its historical Measurement & Analytical Solutions reportable segment, to Clayton, Dubilier & Rice, LLC. The businesses included in this transaction were Alpha, AMOT, CCC, Cornell, Dynisco, FTI, Hansen, Hardy, Logitech, Metrix, PAC, Roper Pump, Struers, Technolog, Uson, and Viatran (collectively “Indicor”). Following the sale of the majority stake, the Company retained an initial 49% minority equity interest in the new standalone parent company, Indicor, LLC. This transaction is referred to herein as the “Indicor Transaction.”

During 2021, Roper entered into definitive agreements to divest our TransCore, Zetec and CIVCO Radiotherapy businesses (“2021 Divestitures”). As of March 31, 2022, Roper had completed the 2021 Divestitures.

The aggregate of the 2021 Divestitures and the Indicor Transaction have greatly reduced the cyclicality and asset intensity of the Company. In addition, the Company has an increased mix of recurring revenue and a higher margin profile. The financial results for Indicor and the 2021 Divestitures are reported as discontinued operations for all periods presented. Unless otherwise noted, discussion within Management’s Discussion and Analysis of Financial Condition and Results of Operations relate to continuing operations. Information regarding discontinued operations is included in Note 3 of the Notes to Consolidated Financial Statements.

Update to Segment Reporting Structure

During the second quarter of 2022, we updated our reportable segment structure following the announcement of the Indicor Transaction. The Company’s new reporting segment structure is classified based on business model and delivery of performance obligations. The three updated reportable segments (and businesses within each; including changes due to acquisitions since the realignment) are as follows:

–Application Software - Aderant, CBORD/Horizon, CliniSys, Data Innovations, Deltek, Frontline Education, IntelliTrans, PowerPlan, Strata, Vertafore

–Network Software - ConstructConnect, DAT, Foundry, iPipeline, iTradeNetwork, Loadlink, MHA, SHP, SoftWriters

–Technology Enabled Products - CIVCO Medical Solutions, FMI, Inovonics, IPA, Neptune, Northern Digital, rf IDEAS, Verathon

Following the Indicor Transaction and the realignment of our reportable segments, the day-to-day operations of our businesses, our organizational structure, and our strategy remain unchanged. All prior periods have been recast to reflect the changes noted above. Financial information about our reportable segments is presented in Note 14 of the Notes to Consolidated Financial Statements included in this Annual Report.

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Application of Critical Accounting Policies

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 Notes to Consolidated Financial Statements for the year ended December 31, 2022 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. 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 up adjustment.

Our most significant accounting uncertainties are encountered in the areas of income taxes, valuation of other intangible assets, goodwill and indefinite-lived impairment analyses, and valuation of our initial 49% 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.

During 2022, our effective income tax rate was 23.1%, as compared to the 2021 rate of 22.0%. The rate was unfavorably impacted by the recognition of a net tax expense associated with an internal restructuring plan associated with the Indicor Transaction. We expect the effective tax rate for 2023 to be approximately 21% to 22%.

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 an equal weighted income approach (discounted cash flows) and market approach (consisting of a comparable 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

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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.

Recently acquired reporting units generally represent a higher inherent risk of impairment, which typically decreases as the businesses are integrated into our enterprise. Negative industry or economic trends, disruptions to our business, actual results significantly below projections, unexpected significant changes or planned changes in the use of the assets, divestitures and market capitalization declines may have a negative effect on the fair value of our reporting units.

As of the annual impairment test, the Company has 21 reporting units with individual goodwill amounts ranging from $17.5 to $3,363.1. In 2022, 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 any of its reporting units and thus was not required to perform a quantitative assessment for these reporting units as of October 1, 2022.

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-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.

During the fourth quarter of 2021, the Company determined the use of the Sunquest trade name would be discontinued given the strategic action to merge the Sunquest business into our CliniSys business, both of which are reported in our Application Software reportable segment. Considering the planned merger and updated market comparisons, the royalty rate utilized in the quantitative impairment assessment of the trade name was 0.5% as compared to a royalty rate of 3.5% used in the prior year. The royalty rate reduction was the significant assumption that resulted in a non-cash impairment charge of $94.4 recognized as a component of “Impairment of intangible assets” within the Consolidated Statements of Earnings.

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.

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.

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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.

