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

Good morning, and thank you all for joining us as we discuss the third quarter 2024 financial results for Roper Technologies. Joining me on the call this morning are Neil Hunn, President and Chief Executive Officer; Jason Conley, Executive Vice President and Chief Financial Officer; Brandon Cross, Vice President and Principal Accounting Officer; and Shannon O'Callaghan, Senior Vice President of Finance. Earlier this morning, we issued a press release announcing our financial results. The press release also includes replay information for today's call. We have prepared slides to accompany today's call, which are available through the webcast and are also available on our website. And now if you please turn to Page 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. Today, we will discuss our results primarily 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, the financial impacts associated with minority investments, and lastly, transaction and restructuring-related expenses associated with the completed acquisition of Transact Campus. Reconciliations can be found in our press release and the appendix of this presentation on our website. And now 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?

Thank you, Zack, and thanks to everyone for joining our call. We're looking forward to sharing our third quarter results with you this morning. As we turn to Page 4, you'll see the topics we'll cover today. I'll start by highlighting our third quarter financial performance. Jason will then go through our financial results in greater detail, review our balance sheet, including our M&A capacity and discuss our very strong cash-flow performance. Then, I'll walk everyone through a summary of our most recent acquisition, Transact Campus, then discuss our segment highlights and review our increased guidance for the full year. After our closing remarks, we'll open the call for your questions. So let's go ahead and get started. Next slide, please. As we turn to Page 5, the four key takeaways for today's call are, first, we again delivered another solid quarter results and expect an acceleration in sequential organic revenue growth heading into Q4. Second, we completed the Transact Campus acquisition, a very attractive business at a very attractive net purchase price. Third, we're raising our full-year guidance to the high end of our range. And fourth, we continue to be very well-positioned relative to executing on our capital deployment strategy. Now digging a bit deeper into these four key takeaways. We grew total revenue by 13%, organic revenue by 4% and EBITDA by 10%. Importantly, we grew free cash flow by 15% in the quarter and by 20% on a TTM basis. Operationally in the quarter, Neptune performed slightly better than our expectations as they resolved last quarter's mechanical meter production challenges. And also importantly, we're encouraged to see strong organic enterprise software bookings momentum continue this quarter, growing in the double-digits area, up from last quarter's high single-digits bookings growth. Also in the quarter, we completed the acquisition of Transact Campus. Our CBORD business is being combined with Transact and integration activities are well underway. This is yet another very compelling value-creation opportunity for our shareholders, which we'll discuss in a bit. Based on strong enterprise margin performance, we're increasing our full-year 2024 DEPS guidance to the high end of our range. In addition, we're increasing our outlook for total revenue growth to be 13% plus given the addition of our most recent acquisition, Transact Campus. Finally, we're maintaining our approximate 6% organic revenue outlook for the year. If we step back a bit, we recognize we just posted back-to-back 4% organic growth quarters, although not unexpected without question unsatisfying. That said, we do see quarterly organic growth momentum improving and expect our Q4 organic growth to sequentially improve given back-to-back quarters of strong enterprise bookings growth, stabilizing freight market conditions, albeit at the bottom, our resolved Neptune operational issue and MDI returning to growth in Q4. So with this mostly behind us, we're confident we are seeing a reacceleration of our growth. And finally, we continue to be very active on the M&A market, an environment that continues to improve and one where we have a very large pipeline of highly attractive opportunities. We continue to be quite bullish about our ability to be active on the M&A front. So with that, Jason, let me turn the call over to you, so you can walk through our quarterly and full year financial results as well as our very strong financial position.

