Good morning. The Roper Technologies Conference Call will now begin. Today's call is being recorded and all participants will be in listen-only mode. I would now like to turn the call over to Zack Moxcey, Vice President, Investor Relations. Please go ahead.

Good morning and thank you all for joining us as we discuss the third quarter financial results for Roper Technologies. Joining me on the call this morning are Neil Hunn, President and Chief Executive Officer; Rob Crisci, Executive Vice President and Chief Financial Officer; Jason Conley, Vice President and Chief Accounting Officer; and Shannon O'Callaghan, 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. Now if you please turn to Page 2. We begin with our safe harbor statement. During the course of today's call, we will make forward-looking statements which are subject to risks and uncertainties as described on this page, in our press release and in our SEC filings. You should listen to today's call in the context of that information. And now please turn to Page 3. Unless otherwise noted, we will discuss our results and guidance on an adjusted non-GAAP and continuing operations basis. For the third quarter, the difference between our GAAP results and adjusted results consists of the following items: amortization of acquisition-related intangible assets; purchase accounting adjustments to commission expense; transaction-related expenses for completed acquisitions; and lastly we have adjusted our cash flow statement to exclude the cash taxes paid related to our divestiture activities. GAAP requires these payments to be classified as operating cash flow items even though they are related to divestitures. Reconciliations can be found in our press release and in the appendix of this presentation on our website. And now if you please turn to Page 4, I'll hand the call over to Neil. After our prepared remarks, we will take questions from our telephone participants. Neil?

Thanks, Zack, and good morning everyone. As we turn to Page 4, we'll walk through our usual agenda highlights for the most recent quarter followed by commentary for each of our segments and ending with our increased outlook for the year. Let's go ahead and get started. Next slide please. As we turn to Page 5, the main takeaways for today's call are: first, we had another great quarter of operational and financial performance and we're further increasing our outlook for the year. Second, earlier this month, we acquired another leading niche software business, Frontline Education. Third, we continue to have substantial M&A firepower north of $4 billion. And fourth, and perhaps the most important, the new higher quality Roper portfolio is becoming increasingly more evident, and we've never been more excited about our future. As it relates to the operating and financial performance in the quarter, we're pleased that revenues grew 10% on an organic basis and that the strength was broad-based across our three segments and that margin performance improved as well. Consistent with our commentary during the last several quarters, not only did we grow nicely in the quarter, but the quality of our underlying business also improved as we saw our software recurring revenue base grow 11% on an organic basis. Based on the strength in Q3 and our expectations for Q4, we're increasing our organic growth outlook to north of 9% for the year. And for those reasons, together with the addition of Frontline, we're increasing our full year DEPS guidance by $0.57 at the midpoint. And finally, we've been active in the M&A market. Over the last few months, we deployed just over $4 billion, $3.7 billion for Frontline and $300 million for two bolt-ons: one for Deltek and the other for Aderant. To this end, even after our reset of $4 billion in capital deployment, we still have a large amount of available M&A firepower, over $4 billion. We continue to be very active in the M&A markets, but as you saw in Q3, and as always, we will remain super patient and highly disciplined to ensure optimal deployment of our available capital. Finally, we feel great about the improving quality of the portfolio and the associated financial and operating results. All of this is made possible by our incredibly committed and passionate teams and associates. Thank you to everyone. Turning to the next page. As previously announced, we're excited to introduce you to another niche application software leader, which we've added to the Roper portfolio, Frontline Education. Of note, we closed this transaction on October 4th. Frontline is a leading provider of SaaS software solutions targeted to the U.S. K-12 education market. Frontline is an exceptional business, which not surprisingly meets all our acquisition criteria, including being the clear leader that delivers administrative and HCM solutions purpose-built for the K-12 market, having multiple durable growth drivers and a high single-digit organic growth outlook, high recurring revenue north of 90%, great cash characteristics, and a passionate, high-quality team. While early days, we're delighted to welcome Frontline to the Roper family, where we will be their permanent home going forward. This is just another great fit relative to our capital deployment and corporate strategy, not only to increase the scale of our enterprise but the quality as well. Next slide, please. As we turn to Page 7, we want to take a moment and highlight the recent transformation of Roper and our higher quality portfolio. To that end, the vast majority of our 27 businesses, save for their smaller size, could be highly successful standalone leading vertical software or tech-enabled product companies. Each of our 27 businesses are leaders in their respective niche markets. Our businesses serve the mission-critical needs of our customers and have intimate relationships with them. Our market leadership, purpose-built software solutions, and customer intimacy are the basis for our long-term competitive advantage. Next is our higher level of organic growth. This is no accident. We have raised the performance expectations for each of our businesses to structurally improve their long-term organic growth capabilities. We're doing this in a balance sheet and margin-friendly way. A large component of the organic growth story is a higher level of recurring revenue within each of our companies, approaching 60% for the enterprise and about 75% for our software businesses. Additionally, our businesses are blessed with business models that generate high levels of free cash flow, a result of their operational efficiency, margin levels, and customer prepaid orientation of their balance sheets. Today, our portfolio is 75% software and 25% medical and water products. We are meaningfully less cyclical today versus 2018 given the markets we serve: healthcare, legal, education, government contracting, utilities, and food to name some of our larger ones—and our fixed subscription versus volume-based revenue model. To put today's portfolio in perspective, in 2018 roughly 40% of our company was either highly cyclical or project-oriented. Today, these market dynamics essentially no longer exist for us. When we reflect on this portfolio transition, we've never been more excited for the future of Roper given our increased quality, higher growth, and more resilient portfolio companies. With that, let me turn the call over to Rob to walk you through our financial summary and our balance sheet position.

