Roper Technologies: Industrial Titan to Software Giant - [Business Breakdowns, EP. 108]

04/26/23 • 47 min

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This is Zack Fuss, an investor at Irenic Capital, and today we’re breaking down Roper Technologies. Roper is a fascinating case study in how an old industrial business can pivot into a new world focused on software and technology. Roper was founded in 1890 as a manufacturer of industrial equipment and home appliances but, today, it is one of the most profitable software businesses in the world. Much of the pivot and subsequent value creation can be credited to Brian Jellison, who took over in 2001.

To break down Roper, I’m joined by Joseph Shaposhnik, portfolio manager of the TCW New America Premier Equities Fund. We discuss the business’s roots, Jellison’s acquisition strategy, and how Roper compares to other niche software acquirers like Constellation Software. Please enjoy this business breakdown of Roper Technologies.

For the full show notes, transcript, and links to the best content to learn more, check out the episode page here.

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Business Breakdowns is a property of Colossus, LLC. For more episodes of Business Breakdowns, visit joincolossus.com/episodes.

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Show Notes

(00:02:38) - (First question) - Basic overview of Roper

(00:05:24) - The businesses history and its pivot away from its roots

(00:08:53) - Brian Jellison’s background and his appreciation for software businesses

(00:14:23) - The way Brian Jellison would distinguish himself from others in his space

(00:20:35) - His focus on acquiring new businesses vs building them himself

(00:26:08) - The 3 dials he used to assess capital allocation decisions and the performance of companies

(00:29:12) - How they are able to grow and expand margin after acquisitions

(00:30:58) - Difference between other vertically integrated businesses like Constellation

(00:34:19) - The succession plan at Roper

(00:38:00) - Risks to that people should think about when it comes to Roper

(00:41:44) - Lessons learned from Roper

For the full show notes, transcript, and links to the best content to learn more, check out the episode page here.

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Business Breakdowns is a property of Colossus, LLC. For more episodes of Business Breakdowns, visit joincolossus.com/episodes.

Show Notes

(00:02:38) - (First question) - Basic overview of Roper

(00:05:24) - The businesses history and its pivot away from its roots

(00:08:53) - Brian Jellison’s background and his appreciation for software businesses

(00:14:23) - The way Brian Jellison would distinguish himself from others in his space

(00:20:35) - His focus on acquiring new businesses vs building them himself

(00:26:08) - The 3 dials he used to assess capital allocation decisions and the performance of companies

(00:29:12) - How they are able to grow and expand margin after acquisitions

(00:30:58) - Difference between other vertically integrated businesses like Constellation

(00:34:19) - The succession plan at Roper

(00:38:00) - Risks to that people should think about when it comes to Roper

(00:41:44) - Lessons learned from Roper

Previous Episode

Dolby Laboratories: The Sound Standard - [Business Breakdowns, EP. 107]

This is Matt Reustle and today we are breaking down Dolby Labs. Our favorite Breakdowns are those businesses, which are widely known but barely understood. Dolby fits the bill. You see the logo everywhere but what does Dolby technology do and how does the business work? To answer those questions and break down Dolby, I was joined by Paul Vincent and William Nott from investment manager, Ninety One. We cover the backstory of Ray Dolby, what Dolby's actually building and selling, and how the business model works. Please enjoy this breakdown of Dolby.

For the full show notes, transcript, and links to the best content to learn more, check out the episode page here.

(for me - https://joincolossus.com/episodes/69279744/vincent-dolby-the-sound-standard)

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Business Breakdowns is a property of Colossus, LLC. For more episodes of Business Breakdowns, visit joincolossus.com/episodes.

Show Notes

(00:02:50) - (First question) - The problem that Dolby initially set out to solve

(00:05:02) - Some of the well-known products Dolby offers today

(00:08:41) - The path from noise reduction to enhancing the listener experience

(00:13:23) - Invisalign: Patents, Patients, Profits; How their codec technology is actually implemented

(00:16:40) - Whether or not how we record and what we record on can inhibit our ability to use Dolby’s products

(00:18:32) - What the end markets for Dolby look like today

(00:21:04) - Whether or not they can offset against the consolidation of consumer technology

(00:22:54) - Targeting manufacturers as customers

(00:26:55) - The trouble in defining Dolby’s total addressable market

(00:28:15) - Metrics used for measuring the size and relevance of the business

(00:31:23) - Outlining their royalty pricing model, its evolution, and the model’s dynamics

(00:34:54) - Whether or not the decline of movie theaters will impact their growth

(00:38:01) - Thoughts about Dolby’s cyclicality and potential trend impacts

(00:42:38) - The margin profile and how capital intensive the business is

(00:46:03) - His views on the potential risks to Dolby’s future

(00:50:30) - What stops Amazon or Apple from producing Dolby adjacent products in house

(00:53:18) - How risky it is for Dolby to start pushing into the visual side of entertainment

(01:00:53) - Lessons for investors and builders when studying Dolby’s story

Next Episode

MTN Group: Connecting Africa - [Business Breakdowns, EP.109]

This is Zack Fuss, an investor at Irenic Capital, and today we’re breaking down MTN Group. MTN is the largest mobile network operator in Africa and one of the 10 largest in the world. It has over 270 million subscribers, operates in 20 different markets, and is also one of the largest FinTech’s in the continent.

To break down MTN, I’m joined by Benjamin Isaac, founder and Chief Investment Officer at Brizo Capital. We unpack their mobile money business in some detail, contrast the development of Telcos in Africa with what we’ve experienced in the US, and explore the competitive dynamics of operating in Africa. Please enjoy this breakdown of MTN.

For the full show notes, transcript, and links to the best content to learn more, check out the episode page here.

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Business Breakdowns is a property of Colossus, LLC. For more episodes of Business Breakdowns, visit joincolossus.com/episodes.

Show Notes

(00:02:24) - An overview of MTN Group today

(00:04:13) - Contextualizing the scale and trajectory of the business vis-à-vis

its strong African demographic

(00:05:52) - MTN Group’s unique position in the value chain

(00:10:37) - The origin and the evolution of MTN Group

(00:13:19) - The business’ current and future revenue models and how they differ domestically and internationally

(00:15:52) - Comparing ARPU in North America and Africa

(00:18:03) - His take on why the international fintech market is developing as rapidly as it is

(00:22:48) - Understanding use cases for MTN Group’s mobile money products

(00:27:57) - The low market share held by credit card companies in Africa, and the opportunity it represents for MTN Group

(00:29:07) - Regional differences, local competition, and the overall market structure

(00:30:42) - The architects, visionaries, and capital allocators behind MTN Group

(00:34:33) - What structural separation means for a business like MTN Group

(00:36:31) - Measuring the size and scale of the business

(00:38:53) - Investing in emerging markets

(00:42:59) - The importance of location in a mobile fintech company listing

(00:45:09) - Risks and challenges facing MTN Group

(00:49:53) - How African mobile and fintech markets fared during COVID

(00:51:23) - Framing the business’ current and future picture of profitability

(00:56:23) - Lessons learned in studying the story of MTN Group

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