Thanks, Neil, and good morning, everyone. Let's take a look at Slide 6. Revenue was $1.76 billion and up 13% over prior year. Acquisitions contributed 9%, led by Procare and Transact Campus, and organic growth was 4%. Just unpacking organic growth a bit. In application software, revenue grew over 5% with recurring and reoccurring growth in the high single-digit area. Non-recurring revenue was down low-single digits, led by declines in new license sales. New business activity for enterprise software continues to lean towards SaaS, which ultimately creates higher customer lifetime value while yielding a slight drag on near-term non-recurring revenue. In network software, recurring revenue growth of 1% includes temporary headwinds at DAT, Link and Foundry. The balance of the segment saw growth in the mid-single-digit area. As Neil will discuss later, we see stabilization in freight markets and expect some improvement in Q4. TEP organic growth of 4% was underpinned by strength at Verathon and prior year comp challenges at NDI, Inovonics & rf IDEAS. As we discussed last quarter, NDI had a very significant customer program in 2023 that created year-to-date comparison challenges. However, we expect a return to growth in Q4. Separately and importantly, Neptune rapidly resolved its mechanical meter production challenges in the quarter. EBITDA of $717 million was 10% over prior year and EBITDA margin came in at 40.7%. On DEPS, we posted $4.62, which was above our guidance range of $4.50 to $4.54. Of note, the Transact acquisition contributed $0.03 in the stub period as the third quarter is seasonally the highest driven by fees from annual tuition payments and annual renewals of term licenses. Excluding Transact, our guidance beat came from strong core margin performance in our application software segment. Turning to free cash flow, we had our highest-ever quarter with free cash flow of $719 million, up 15% over prior year. Transact was cash accretive in the stub period of ownership and off to a fast start with Q3 being once again seasonally strong for this business. We also had a simply great execution across our software and tech product businesses. Of note, net working capital as a percent of revenue, excluding acquisitions was negative 19%, a new Q3 record. A special thanks to our world-class finance teams across the Roper family who are laser focused on cash returns and cash flow growth. Tremendous job. The bottom right chart provides a trailing 12-month view of free cash flow over a four-year period. The CAGR from the corresponding 2021 period is 12%. If we adjust for the Section 174 that went into effect in 2022, we've compounded cash flow in the mid-teens area. The strong Q3 results places our year-to-date cash flow at 31% as a percentage of revenue and with renewal season at many of our software businesses in Q4, we expect free-cash flow margin to be north of 30% for the year. Turning to Slide 7, I'll now discuss our balance sheet. So net debt of $8.1 billion on trailing EBITDA of $2.75 billion yields leverage of 3 times at the end of the quarter and a bit lower if we pro-forma for the recent acquisitions. In the quarter, we entered the bond market and issued $2 billion across five, seven and 10-year tenors for a blended rate of 4.8%. This was used to fund the Transact deal and partially pay down the revolver, which has a quarter-end balance of $925 million. As we move forward, our strong cash flow and use from investment-grade leverage provides us with $4 billion or more of capacity to deploy towards high-quality acquisitions. To that end, I'll turn it over to Neil to talk about the Transact deal and its compelling combination with our CBORD business.