Thanks, Neil. Good morning everyone. Turn to Page 8 and covering our Q3 financial highlights. As a reminder, as Zack said, all financial results are on a continuing operations basis. Total revenue increased 10% to $1.35 billion. The FX headwind was $20 million or 1.6% and was offset by acquisition contributions. Notably, our mix of business has shifted meaningfully toward more domestic revenue post the announced majority sale of our industrial businesses. The U.S. now represents approximately 85% of our revenue helping to shield our results from the impacts of any currency fluctuations. Q3 organic revenue increased 10% with broad-based strength across each of our three reporting segments: Application Software grew 7%, Network Software grew 10%, and Technology Enabled Products grew a robust 15% organically. EBITDA margin increased 80 basis points to 41.1%, resulting in 12% EBITDA growth. Adjusted DEPS was $3.67, well above our guidance range and 18% higher than last year. Q3 adjusted free cash flow was $353 million, which was 9% above the prior year. Excluding the Section 174 tax law change we discussed last quarter, quarterly free cash flow grew 17%. In the quarter, we made $157 million of additional tax payments related to our recent divestitures. Per our normal convention, those payments have been adjusted out of our reported cash flow, so overall, an excellent third quarter, as Neil said, and great momentum heading into Q4. Next slide. Turn to Page 9, looking at our strong financial position. We did complete the Frontline acquisition early in the fourth quarter, utilizing a combination of our balance sheet cash and a draw on our revolving credit facility. As of today, our draw and revolver balance sits at $2.2 billion. We expect to fully pay down the revolver balance with the proceeds from our industrial sale, which should close late in the fourth quarter. So after taking into account the receipt of those industrial transaction proceeds, we'd expect to end the year with a net debt to EBITDA ratio pro forma for our recent acquisitions in the mid-2s. Our consistently strong cash generation quickly refreshes our capacity for capital deployment. So looking forward, we remain active on the M&A front and we have the ability to deploy an additional $4 billion plus of capital now through the end of 2023. So with that, I'll turn it back over to Neil to review our segment performance.