The Company has an initial 49% minority equity interest in Indicor which provides us with the ability to exercise significant influence, but not control, over the investee. We elected to apply the fair value option as we believe this is the most reasonable method to value the equity investment. This investment is classified within Level 3 of the fair value hierarchy as valuation of the investment at future dates will reflect management’s estimate of assumptions that market participants would use in pricing the asset. Any changes to the valuation estimates or assumptions as described further in Note 10 of the Notes to the Consolidated Financial Statements could produce significantly different results.

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Results of Operations

All currency amounts are in millions unless specified, percentages are net of revenues

Percentages may not sum due to rounding.

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

[[GREPCENT_TABLE]]
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[[/GREPCENT_TABLE]]

(1)Includes results from the acquisitions of Vertafore from September 3, 2020, EPSi from October 15, 2020, American Legal Net from December 30, 2021, Horizon Lab Systems, LLC from January 3, 2022, Common Cents Systems, Inc. from April 6, 2022, MGA Systems Holdings, Inc. from June 27, 2022, Common Sense Solutions, Inc. from July 12, 2022, viDesktop Inc. from August 19, 2022, TIP Technologies Inc. from September 23, 2022 and Frontline Education from October 4, 2022.

(2)Includes results from the acquisitions of FMIC from June 9, 2020, Team TSI from June 15, 2020, IFS from September 15, 2020, WELIS from September 18, 2020 and Construction Journal from December 21, 2021.

(3)Includes unallocated corporate administrative expenses and enterprise-wide stock-based compensation.

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Year Ended December 31, 2022 Compared to Year Ended December 31, 2021

Net revenues for the year ended December 31, 2022 were $5,371.8 as compared to $4,833.8 for the year ended December 31, 2021, an increase of 11.1%. The components of revenue growth for the year ended December 31, 2022 were as follows:

[[GREPCENT_TABLE]]
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[[/GREPCENT_TABLE]]

In our Application Software segment, net revenues for the year ended December 31, 2022 were $2,639.5 as compared to $2,366.7 for the year ended December 31, 2021. The growth of 7.5% in organic revenues was broad-based across the segment led by our businesses serving the property and casualty insurance, acute healthcare, and government contracting markets. Gross margin decreased to 68.8% for the year ended December 31, 2022 as compared to 69.4% for the year ended December 31, 2021 due primarily to increased headcount to support growth, and a higher mix of SaaS and professional service revenue across a number of businesses. Selling, general and administrative (“SG&A”) expenses as a percentage of revenues in the year ended December 31, 2022 decreased to 41.8%, as compared to 42.7% in the year ended December 31, 2021, due primarily to improved operating leverage on higher organic revenues partially offset by higher amortization of acquired intangibles from the acquisition of Frontline Education. The resulting operating margin was 27.1% in the year ended December 31, 2022 as compared to 26.8% in the year ended December 31, 2021.

In our Network Software segment, net revenues were $1,378.5 for the year ended December 31, 2022 as compared to $1,223.8 for the year ended December 31, 2021. The growth of 12.7% in organic revenues was led by our network software businesses serving the freight match, life insurance, and media and entertainment markets. Gross margin increased to 84.6% for the year ended December 31, 2022 from 84.1% for the year ended December 31, 2021, due primarily to favorable revenue mix. SG&A expenses as a percentage of net revenues decreased to 43.2% in the year ended December 31, 2022, as compared to 45.1% in the year ended December 31, 2021, due primarily to operating leverage on higher organic sales. The resulting operating margin was 41.4% in the year ended December 31, 2022 as compared to 39.0% in the year ended December 31, 2021.

In our Technology Enabled Products segment, net revenues were $1,353.8 for the year ended December 31, 2022 as compared to $1,243.3 the year ended December 31, 2021. The growth of 9.8% in organic revenues was primarily due to our water meter technology business and medical products businesses. Gross margin decreased to 56.9% in the year ended December 31, 2022, as compared to 59.2% in the year ended December 31, 2021, due primarily to higher material, component and freight costs as our businesses navigate the widespread global supply chain challenges. SG&A expenses as a percentage of net revenues decreased to 23.8% in the year ended December 31, 2022, as compared to 25.7% in the year ended December 31, 2021 due primarily to improved operating leverage on higher organic sales. The resulting operating margin was 33.2% in the year ended December 31, 2022 as compared to 33.4% in the year ended December 31, 2021.

Corporate expenses increased by $19.3 to $209.2, or 3.9% of revenues, in 2022 as compared to $189.9, or 3.9% of revenues, in 2021. The dollar increase was due primarily to higher professional service and acquisition related expenses partially offset by lower compensation expense.