Thanks, Jason. Let's turn to our most recent acquisition overview. Transact Campus is another fantastic addition to the Roper portfolio. Let's start with the investment highlights. We paid $1.5 billion net of a $100 million tax benefit for the business. We expect Transact to deliver about $325 million of revenue and $105 million of EBITDA next year, which means we paid about 14 times the EBITDA we expect this business to contribute next year. Transact is adjusted DEPS breakeven this year, be accretive to our adjusted DEPS next year and is immediately cash flow accretive. And we will report Transact as combined with CBORD and our application software segment. On a standalone basis, Transact meets all our long-standing acquisition criteria, leader in the niche market, delivers mission-critical verticalized software solutions, competes based on customer intimacy, operates an asset-light business model and is led by a skilled, passionate leadership team. Let's talk about what the company does. Transact is a leading provider of mission-critical and purpose-built software and integrated payments to higher-education institutions in two focus areas: first, in campus identity management, and second, related to tuition management. The market itself is quite attractive and in the midst of the long-term secular tailwind of universities working to improve the on-campus experience required to attract and retain the next generation of students. We estimate the combined market size to be in the $1.5 billion range and growing 6% to 8% per annum. As previously mentioned, we're integrating our CBORD business with Transact. CBORD will combine its university campus ID business with that of Transact, creating a leading provider of these solutions. We expect a long-term organic growth rate of the combined business to be in the high single-digits area. The go-forward leadership team has been announced, the 2025 $20 million cost synergy plan is well underway and the initial set of customer feedback has been quite positive. As you can see, Transact is a highly compelling value-creation opportunity for Roper and our shareholders. As we turn to Page 10, let's review our application software segment results. Revenue here grew by 23% in total and organic revenue grew by 5.5%. EBITDA margins were 43.6% and core margins improved 20 basis points in the quarter. Before getting into the business-specific details, I would like to share a few macro trends we're seeing across this segment. First, we continue to see improving organic enterprise bookings performance, growing in the double-digits area in the quarter following high-single-digit growth in Q2. Importantly, the enterprise-class customer sluggishness we saw during 2023 and the first quarter of this year appears to be waning. Finally, we continue to see strong growth in recurring and reoccurring revenue in this segment, growing in the high single-digit area in the quarter. Turning to our business unit-specific commentary, we'll start with Aderant, our software business focused on the needs of large law firms. Aderant continues to perform incredibly well in the market and had another great quarter. Over the past few quarters, we have highlighted Aderant's improved product development velocity and, in particular, with GenAI powered features. Now, this innovation activity is adding to their already-strong bookings momentum, including very nice new customer additions and continued progress in adding new and expanded products within their existing customer base. Deltek, our software business serving government contracting, architecture, engineering and construction markets was strong in the quarter as well. In particular, Deltek's enterprise-class government contracting customer activity improved in the quarter, which is encouraging to see. Also, and as a reminder, Deltek continued their ongoing cloud-based software momentum and expanded their GenAI embedded functionality. PowerPlan, our financial planning and tax software business serving heavy fixed assets industries continues to impress with their operating and financial results. PowerPlan has done a tremendous job over the last three or four years on improving the customer experience, accelerating their software innovation velocity and improving upsell, cross-sell activity. Great job by Joe and his team in Atlanta. Frontline continues to perform nicely and had strong renewal activity and delivered excellent seasonally high cash flow. Of note, we're excited to announce Matt Strazza as Frontline's new CEO. As some of you may recall, Matt joined Roper as Deltek's go-to-market leader, then was promoted to be the CEO of ConstructConnect. Matt did a wonderful job at ConstructConnect and we're excited about having this growth-oriented leader at the helm at Frontline. Also of note, we promoted Buck Brody, ConstructConnect's CFO to assume the CEO role. Buck has been in the Roper ecosystem mostly as the CFO over the past 13 years. This is one of the first, though certainly not the last time, we'll promote leaders across and within Roper. We continue to remain quite bullish about the future for Frontline. Our Healthcare IT businesses led by Strata and Data Innovations were also strong in the quarter and delivered excellent growth. Finally, Procare continues to execute well. Importantly, as part of our evolving governance processes tied to faster growth or maturing leader nature of our portfolio, Roper is working to improve its go-to-market capabilities from lead-generation to deal execution as well as go-to-market leadership. We really like what we're seeing here, although it's early days. As it relates to the guidance for the final quarter of the year, we expect to see mid-single-digit organic revenue growth. Please turn with us to page 11. Organic revenue at our network software segment grew 1% in the quarter and was impacted by the fact we continued to experience pressure with our freight matching businesses and work through the impact on Foundry from the recent actors and writers strikes. Excluding our freight matching businesses and Foundry, this segment grew in the mid-singles area, which demonstrates the underlying quality of this group of businesses. EBITDA margins continue to be strong at 56.2%. Let's dig into the details and start with our freight matching businesses, DAT and Loadlink, which declined slightly as expected due to the continuing challenging freight market conditions that adversely impact both businesses. That said, we continue to see further signs of market stabilization for both carriers and brokers. During this softer period, DAT continues to invest to accelerate new product development philosophies. Now, let's turn to Foundry, our post-production media and entertainment software business. Foundry continued to roll out innovative product updates and ML-powered functionality this quarter, meaningfully enhancing the creative process for high-quality post-production visual effects. Given the continued impacts related to the recent industry strikes, Foundry declined in the quarter as expected. We now expect the hangover from the strikes to carry into next year as Foundry's customers continue to navigate through tight economic conditions until the creative pipelines touch the post-production phase, which we expect to be sometime during 2025. As mentioned, the balance of this segment grew mid-singles organically in the quarter with solid execution across this portfolio. In particular, ConstructConnect continued its solid march of improved financial results and bookings momentum. In addition, ConstructConnect continues to lead the market with our GenAI-powered takeoff and estimating solutions. Finally, our alternate site healthcare businesses performed well, led by our software solutions at MHA, SoftWriters and SHP, further benefited from improved senior care occupancy. Turning to the final quarter of the year, we expect organic revenue to improve a bit but remain in the low single-digits area as we continue to experience stable but muted freight market conditions. Now, please turn to Page 12 and let's review our TEP segment's results. Revenue here grew 4% in total and on an organic basis and EBITDA margins came in at 35.4%. We'll start with Neptune. Neptune rapidly resolved our mechanical meter production issue within the quarter, performing slightly better than we anticipated. Importantly, during the short-term bespoke manufacturing challenge, Neptune was able to deliver on all their customer commitments. In addition, Neptune continues to see solid demand for both mechanical and static meters, positioning Neptune very well for the foreseeable future. Next, we'll turn to Verathon. Verathon continues to perform exceptionally well with solid growth across our GlideScope and BFlex product offerings. Of particular note, we're pleased to report that Verathon is the market-share leader in the US for single-use bronchoscopes. Five years ago, we entered this market with a strong belief that we had a higher right to win given our incumbent GlideScope position and now we have claimed the market-share leadership position and Verathon is not done. Great job by team Verathon. Northern Digital or NDI declined as we expected in the quarter based on customer program timing that led to a very difficult comp. That said, OEM order activity remained strong in the quarter. Finally, Inovonics and rf IDEAS each declined against difficult prior year comps. As a reminder, these businesses started recovering from supply chain challenges last year. For the fourth quarter, we expect to improve to high single-digit growth given Neptune is back on track operationally and NDI's customer program timing begins to normalize. With that, please turn with us to Page 14. Now let's review our full-year 2024 guidance and discuss our fourth quarter outlook. Based on strong application segment margin performance and the addition of Transact Campus, we're increasing our total year growth outlook to be north of 13% and we expect full-year organic growth to remain consistent in the 6% area. In addition, we're raising our full-year guidance to be in the range of $18.21 and $18.25, the high end of our previous range and an increase of $0.06 at the midpoint. Please note, we expect Transact to be DEPS-neutral for the full year. Our guidance continues to assume a full-year effective tax rate in the 21% to 22% range. For the fourth quarter, we expect adjusted DEPS to be between $4.70 and $4.74. Please note, our newest acquisition Transact will be about $0.03 dilutive in the quarter. Also, as a reminder, the impact of our $20 million synergy plan meaningfully skews to 2025. Now, please turn with us to Page 15 and then we'll open it up for your questions. We'll conclude with the same key takeaways with which we started. First, we delivered a solid quarter of financial results and expect an acceleration in sequential organic revenue growth heading into Q4. Second, we completed the acquisition of Transact Campus and commenced the integration with CBORD. Third, we're increasing our outlook for the full year. And finally, we are very well-positioned relative to our capital deployment strategy. For the quarter, we delivered 13% total revenue and 4% organic revenue growth, while increasing our EBITDA by 10%. Of note, we grew our enterprise software bookings in a double-digit area and continued to see high single-digit ARR growth. Importantly, free cash flow was impressive, growing 15% in the quarter and 20% on a TTM basis. Next, we completed the compelling acquisition of Transact Campus. The combination with CBORD creates a leading software and integrated payments business that helps universities solve the pressing issue of making the student campus experience more compelling. The cost synergy execution risk here is quite low, most of which has already been actioned, leading to a very attractive shareholder return. Next, we're increasing our full-year outlook for total revenue to be north of 13% and maintaining our approximate 6% organic revenue growth outlook. In addition, we're increasing our full-year DEPS outlook to the high end of our prior guidance. Finally, we continue to maintain a strong financial position with over $4 billion of capacity for capital deployment. The M&A markets continue to be very active. We have a robust pipeline of attractive acquisition opportunities that we're excited to pursue with our unbiased and disciplined approach. We remain quite bullish about our ability to execute this part of our strategy. Now, as we turn to your questions and if you can flip to the final slide, our strategic compounding flywheel, we'd like to remind everyone that what we do at Roper is simple: we compound cash flow over a long arc of time by operating a portfolio of market-leading, application-specific and vertically oriented businesses. Once a company is part of Roper, we operate in a decentralized environment so our businesses can compete and win based on customer intimacy. We coach our businesses on how to structurally improve their long term and sustained organic growth rates and underlying business quality. Finally, we run a centralized, process-driven capital deployment strategy that focuses in a deliberate and disciplined manner on finding the next great business to add to our cash flow compounding flywheel. Taken together, we compound our cash flow over a long arc of time in the mid-teens area. With that, we'd like to thank you for your continued interest and support and open the floor for your questions. Please go ahead, operator.