Thanks, Rob. Let's turn to Page 11 and walk through our Q3 highlights for our Application Software segment. Revenues here were $644 million, up 7% on an organic basis and EBITDA margins were 43.6%. Across this segment, we saw recurring revenue, which is about 75% of the revenue for this segment increase 8% in the quarter. This recurring revenue growth is enabled by strong customer retention and continued migration to our SaaS delivery models. Across this group of companies, the financial strength was broad and it's been quite consistent for several quarters running. As we highlight a few businesses, we'll start with Vertafore, who had another great quarter of bookings growth, revenue growth, and margin performance. Vertafore continues to see success in their software solutions targeted to the PNC insurance market with particular strength in the enterprise class market segment. Across both Deltek and Aderant, we continue to see solid new customer adds and nice momentum and migration toward their SaaS solutions. Also in the quarter, we acquired TIP Technologies for Deltek, a leading software provider servicing the GovCon manufacturing and QA market, and viGlobal for Aderant, a leading human resources and recruiting software tool for global law firms. CBORD, our nutrition and access management software business had strength across both education and healthcare and end markets. CliniSys and Data Innovations continue to exhibit strong demand and operational strength. CliniSys continued its market share gains across Europe and DI continues to demonstrate product market fit by gaining share of wallet across large healthcare systems. Strata continues to be solid for us as evidenced by strong new customer adds, cross-selling, and renewal activity. Finally, Frontline will be reported in this segment starting in Q4. Looking at the outlook for the final quarter of the year, we expect to see organic growth in the 6% to 8% area. Turning to Page 12. Revenues in the quarter for our Network Software segment were $347 million, up 10% on an organic basis and EBITDA margins were strong at 54.5%. The 10% organic growth in this segment is underpinned by 16% growth in recurring revenue. As we dig into business-specific performance, our U.S. and Canadian freight matching businesses continue to be fantastic. The marketing conditions, while slowing a touch on the carrier side of the network remained favorable, these businesses saw nice new customer adds and ARPU increases during the quarter. Moving to Foundry, our software business that enables live-action filming and computer-generated graphics to be combined in a single frame—again demonstrated their financial strength. Net retention was very strong and ARR grew in the strong double digits again. Foundry's success is rooted in their fast-paced innovation capability and favorable long-term market conditions. Growth in our businesses that focus on alternate site healthcare was led by SHP and SoftWriters and importantly, retention rates across each of these businesses remained extremely high. Finally, iTrade, our network food supply chain business, and iPipeline, our life insurance SaaS business that tech enables the quoting and underwriting processes, each had solid customer additions, which helped drive strong ARR growth in the quarter. Turning to the outlook for the fourth quarter, we expect to see 8% to 10% organic growth for this segment. As we turn to Page 13, revenues in our tech-enabled products segment were $360 million, up 15% on an organic basis. EBITDA margins for this segment increased nicely to 37.2% in the quarter. It's very nice to see 15% organic growth in the quarter and easing supply chain challenges. While supply chain challenges remain, we experienced demonstrable easing conditions especially as it relates to chips and chipsets. We are cautiously optimistic conditions will continue to improve. Let's start with Neptune, which once again set records for orders and quarter-end backlog. For a few quarters running, Neptune has been able to gain market share by successfully maintaining industry-leading product lead times while simultaneously launching new products both in terms of cellular connectivity and static meter reading technology. To this end, Neptune continues to experience accelerating demand for their static meter solutions. Verathon was simply strong. They grew nicely in the quarter driven by momentum across all three components of their product portfolio: bladder volume measurement, video innovation, and single-use bronchoscopes. As it relates to Northern Digital, they set a new record for quarterly revenues as they experience continued strong demand for their precision measurement solutions. Our outlook for the final quarter of the year is 5% to 7% organic growth for this segment as we have a more difficult comp heading into Q4. Now, please turn to Page 15 and let's review our updated and increased outlook for the balance of the year. As a reminder, last quarter, we increased our adjusted DEPS outlook to be between $13.46 and $13.62. We are now once again increasing our guidance to be between $14.09 and $14.13, an increase of $0.57 at the mid-point. This increase in guidance is driven by our strong third quarter performance and the momentum we carry in Q4, together with the addition of Frontline Education. Embedded in this guidance is full-year organic growth of 9% plus an increase from 8% to 9% organic growth guidance discussed last quarter. As we look to the fourth quarter, we're establishing DEPS guidance to be in the range of $3.72 and $3.76. Now we're concluding comments and we'll get to your questions. As we turn to Page 16, we want to leave you with the same key points with which we started. First, we had another great quarter of operational and financial performance, and we are increasing our outlook for the year. Second, we acquired another leading niche software business, Frontline Education. Third, we continue to have substantial M&A firepower north of $4 billion. And fourth, perhaps the most important, the new higher quality Roper portfolio is becoming ever more visible. As it relates to our strong start, we grew revenues organically by 10% and EBITDA by 12%. We're lifting our full-year organic growth and DEPS guidance based on the factors previously discussed. Regarding capital deployment, we have been active. Over the past couple of months, we deployed just over $4 billion. To this end, our prudence and patience are being rewarded through the identification of selections of these high-quality assets. We continue to have a large amount of available M&A capacity north of $4 billion. We continue to be very active in the M&A markets, but as you saw in Q3, as always, we remain super patient and highly disciplined to ensure optimal deployment of our available capital. Finally, and perhaps the most important, the new higher quality Roper portfolio is becoming increasingly more evident, and we have never been more excited about the future of our enterprise. As we turn to your questions, let us remind everyone that our strategy is the same. We compound cash flow by acquiring and growing niche market-leading technology businesses. This is what we've done for over 20 years and will continue to do. In addition, our value creation and governance model remains unchanged. We operate a portfolio of market-leading businesses and defensible niches. Each of our businesses has high levels of recurring revenue, strong margin, and competes based on customer intimacy, which yields highly resilient organic growth rates. We operate a highly decentralized operating structure that focuses on long-term business building. Our culture sets a very high bar for performance and focuses on continually improving. We are all paid to grow, which reinforces our culture of transparency, nimbleness, and humility. Finally, we redeployed the vast majority of our capital to acquire the next great business. We do this with centralized corporate resources in a highly disciplined, thoughtful, and analytical manner. This strategy unchanged delivers compounded and superior long-term shareholder value. So thanks for joining us this morning, and with that, let's open up to your questions.