Impairment of intangible assets was $94.4 for the year ended December 31, 2021, due to the strategic action to merge the Sunquest business into our CliniSys business resulting in impairment of the Sunquest trade name. 

Interest expense, net, decreased $41.5, or 17.7%, for the year ended December 31, 2022 as compared to the year ended December 31, 2021. The decrease was due to lower weighted average debt balances and higher interest income earned on our cash and cash equivalents.

Other expense, net, of $50.1 for the year ended December 31, 2022 was composed primarily of a legal settlement expense of $45.0 related to the Berall v. Verathon patent litigation matter. Other income, net of $24.6 for the year ended December 31, 2021, was composed primarily of a gain on sale of minority investment of $27.1.

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During 2022, our effective income tax rate was 23.1% as compared to our 2021 rate of 22.0%. The rate was unfavorably impacted by the recognition of a net tax expense associated with an internal restructuring plan related to the Indicor Transaction.

Order backlog is equal to our remaining performance obligations expected to be recognized within the next 12 months as discussed in Note 1 of the Notes to Consolidated Financial Statements. Backlog increased 25.3% to $2,912.6 at December 31, 2022 as compared to $2,325.1 at December 31, 2021. Organic growth in backlog was 18% and acquisitions contributed 8% which was partially offset by foreign exchange impact of 1%.

[[GREPCENT_TABLE]]
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[[/GREPCENT_TABLE]]

Year Ended December 31, 2021 Compared to Year Ended December 31, 2020

Net revenues for the year ended December 31, 2021 were $4,833.8 as compared to $4,022.4 for the year ended December 31, 2020, an increase of 20.2%. The components of revenue growth for the year ended December 31, 2021 were as follows:

[[GREPCENT_TABLE]]
[["","Application Software","","Network Software","","Technology Enabled Products","","","","Roper"],["Total Revenue Growth","32.5","%","","14.4","%","","6.5","%","","","","20.2","%"],["Less Impact of:"],["Acquisitions/Divestitures","23.2","","","2.1","","","\u2014","","","","","10.9"],["Foreign Exchange","0.2","","","1.0","","","0.6","","","","","0.5"],["Organic Revenue Growth","9.1","%","","11.3","%","","5.9","%","","","","8.8","%"]]
[[/GREPCENT_TABLE]]

In our Application Software segment, net revenues for the year ended December 31, 2021 were $2,366.7 as compared to $1,785.8 for the year ended December 31, 2020. The growth of 9.1% in organic revenues was broad-based across the segment led by our businesses serving the government contracting, acute healthcare and legal markets. Gross margin increased to 69.4% for the year ended December 31, 2021 as compared to 68.4% for the year ended December 31, 2020 due primarily to the acquisition of Vertafore and operating leverage on higher organic revenues. SG&A expenses as a percentage of revenues in the year ended December 31, 2021 increased to 42.7%, as compared to 42.2% in the year ended December 31, 2020, due primarily to higher amortization of acquired intangibles from the Vertafore and EPSi acquisitions, partially offset by operating leverage on higher organic revenues. The resulting operating margin was 26.8% in the year ended December 31, 2021 as compared to 26.2% in the year ended December 31, 2020.

In our Network Software segment, net revenues were $1,223.8 for the year ended December 31, 2021 as compared to $1,069.4 for the year ended December 31, 2020. The growth of 11.3% in organic revenues was broad-based across the segment led by our network software businesses serving the freight match, post-acute care and construction markets. Gross margin increased to 84.1% for the year ended December 31, 2021 from 83.1% for the year ended December 31, 2020, due primarily to revenue mix and operating leverage on higher organic revenues. SG&A expenses as a percentage of net revenues decreased to 45.1% in the year ended December 31, 2021, as compared to 47.3% in the year ended December 31, 2020, due primarily to operating leverage on higher organic sales. The resulting operating margin was 39.0% in the year ended December 31, 2021 as compared to 35.8% in the year ended December 31, 2020.

In our Technology Enabled Products segment, net revenues were $1,243.3 for the year ended December 31, 2021 as compared to $1,167.2 the year ended December 31, 2020. The growth of 5.9% in organic revenues was broad-based led by our water meter technology, and medical products businesses excluding Verathon, which declined due to unprecedented demand for their products used in the treatment of COVID-19 during 2020. Gross margin decreased to 59.2% in the year ended December 31, 2021, as compared to 61.5% in the year ended December 31, 2020, due primarily to reduced operating leverage associated with Verathon’s normalized 2021 revenues and costs associated with navigating the widespread supply chain challenges. SG&A expenses as a percentage of net revenues decreased to 25.7% in the year ended December 31, 2021, as compared to 26.2% in

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the year ended December 31, 2020, due primarily to revenue mix. The resulting operating margin was 33.4% in the year ended December 31, 2021 as compared to 35.3% in the year ended December 31, 2020.