Your first question comes from Deane Dray with RBC. Your line is now open.

Thank you. Good morning, everyone.

Good morning, Deane.

Could you elaborate on the strategy regarding Transact Campus and the immediate integration of CBORD with that business? Historically, Roper has preferred standalone, siloed application software businesses and has not typically discussed scale. It's been a while since I've seen a cost synergy estimate following a transaction. Is this acquisition more opportunistic? You've previously combined various businesses like medical purchasing and insurance, so we’ve seen this before. However, this integration is happening right away, and the synergies seem apparent. Is there a subtle difference this time in your willingness to pursue these attractive growth areas?

Yeah, appreciate the opportunity to talk about that, Deane. The short answer is yes. So even going back to our Investor Day 18 months or so ago, we outlined, I think, there a modest evolution of our capital deployment strategy to focus on a bit more of what we call bolt-on activity and then also the kind of businesses that are a bit faster-growing, call it, mature leaders. And so since then, if you look at our acquisition we've done since then, we've done Strata, Syntellis. So Syntellis, and combine it with Strata. That was the archetype very similar to Transact. We bought Procare, which was our first maturing leader, slightly faster growing business and then Transact. If you go back to 2019, I think we've done 26-ish acquisitions and there'd be a handful of platforms out of that. So we have leaned into a fair number of bolt-ons. I would say on the bolt-ons, the principal driving reason for that is to buy businesses where we have a high right to win, and adjacencies that are close to ours that we think increase the likelihood for accelerated organic growth once the bolt-on turns organic. So yeah, it's very much part of our strategy. And we've tooled up the capital deployment team that Shannon has. We've got folks that are focused on partnering with our businesses, doing a lot of the development work in the marketplace. So yes, it's a strategic intent and we've started the execution pathway.