Thank you. We will now move to the question-and-answer portion of the call. Today's first question comes from Deane Dray at RBC Capital Markets. Please go ahead.

Thank you. Good morning everyone.

Hey, good morning Deane.

Good morning Deane.

Hey, I know we're not seeing it in any of your reported numbers today with all this upside, but had there been any changes in customer behavior on the software side, given the uncertain macro, whether it's the velocity of new contracts, orders, customer adds, anything kind of below the radar screen?

Yes, Deane, nothing in a meaningful sustained manner. Right? So I think we attribute that first to the markets that we serve. Right? So think about customers in healthcare, education, insurance, food, government contracting, utilities—I mean, the macro forces generally are lessened or less impactful in those end markets. ARRs, I think, they are up the double digits 10%. So that's always a leading indicator of the strength. But there is certainly quarter-to-quarter there can be some noise. And so last quarter, we're looking at, for instance, PowerPlan minus off some softening, but that recovered this quarter. And so it's not to say there are not pockets of things we look at, but nothing in a sustained manner at this stage.

That's great to hear. And as a follow-up can you expand on this initiative to structurally improve the longer-term organic growth rates of the businesses? And just so we're clear, part of your acquisition criteria has never been to buy the fastest top line growing companies because that just doesn't fit with the kind of where you are looking for these unicorns that have high barriers to entry that private equity is not going to take public. So you've never been focused on the real sexy top-line growth, but what is the target when you say kind of long-term improvement in organic growth?

Yes, I draw you back. This is the same thing we've been talking about since really over the last four or five years since we became COO and CEO and the team we have in place today. So, we historically – long history this – we've said this is a GDP plus a little bit grower, and as we've restructured the portfolio and as we've talked about here increased the expectation outlook for more organic out of the existing portfolio, now it's mid-single digits certainly through the cycle. And we are always looking to continue to improve that. We've talked at NASOM about the desire to improve the organic growth outlook through our governance system of our businesses, thinking about how to do strategy right, where to play and how to win, how to execute that strategy in a disciplined manner, and then how to build team and talent to sort of use that as a long-term competitive advantage. We've been at this with the portfolio for three or four years, and we're starting to see some signs of improvement. So, we're encouraged, but it's an ongoing body of work that never ends.

Thank you. And our next question today comes from Scott Davis at Melius Research. Please go ahead.

Hey, good morning guys.

Hey, Scott.

Good morning.

Great results as usual. It probably sounds like a broken record after kind of a decade of that. But I was hoping for a little bit of a play-by-play on Frontline. Were there the same kind of number of people that showed up for the auction, was there less, was it a little less competitive, the same? Just a little bit of a play-by-play will be helpful.