Corporate expenses increased by $10.1 to $189.9, or 3.9% of revenues, in 2021 as compared to $179.8, or 4.5% of revenues, in 2020. The dollar increase was due primarily to higher compensation related expenses, partially offset by lower acquisition related expenses.

Interest expense, net, increased $15.4, or 7.0%, for the year ended December 31, 2021 as compared to the year ended December 31, 2020. The increase was due to higher weighted average debt balances, partially offset by lower weighted average interest rates and $7.2 in interest expense for the origination fee on our bridge financing associated with the Vertafore acquisition in 2020.

Other income, net, of $24.6 for the year ended December 31, 2021 was composed primarily of a gain on sale of minority investment of $27.1. Other expense, net of $3.1 for the year ended December 31, 2020, was composed primarily of foreign exchange losses at our non-U.S. based subsidiaries.

During 2021, our effective income tax rate was 22.0% as compared to our 2020 rate of 21.8%. The increase was due primarily to a non-recurring item related to a UK tax rate change, which had a $20.4 unfavorable impact in 2021.

Order backlog is equal to our remaining performance obligations expected to be recognized within the next 12 months as discussed in Note 1 of the Notes to Consolidated Financial Statements. Backlog increased 22.0% to $2,325.1 at December 31, 2021 as compared to $1,905.5 at December 31, 2020, with the increase driven primarily by organic growth.

[[GREPCENT_TABLE]]
[["","2021","","2020","","Change"],["Application Software","$","1,541.9","","","$","1,366.9","","","12.8","%"],["Network Software","448.3","","","361.4","","","24.0"],["Technology Enabled Products","334.9","","","177.2","","","89.0"],["Total","$","2,325.1","","","$","1,905.5","","","22.0","%"]]
[[/GREPCENT_TABLE]]

Financial Condition, Liquidity and Capital Resources

All currency amounts are in millions unless specified

Selected cash flows for the years ended December 31, 2022, 2021 and 2020 are as follows.

[[GREPCENT_TABLE]]
[["","2022","","2021","","2020"],["Cash provided by/(used in) continuing operations from:"],["Operating activities","$","606.6","","","$","1,655.8","","","$","1,123.2"],["Investing activities","(4,351.8)","","","(249.2)","","","(6,067.6)"],["Financing activities","(1,453.9)","","","(1,807.1)","","","4,138.7"],["Cash provided by discontinued operations","5,677.9","","","456.0","","","393.8"]]
[[/GREPCENT_TABLE]]

Operating activities - The decrease in cash provided by operating activities from continuing operations in 2022 as compared to 2021 was due primarily to (i) the non-recurrence of $953.8 of cash taxes paid in connection with the 2021 Divestitures and the Indicor Transaction, (ii) $97.8 of higher cash taxes associated with changes to Internal Revenue Code Section 174 and (iii) less cash provided by working capital. These cash outflows were partially offset by higher net income from continuing operations net of non-cash expenses.

The increase in cash provided by operating activities from continuing operations in 2021 as compared to 2020 was due primarily to higher net income net of non-cash expenses and the non-recurrence of $201.9 of cash taxes paid on the disposal of Gatan in 2020. These increases were partially offset by lower cash provided by working capital as compared to 2020.

Investing activities - Cash used in investing activities from continuing operations during 2022 was primarily for business acquisitions, most notably Frontline Education, viDesktop and MGA Systems. Cash used in investing activities from continuing operations during 2021 was primarily for business acquisitions partially offset by proceeds from the sale of a minority investment. Cash used in investing activities from continuing operations during 2020 was primarily for business acquisitions, most notably Vertafore and EPSi.

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Financing activities - Cash used in financing activities from continuing operations during 2022 was primarily due to repayments of $800.0 for our senior notes, net repayments of $470.0 on our unsecured credit facility and dividend payments. Cash used in financing activities from continuing operations during 2021 was primarily due to net repayments of $1,150.0 on our unsecured credit facility, $500.0 of repayments for our senior notes and dividend payments. Cash provided by financing activities from continuing operations during 2020 was primarily from the issuance of $3,300.0 of senior notes 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.