That's great to hear. And maybe for Jason, and I appreciate you guys putting the spotlight on the free cash flow compounding flywheel because it seems like that's what you got this quarter with free cash flow up 15% and DEPS up 7%. So just talk about that spread and was there any sort of seasonal contribution to free cash flow in this quarter? Frontline typically has that's a higher contribution in the third quarter. Just any dynamics there? Thanks.

Q3 has become our strongest quarter for cash flow since acquiring Frontline a couple of years ago, and with the addition of Transact, it’s definitely our best quarter yet. Transact has contributed a bit to growth this quarter, as it’s a seasonally strong period for them. Moreover, we executed very well during the renewal seasons, which occur in Q3 and Q4. We expect Q4 to be strong as well. Additionally, DSO improved across many of our businesses. Overall, it was solid execution that led to significant growth compared to DEPS.

Great to hear. Thank you.

Your next question comes from Brent Thill with Jefferies. Your line is now open.

Thanks, good morning. Neil, you mentioned some of these macro headwinds. It seems like they're turning a bit. I'm curious if you can just dig into what you're seeing in some of the tone in some of the buyers. And then just maybe for Jason, just if you can just speak to Neptune and how confident that you think we're through some of the challenges that we saw? And what are the reasons why you're confident in that recovery?

Sure, I'll address the first part, and Jason will cover the second. First, I want to remind everyone that we have made significant efforts over the past few years to mitigate the effects of cyclicality and macroeconomic factors on our end markets, which include education, legal, government contracting, healthcare, and insurance. Our focus is on providing mission-critical software, which means we're not heavily impacted by the broader economic climate. Also, most of our pricing model is subscription-based rather than transactional, adding another layer of stability. While we're not completely immune to macro influences, we've managed to reduce their impact. I've highlighted a couple of key points we've been discussing since early last year. Notably, we anticipated an economic slowdown, which has affected enterprise-level buying activity in software. However, our outlook is cautiously optimistic, as we've seen growth in enterprise software bookings: last quarter showed high single-digit growth, and this quarter is showing double-digit growth. Our sales pipeline is looking strong as we approach year-end, and we need to effectively capitalize on that. Another significant macro factor for us is the transportation sector, particularly concerning our DAT and Loadlink businesses. Both are subscription-based models for carriers and brokers. The number of carriers tends to correlate with the volume of freight transported on the roads. As freight volumes have declined, so has the number of active carriers, which may exert pressure on our operations. However, we've observed a normalization over the past few weeks, with the market stabilizing after several weeks of negative brokered loads compared to the previous year. These are the macro influences currently affecting our business.

Yeah. And just add to talk about Neptune a little bit. So if you recall, we stood up the ultrasonic or static line last quarter, the second-line. And so we had some constraints in our mechanical meter production. And so, happy to report the root causes were identified, corrective actions implemented. We had some yield issues on plastic molding that got printed. Some of the machines were creating some constraints as well. That's been remedied. Really like the trends we saw through September and those trends pretty much inform the production output for the fourth quarter and beyond. So we feel good about demand is really strong there. So it's really just getting through this mechanical meter production issue and we feel good based on what we saw in Q3 and the confidence the teams have in Q4.

The only thing I would add to Jason regarding Neptune is that, as I mentioned in the prepared remarks, Neptune was able to fully meet the customer commitment. There were no issues there. Kaizen continues to improve, and Don and the team did an excellent job of going to the shop floor to identify the root causes.

Great. Thanks.

Your next question comes from Julian Mitchell with Barclays. Your line is now open.

Hi, good morning.

Good morning, Julian.

Maybe I just wanted to follow up on the sort of the macro context as it pertains to network software specifically. As we're thinking out sort of beyond this quarter trying to gauge how you're thinking about the recovery slope at network software, you cautioned that Foundry in aggregate next year may not see much growth because of the ongoing sort of strikes hangover. I just wondered on sort of DAT and Loadlink that portion what the expectation is? Do you think it's plausible, we could just keep moving sideways sort of sequentially for some time? And maybe just frame as you see it now, how much are Foundry and the freight match businesses down in 2024?