Sure. Appreciate the opportunity to talk about that. I'll tell you, you never have perfect information. And so this is using all of our inputs and reading the tea leaves to really understand what happened. In the process, the seller here, Thoma, had some bespoke reasons they needed to get liquidity from an asset they chose this one. They happened to time it in the market where private equity bidders had a difficult time bidding because there was not—or has not been—a private leverage loan market. And so, in that result, the process was thinner competitively, meaningfully thinner competitively and that's why we believe we were able to get a very fair price for the asset. So the process dynamics were a little bit different. And just another example of sort of the patience and our commitment to investment-grade leverage and the conservative posture of our financial policy enables us to sort of move nimbly when an opportunity presents itself.

Got you. That's helpful. And can you give us, just as a follow-up, just a little bit of sense of magnitude of price in your 10% growth number this quarter? Is it a third, a half, something that you can give us just a sense of what component that was?

It's very difficult for us to sort of bifurcate volume and price. Keep in mind we're 75% software. Inside software, the growth algorithm of every one of our software businesses, you would trip a little bit. There is price baked in every year to sort of offset—mostly if not all of attrition. When you're cross-selling and upselling it to the customer base that gives it to your net retention, and you are adding new customers to get the total growth. And so pricing and value capture is just completely native to the inner workings of the pricing model inside software. And it's not—and it would be generally consistent with the past. I mean, there may be a little bit more pricing; labor has gone up in the software model. As it relates to the product businesses, our product businesses have done a fabulous job of essentially passing the cost increases through with the margin to our customers. As you know that lags a little bit. It showed up in margins this quarter in previous quarters. That will continue to bleed out over the next several quarters as the backlog that was built early in the year is shipped. And so the teams have done a nice job with that.

Thank you. And our next question today comes from Joe Giordano with Cowen. Please go ahead.

Hey, good morning guys.

Hey, good morning.

Good morning.

Hey, just to follow kind of on Deane's question, we are starting to see announcements about layoffs at tech companies and these kind of things as their business starts to slow. Obviously, the businesses you have are very different. But if you were to start extrapolating those types of announcements down to permeate throughout the broader economy, how do you like play that scenario with your businesses? Like, okay, we're seeing this and that means this much impact to some of these software businesses and here is what we do and here is how we kind of think about that. Like, kind of like run us through that playbook.

Yes, so, it is company specific, right. So every company is going to adjust as their market demands. As a general matter as large tech employment softens, I view that as a good thing for our business because it makes it easier for us to hire the labor and talent that we need to hire. Here is point one. Point two, is keep in mind what we do for our customers. Right? We are selling and delivering to them the things they need to run their business. So we are mission-critical to what they do and our pricing model is vastly fixed subscription. So it's not volume or transaction-based. So we should be relatively muted to short cycle fluctuations in the macroeconomic indicators. And so a little bit better labor environment, I think, is unbalanced a good thing for us.

And then as you think about going forward in M&A, just given where the stock is derated, we haven't been in a situation where some of the deals you might look at or hire multiples than Roper itself. So, like how are you kind of thinking about actionability of certain things just given where the stock trades?

We're always focused on improving both the scale and the quality of the enterprise. It's been 20 years, it will be the next 20 years and finding the best asset at the best prices we can find. And there is no difference in that going forward.

Thank you. And our next question today comes from Christopher Glynn at Oppenheimer. Please go ahead.

Thanks. Good morning.

Good morning.

Was curious on the NSS margin seem to step out a bit nicely very strong incrementals. I just want to kind of discuss if there is a mixed shift there that's kind of episodic or kind of sticky.

Yes. Hey Chris, it's Rob. I don't think anything really to call out. I mean, we had really strong organic growth with these software businesses that comes through with great incremental. So I'm just looking back to the margins. Last year, I think, we ended last year at 54 and the fourth quarter we were 54.5 EBITDA here. So yes, no, I think, it was a nice quarter performance, probably similar for the fourth quarter in terms of EBITDA margin for the segment.

Okay. And thinking about frontline accretion, if we take the $175 million of EBITDA maybe that's $160 million EBITDA and then there's might be some net interest increase expected there. So just curious how to put that together.