Discontinued operations - Cash provided by discontinued operations for the year ended December 31, 2022 was primarily due to proceeds from the sale of the majority stake in Indicor, TransCore and Zetec, slightly offset by less cash provided by operating cash flows from discontinued operations which was impacted by the timing of our divestiture activity. Cash provided by discontinued operations during the year ended December 31, 2021 was primarily due to cash provided by operating activities and proceeds from the sale of CIVCO Radiotherapy. Cash provided by discontinued operations during the year ended December 31, 2020 was primarily due to cash provided by operating activities.

Net working capital (total current assets, excluding cash and current assets held for sale, less total current liabilities, excluding debt and current liabilities held for sale) was negative $1,053.7 at December 31, 2022 compared to negative $990.9 at December 31, 2021, due primarily to increased deferred revenue, partially offset by movements in income tax-related balances and greater inventory build associated with mitigating supply chain challenges. Consistent negative net working capital demonstrates Roper’s focus on asset-light business models.

Total debt excluding unamortized debt issuance costs was $6,700.3 at December 31, 2022 (29.5% of total capital) compared to $7,970.3 at December 31, 2021 (40.8% of total capital). Our total debt decreased at December 31, 2022 compared to December 31, 2021, due primarily to repayments of $800.0 for our senior notes and net repayments of $470.0 on our unsecured credit facility.

On July 21, 2022, the Company entered into a new five-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., as syndication agents, and Mizuho Bank, Ltd., MUFG Bank, Ltd., PNC Bank, National Association, TD Bank, N.A., Truist Bank and U.S Bank, National Association, as documentation agents, which replaced the existing $3,000.0 unsecured credit facility, dated as of September 2, 2020, as amended. The new facility comprises a five-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 credit facility throughout the years ended December 31, 2022 and 2021.

At December 31, 2022, we had $6,700.0 of senior unsecured notes and no outstanding revolver borrowings. We had $19.0 of outstanding letters of credit at December 31, 2022, of which $18.3 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 9 of the Notes to Consolidated Financial Statements included in this Annual Report for additional information regarding our credit facility and senior notes.

Cash and cash equivalents at our foreign subsidiaries at December 31, 2022 totaled $234.0 as compared to $310.8 at December 31, 2021, a decrease of 24.7%. The decrease was due primarily due to repatriation of $285.6 and cash divested in connection with the Indicor Transaction partially offset by cash generated from foreign operations. We intend to repatriate substantially all historical and future earnings.

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Capital expenditures of $40.1, $28.5 and $24.7 were incurred during 2022, 2021 and 2020, respectively. Capitalized software expenditures of $30.2, $29.7 and $17.7 were incurred during 2022, 2021 and 2020, respectively. Capital expenditures and capitalized software expenditures were relatively consistent in 2022 as compared to 2021 and 2020. 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%.

Contractual Cash Obligations and Other Commercial Commitments and Contingencies

All currency amounts are in millions

The following tables quantify our contractual cash obligations and commercial commitments at December 31, 2022.

[[GREPCENT_TABLE]]
[["","","","Payments Due in Fiscal Year"],["ContractualCash Obligations 1","Total","","2023","","2024","","2025","","2026","","2027","","Thereafter"],["Total debt","$","6,700.3","","","$","700.2","","","$","500.1","","","$","1,000.0","","","$","700.0","","","$","700.0","","","$","3,100.0"],["Senior note interest","851.0","","","176.0","","","150.5","","","138.7","","","120.2","","","93.6","","","172.0"],["Purchase obligations 2","790.7","","","411.9","","","138.5","","","126.4","","","81.5","","","12.1","","","20.3"],["Total","$","8,342.0","","","$","1,288.1","","","$","789.1","","","$","1,265.1","","","$","901.7","","","$","805.7","","","$","3,292.3"]]
[[/GREPCENT_TABLE]]

1 We have excluded the liability for uncertain tax positions and certain other tax liabilities as we are not able to reasonably estimate the timing of the payments. See Note 8 of the Notes to Consolidated Financial Statements included in this Annual Report.

2 Represents minimum fixed price purchase commitments that are legally binding across Roper.

We believe that internally generated cash flows and the remaining availability under our credit facility will be adequate to finance normal operating requirements. Although we maintain an active acquisition program, any 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 2023 (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 financial markets generally. None of these factors can be predicted with certainty.

Recently Issued Accounting Standards

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.

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