I'll address the first part. On DAT and Loadlink, we intentionally chose the term "stabilizing" during this call, as we really are in a stabilized market. We expect to maintain this position regarding tonnage or load volumes moving across the roads and into the network until we observe a different trend. DAT, however, has a clear plan in place with a strong confidence that it will return to modest growth levels next year, without expecting any improvements in carrier network participation through packaging prices. Therefore, we anticipate some modest growth at DAT next year, which we feel confident about as we head into our AOP sessions next month. Regarding Foundry, we are simply waiting for post-production employment to return to its historical levels. Currently, we are roughly 15% below pre-pandemic employment levels, and while content is being produced, it needs to progress through the pipelines, which we expect to happen sometime in 2025. It has taken a bit longer than we initially expected earlier this year.

Freight match has decreased to low single digits this year. We believe that Q3 will be the lowest point for us and that we will begin to see an upward trend going into Q4 and into next year, depending on market momentum. Foundry has experienced a decline in the double digits this year, which has been consistent. We anticipated more recovery in the latter half of the year, but it's taking longer than expected. As we look ahead to next year, I want to remind you that the first quarter included a one-time item related to MHA. Aside from that, we expect to see steady growth in the segment going forward.

Thanks very much. And then just my follow-up, switching back maybe to the EBITDA margins at TEP. So those have been sort of down year-on-year for a few quarters. You've mentioned the production issues, there were clearly supply-chain efficiencies sort of moving around. As we look ahead at TEP, kind of what's the confidence maybe that margins can return to year-on-year expansion in the coming quarters.

Yes, you're correct. In the second and third quarters, we experienced significant supply chain improvements for our medical product divisions. This year, however, we are seeing a slight decline. NDI has also decreased and faced some negative mix effects, but we are actively investing in its growth since it has consistently delivered double-digit growth for us. Overall, we anticipate that our EBITDA margin will remain flat for the year, but we expect it to improve in the fourth quarter.

Great. Thank you.

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

Yeah, thanks. Hi, Neil, Jason and Zack. And my primary question is actually on the enterprise software bookings. I think you said double-digits, up from high single-digits. I don't know what you could share in terms of what kind of budget flush you're looking for 4Q. I assume there is some of that. So if you could make either a comment on that or just more importantly, if the bookings are picking up, do you think there's potentially an inflection in the first half next year or second half just depending on how some of that activates to revenue? And then I had a follow-up.

I can provide some insights on that. You're correct that the fourth quarter isn't really a budget flush; it's more about customer behavior. Typically, it's our biggest quarter, so we're eager to see how that unfolds. The last couple of quarters have been strong, and just to add some context, Neil pointed out that Deltek, GovCon Enterprise improved a bit. If we look at the change from Q2 to Q3, that contributed to the growth. Verathon also performed strongly, particularly in the carrier sector, and had good broker expansions, with a focus on carriers leading to some new logo wins. Aderant has also shown strong performance, with a good mix of expansion from existing customers and new logo wins with their Sierra Cloud products. It's encouraging to see them continue to make strides in the market. Looking ahead to the fourth quarter, it will be crucial in terms of its impact on next year and its effect on revenue. Overall, we are optimistic based on the performance over the last couple of quarters.

We continue to see momentum in enterprise bookings that will translate into revenue. The timing for next year will depend on implementation schedules and when customers go live. This is definitely a trend we are monitoring closely.

That's good to hear. I have a follow-up question. Neil, you mentioned earlier about your insights on business-level commentary and talent management decisions. You talked about Procare and Frontline. What motivated the changes there? You mentioned that they are performing well but have the potential to improve further. Could you elaborate a bit more on what to expect from the leadership changes at Procare and Frontline? Thank you.

Sure. There are two different points to discuss. First, regarding Procare, we recognized during our evaluation process that there was an opportunity to enhance and modernize the go-to-market functions. Shortly after taking ownership, we shared our findings and the potential for value creation with Procare's leadership team, who agreed with our assessment. As a result, we made a leadership change. The new leader, promoted from within the company, is implementing strategies to target various underlying opportunities, such as improving lead generation, optimizing call staffing between inbound and outbound efforts, refining compensation structures, and enhancing call scripts for better upselling. Although it’s still early, we are beginning to see positive results. On a different note, our previous leader retired, which opened up the chance to bring in Matt Strazza, someone with whom we have a long history. He initially joined as the go-to-market leader at Deltek and performed exceptionally well. Following that, he took on his first CEO role at ConstructConnect, where he also excelled in leadership. Since Frontline represents one of our more promising growth assets, we wanted a growth-focused leader in that position. It's still early days for him at Frontline, just a couple of months in. Additionally, as a result of our internal transitions, Buck Brody, the former CFO at ConstructConnect, has now stepped up as its CEO, with the Head of FP&A moving into the CFO role. This approach allows us to promote and rotate leaders within Roper while making effective external hires. Ultimately, it's beneficial for both the organization and the individuals involved.

That's great. That's very helpful. Thanks.

My pleasure.