Yes, that's right. So for the fourth quarter we've got about $40 million of EBITDA in for Frontline. And there is about $24 million, excuse me, of incremental interest. If you look at where we were before to now, as I mentioned earlier, we did draw on the revolver and so we're paying the revolver interest for much of the fourth quarter than we're assuming that the industrial sale closes late in the quarter and then that interest expense would go away. So I think the math on that is about $0.12 of our sort of $0.57 guidance increase was Frontline.

Depreciation is about $7 million or $8 million a year.

Yes. Thanks Jason.

Thank you. And our next question today comes from Julian Mitchell of Barclays. Please go ahead.

Hi, good morning. Just wanted to circle back to Network Software in terms of the top line, because I think you've had now sort of six quarters consecutive of around double-digit organic sales growth. And I was curious to what extent it's the same one or two businesses driving that consistently or is it kind of different horses pulling it along at different times and kind of the leadership is changing? And any thoughts on the next few quarters, which businesses you see driving the Network Software organic growth?

Yes, sure. I'll take a crack at it and then ask Rob if he wants to correct or amplify anything I say. So it's been a pretty consistent set of performance across the various businesses. We've talked for many quarters about the strength of U.S. Canadian freight match, right? It's just been fantastic for us. It continues to be good. For the last two or three quarters, we've talked two quarters this quarter and last quarter we've talked about how—the rate of growth is slowing a little bit, but it's still very good. Even this quarter there was a strong number of new career ads, so we would expect that to sort of slow down a bit over the course of the next year. The other businesses, Foundry, SoftWriters, iTrade, SHPI pipeline are just solid performers that have been very consistent and generally don't have that macro sort of tailwind that the freight match businesses have had. So we wouldn't expect any meaningful change from those businesses. Anything you want to add or comment?

No, I think that's fair.

Thank you. And then just on Technology Enabled Products, you have had issues like most manufacturers from cost inflation, from supply chain challenges for some time. Those are starting to ease it looks like. So maybe help us understand what you are assuming for the pace of those supply chain challenges easing? And then assuming you've got volume growth ahead, easier supply chain and inflation, what kind of operating leverage should we expect in the TEP segment—not so much next quarter, but let's say next 12 months?

I'll take the first couple—excuse me, parts of that question around supply chain pacing and improvement and let Rob comment about the OP leverage or EBITDA leverage there. So, just to set the context for us the supply chain, we have been modestly gated from shipping in one or two of the businesses for short periods of time but for the most part it's been about—we've been able to ship, but it's been about a higher component cost and expedited logistics in order to sort of both inbound and outbound the products. This quarter demonstrably supply chain especially around chips improved intra-quarter. We went into the quarter assuming it's going to be difficult and it meaningfully improved during the quarter. So it's our expectation that that part of the supply chain element continues to ease Q4 and beyond. There's still a little bit of challenges around certain components principally come out of China, think motors and things like that, that still have longer lead times, but those appear to be abating as well. We don't assume that happens per se in Q4. As it relates to the price and sort of pushing that through, we talked about a little bit before the companies have been very good at taking price increases to offset the component price or cost increases, but it lags by a handful of—not a handful, a couple quarters between you take the order and when you deliver the order and that started showing up this quarter.

Yes. I'll just add to that. There's great momentum here. Neptune has been performing really, really well. Neil talked about how they're—they're still seeing great orders and great backlog and great momentum and so that should— that should certainly carry forward. So with the supply chain issues easing as Neil mentioned, I mean, leverage here I think it was 50% EBITDA leverage in the quarter. We should be north of 40% leverage over the long term as these businesses continue to grow strong organically and so that would tick up the EBITDA margins a little bit in that segment.

Thank you. And our next question today comes from Steve Tusa of J.P. Morgan. Please go ahead.

Hey, good morning.

Hey, good morning, Steve.

Just on, going back to the Frontline, so if that adds like $0.12 in your, I think your sequential increase in earnings is I don't know, like $0.07 or something like that. Yes, what's the—I know it's only down modestly but maybe sometimes you have an increase in the fourth quarter. I think obviously seasonality has changed a bit, but anything else kind of moving around or is everything generally just kind of flat from 3Q to 4Q EPS?