Your next question comes from Scott Davis with Melius Research. Your line is now open.

Hey, good morning, guys.

Good morning, Scott.

I wanted to ask a high-level question. There has been significant price movement over the last couple of years, affecting almost everyone in the industry. Have you found it more challenging to secure price increases? Are we heading back to a more normal pricing environment? Looking ahead to 2025, do you anticipate a return to the usual pace of price increases, especially in software? What is your overall perspective on this?

I recall you asked a pricing question a few years ago as well. For us in software, we’ve always had a pricing mechanism in the ARR snowball. Generally, we have about 95 percent gross retention, which means we experience a roughly 5 percent drop. We offset most of that at each business unit level with pricing adjustments. It's inherent in our algorithms and customer pricing expectations, as well as in the new product features we develop through R&D, which helps us achieve net retention in the 105 percent range across the blended enterprise. Additionally, we have net new sales on top of that. This is a well-understood and established process, although there’s always room for improvement. For instance, we’ve made significant progress with PowerPlan, which initially lacked that capability but has since developed it. In software, we haven’t seen significant price increases in the past, so we’re essentially returning to normal levels. In our tech businesses, most units typically implement price increases when launching new products. We’ve now entered a phase of normalized inflation that allows for regular price adjustments over the next 18 months or so.

Yeah, typically medical product, too, it's all about new products versus price just because you're sort of bound by some of the customer contracts with hospitals and the like. But yeah, I think Neil's point on software is it's been part of the rhythm for a long time. A lot of what we've done in strategic plan reviews is understand key purchasing criteria and really unpacking that at a more detailed level for each of our businesses and that's helped them. It's provided some confidence or just some insight into what the customer thinks about the value proposition and that's been helpful as well.

Okay, yeah, that makes a lot of sense and it's consistent with what you said a couple of years ago. But hey guys, there's just a lot of debate as it relates to software around AI, Generative AI. But, I just wonder kind of your view now that you've had a chance to dig more into this and spend more time on it. It's certainly in your slide decks and you're launching products. But does the Generative AI essentially raise the barrier to entry because you have the relationship with the customer already and you can shorten your time to market on product innovation or is it the opposite, and people can come in with a lower priced product easier because just the development cycles are somewhat shorter? How do you guys think about that?

I believe it leans towards the former. Essentially, what we're doing is at the highest level and it's real. The market seems to be experiencing a phase of disillusionment, where reality is aligning more closely with the initial hype. While the creation of new use cases is slowing down, we're making significant advances in the existing use cases, focusing on both internal productivity and customer-facing products. It's important to note that we consider Generative AI to be an accelerator that raises the barrier to entry because it requires two key components. First, you need data that is highly specific to the questions being posed. Secondly, you have to know what questions to ask. The more nuanced the question, the better the generative tools perform. For instance, in our legal business, which serves as the ERP backbone for large law firms, the question isn't about how to create a general professional bill, but rather how a specific law firm can create a compliant bill tailored for Roper Technologies. These precise and nuanced questions are where generative tools excel. Therefore, incumbency is crucial. We can develop software more rapidly than any startup can, particularly with our established data and the specific questions we know to ask. As a result, verticalized software businesses benefit significantly from their incumbency and access to data.

That's good color and context. Thanks. Good luck, guys. Appreciate it.

Thanks.

Your next question comes from Steve Tusa with JPMorgan. Your line is now open.

Hi, good morning.

Good morning.

Following up on Julian's question about the NSS business for next year, which businesses are showing acceleration and how significant is the impact of the MHA benefit in the first quarter? Additionally, will you be able to reach that mid-single-digit growth range for that business next year?

So, I think, Steve, I think we want to stop short of even implying any guidance in the next year. What I would say just broadly across the enterprise is we like the momentum we're seeing in enterprise software bookings and the fact that it is normalized, a pretty normalized 2024 year from which to grow. You see the reacceleration heading into Q4. We expect those Q4 trends to carry into '25, but I think we want to just sort of stop there short of issuing guidance next quarter.

That's right. I think on MHA, we can call that as a couple of points of drag in Q1.

Got it. Okay. And then just lastly on cash. Obviously, a really strong result here. Seasonally, it steps up. How does it now behave seasonally in Q4? Last year, you were down, but not by much like basically kind of flat-to-down. Is that kind of the new seasonality? Or was there something unusual in Q4? Maybe just help us with this seasonality because it's definitely different than it's been in the past given the Frontline.

Q4 used to be our strongest quarter, but now Q3 has taken that title. I believe we won't experience the same level of growth in the fourth quarter as we did in the third. The addition of Transact was beneficial, but Q4 is traditionally our strongest collections quarter. So while we will see an increase, it won't be as significant as what we experienced in Q3.