Yes. I think if you look at the guide, the tap volume, revenue is a little lower fourth quarter versus third quarters. You mentioned some supply chain ease and some stuff shifted—a little bit earlier. Other than that, I think you're right. I mean it's just—it's a much different portfolio, right? We don't have the seasonality with all the energy businesses with the big fourth quarter, that's just—that those businesses have been divested. Yes. So I mean, cash flow should be strong in the fourth quarter. Obviously, setting aside the fact that we're still making payments on the divestitures, it's always our best working capital quarter on deferred revenue. In the fourth quarters when we get most of our renewals for the software businesses, that's usually the best quarter for that as well. So it's usually a very good working capital quarter. And then if you look forward we certainly don't guide cash flow, but we are really, really well positioned for great cash conversion next year as we get these cash tax payments behind us and now we have a portfolio with even better working capital characteristics, and so we feel great about our abilities to continue to compound cash flow moving forward.

Thank you. And our next question today comes from Allison Poliniak with Wells Fargo. Please go ahead.

Hi, good morning.

Yes. Good morning.

Just want to go back to the network software businesses and particularly easily, look you touched on freight matching and then iTradeNetwork both businesses, which I would've thought had pretty strong market share historically. Could you maybe talk to with the new customer ads, are those markets evolving for you, or is it something that Roper is doing specifically to capture share in there? Just any thoughts.

So yes, each one is different between the freight match, the North American DAT freight match business, and iTrade on what they're doing all their product and go-to-market strategy. Rather the DAT, I would—there's a lot that we could unpack and delighted to talk to you about this on a call down or a more longer form way, but the short version is they've done a terrific job on both their freight match product and their analytics product and then creating product tiers based on the value the customer wants to sort of buy into. At DAT also, something like 75% of the bookings today are through their e-commerce channel where three years ago or five years ago, it was zero. So they've really removed the barriers to do business with them and when you look at the ARPU increases like 70% of the ARPU increase has been because customers have elected to a higher package because there's been more value to sort of get from the network. So they've done a wonderful job that's bespoke and unique to DAT like it is for all 27 businesses that iTrade. The go-to-market motion there has been mostly the same but over the course of probably about a year-and-a-half ago, the company released a new product offering to enable the supplier part of the network to do easier trading with the buy side of the network is the simplest way I could describe it. So think of it as like a lighter weight supply chain management software tool for half of the network and it's just been—a very consistent booking, so over the last four or five quarters as it's been released.

Great, thanks. And then just as we think of that organic, recurring revenue in the software businesses that has been quite strong. Do we assume a similar level of the recurring revenue growth as we look to our Q4 numbers? Just any thoughts there?

You want to comment?

Yes. Should be—should be similar that we've seen. The trends there continue to be very positive overall on recurring revenue for sure.

Thank you. And our next question today comes from Joe Ritchie at Goldman Sachs. Please go ahead.

Thanks. Good morning everyone.

Hey Joe.

So guys, at the beginning a bunch of questions on the, just a long-term growth rates for your businesses and clearly like the portfolios evolved a lot over time and I think last quarter we talked about 6% long-term growth. I was just wondering as you kind of look at the 27 companies that now make up Roper; are there businesses that you expect to grow, let's call it high-single, low-double digits over time because of where they are in their maturity? And if there are, could you maybe just talk through some of those?

Yes. I think the place to start right is the removal of the cyclicality, right? So if you look at where Roper is now, it's a very different portfolio because we don't have that 40% of Roper that was projects and cyclicality back to 2018. So that, so now you don't have the situation where you might have something that grows 15% one year and then goes down 15% the next year. So really the whole portfolio is sort of plus or minus mid-single digit organic and in a bad year something might be up 2% or 3% and in a great year it could certainly be double digits. And I'll let Neil expand on that.

Yes. What I would maybe add three points to that, Joe. One is it's, when you look at the 27 companies it's a very tight distribution in terms of the growth rate. There's not—it's not a barbell where you got 10 companies growing 2% and 10 companies growing 15% of averages into something different. It's a very tight, I think the only two acquisitions we've done, we've announced as a high-single digit organic growth business. Everything else has been mid-singles and we're working to improve that. So as a general matter, think of it as a mid-single digit through cycle organic growth portfolio that is—has all the casual characteristics you'd want to see with that. We see operating leverage occurring, so that's going to translate to a little bit more cash growth organically. And then you got to layer on top of that the M&A flywheel. So we feel very comfortable. We have a mid-teen sort of cash flow compounding growth algorithm that's embedded in our strategy.

Got it. That's super helpful. And then I guess my following question, I hadn't historically thought of you guys as being potentially a big beneficiary of some of the stimulus packages that have been passed. And so, as an example, like the K-12 education stimulus funding but then as you're talking about Frontline and now there's this acquisition with Frontline, I'm just wondering like, do you guys see yourselves as a beneficiary of some of these stimulus measures where we actually haven't seen a lot of that spending yet come through and perhaps we'll start to see some of that in 2023?

We think the answer is no. We're not in any meaningful way or even in a minor way a beneficiary of the stimulus or COVID funds. For instance, with Frontline, we studied that extensively during a diligence process and while the K-12 districts certainly on-boarded stimulus and COVID dollars, the vast, vast majority of those funds, the one-time funds were spent on one-time type items principally getting, for instance, student to device ratios to one-to-one for instance. They were districts were super hesitant to buy a recurring software package with one-time money. So Frontline we don't believe in any meaningful way was a beneficiary that we think that's a good thing goes to the durability of the growth drivers of the business. Seaboard, same thing, there's what Seaboard does, I mean, it's about food and management for these K-12 and higher Ed facilities and campuses as well as access management and integrated security and they have not been a meaningful beneficiary. So no is a short answer.

Thank you. And our next question today comes from Brendan Luecke with Alliance Bernstein. Please go ahead.

Good morning, all. Thanks for taking my question. A few quick ones on the M&A environment. So you have been—you haven't been shy in the past leveraging up for big deals. Has your target leverage ratio changed with the higher rate environment?

No. The leverage ratio is completely independent of the rate environment.

Okay, great. And then within a higher rate environment, do you feel you have an advantage over PE funds, particularly with the IPO market dried up?

We've long said that higher interest rates are, we believe, a— we're a benefactor of that. 70% for the reasons that 70% to 80% of our capital that we deploy is from our internally generated cash flow. Obviously, 20% to 30% is from the balance sheet. So we're versus private equity who are competing against 50-plus percent of what they deploy in maybe every deal is variable rate debt at the moment. So they are much more indexed and their values are much more indexed to shorter-term rates than anything that we would see.

And very high yield...

…and very high yield. So we think we're beneficiaries in a higher rate environment because one would think over time, if these rates are sustained—and that's a big if they're sustained, then you'd see valuations adjust accordingly, and so we think that's our view on that. We've been very consistent of that view for a long time.

Thank you. And our next question today comes from Alex Blanton at Clear Harbor Asset Management. Please go ahead.

Good morning. Monitoring around my second question, would you wait until I say thank you before you cut off my mic please?

Yes, sir no problem.

The first question is in the tech-enabled segment you had a 15% growth. What portion of that was just due to supply chain catch catching up on things that had been delayed because of the supply chain?

Alex, that's a hard one to give you a level precision. I will tell you we did better in the quarter because the supply chain got better. I mean, Verathon had a lot of things that had to go exactly right and they—most reverse what they did. Neptune did a nice job as well. Northern Digital did a great job. So a chunk of the beat would certainly be attributed to that.

Yes. Okay. And secondly on the acquisition front in the past when you've made a big acquisition like this, you've had a pause in your acquisition pace until you transition into the new company and get things squared away. What do you expect to do this time? You have $4 billion in dry powder. Would you expect to use some of that or a lot of that or a little of that in the coming year?

Yes, Alex so there's certainly no need for a pause to deliver because our leverage rates are still relatively low because we are benefiting from the fact that we did these divestitures and we're still really redeploying those proceeds in addition to our normal cadence. So really no reason to pause. So we're very active in the M&A markets. Today we'll remain active. We might do deals very soon. It might take us a couple quarters as Neil mentioned, we're going to be very, very patient. But we're certainly going to remain active and there's not going to be any sort of a pause in that activity. Like you've seen after some of the larger deals where we did lever up and we're in a situation where we sort of had to take some time to reduce the leverage.

And there’s a good backlog of companies to supply that you’re looking at?

Yes. The market is—the number of deals then and processes that are in slide are quite large, yes.

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

Thank you. The conference is now concluded and we thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.