Got it. Sorry, one more. Just on Vertafore, I didn't see it in the slides, any updates there?

Vertafore achieved a couple of significant wins in the quarter, which I can't discuss in detail just yet. They've also launched an impactful product called BenefitPoint, the leading solution for managing medical health insurance. This product includes an automation feature that saves approximately 45 minutes per customer per benefit plan, resulting in tens of thousands of hours of productivity for our clients. This is a significant release that the team has invested considerable effort into. Overall, the new product development is progressing well with some exciting wins.

Got it. Congrats on the cash. Thanks.

Thank you.

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

Hey guys, good morning.

Hey, Joe.

Hey, so on Neptune, it's good to hear the production issues have been fixed. Just curious, like we've been hearing some, like, kind of mixed, I guess, about order patterns in that business. Like, I know almost everyone in that sector had like huge orders for a multi-year period and backlogs are really high. Are you getting any sense of like change in like the incoming flow from like a new bookings standpoint for Neptune?

I would say that it aligns with our expectations as you mentioned. Before the pandemic, our business had a lead time of four to eight weeks, operating on a book-and-ship model. However, during COVID, our lead times extended to around 12 to 14 weeks, but we accumulated a backlog of 12 to 18 months of orders. Now, although the order duration is decreasing, the volume of repeat orders remains strong. Instead of placing orders a year in advance, clients are now placing them six to nine months out. The order duration is coming in as anticipated, and the number of meters being shipped on an account-by-account basis is also healthy.

Yeah, that makes sense. I'm just curious if any of your businesses experience strong excitement or nervousness about the election outcome when you speak with the leaders. For instance, does Deltek show excitement about a potential inflationary government spending spree? Is there anything across the portfolio that you would highlight in one direction or another?

As a general matter, we're apolitical and not significantly impacted by either administration. It’s important to note that the government always spends, but the administration influences the nature of that spending. Historically, during the Bush administration, the focus was on defense, while under Obama, it shifted to education and healthcare. Although the flow of spending changes, government contractors adapt their capabilities to align with where federal spending is directed. For 2025, the appropriations are currently quite clear and won't be affected by the election outcome. This clarity is likely contributing to a slight thawing in enterprise government contracting activities, at least for the near-term outlook.

Great. Thanks guys.

Yeah, thanks.

Your next question comes from Joe Ritchie with Goldman Sachs. Your line is now open.

Hey, good morning, guys. So my first question just a little bit longer-term. Neil, as you have these ambitions to grow the portfolio at a faster clip over the longer-term period, like, do you think you have the right portfolio in place or is there maybe some addition by subtraction to help you kind of achieve the ambitions of maybe more of like a high single-digit type organic growth number going forward?

I believe that within our portfolio, we are confident there are opportunities for every business at Roper to improve. None of our companies have fully realized their potential in terms of organic growth. Our strategy for enhancing organic growth is designed to be sticky and sustainable, although it does require time to implement effectively. A perfect example of this is our Verathon business, which transitioned from low single-digit growth to now achieving low teen growth over the past eight or nine years. While it may take time to refine our strategy and cultivate a culture of continuous improvement, we are currently four or five years into this process and are gaining traction. We are optimistic about enhancing our organic growth. Additionally, as we allocate our capital, we plan to lean towards slightly higher growth companies, such as Transact combined with CBORD and Procare, which is expected to lead to a gradual shift in our portfolio mix over time.

Got it. That makes a lot of sense. Following up on that last point, with your leverage now around three times net leverage, and recognizing that the pipeline is still strong, do you expect any pause in M&A activity as you de-lever and become more opportunistic, or could you see yourself engaging in transactions in the near term, say the next three to six months?

We currently have over $4 billion in M&A capacity and plan to stay active in the M&A markets over the next 12 months. The market is very attractive with many sellers. A significant number of sponsors have recently indicated that the primary focus right now is to sell. There is considerable pressure from limited partners, and DPI is a key factor. As a result, there are several years’ worth of deals that are expected to consolidate within the next year or two. We intend to take advantage of this favorable market environment.

Great to hear. Thank you.

Thank you.

Your last question comes from Christopher Glynn with Oppenheimer. Your line is now open.

Yeah, thanks. Was going to ask also about the deal dynamics out there. You answered the supply side. On the demand side, is that still very favorable to where you're seeing diluted buyer activity per deal?

In terms of the competitive intensity on a per deal basis, it’s difficult to determine definitively. I want to highlight that we executed the Transact deal on a proprietary basis. Our M&A teams are increasingly engaged in more proprietary or quasi-proprietary opportunities, which I can recall has been the case for quite some time. However, given the numerous opportunities expected from the pipeline, I believe all buyers may become a bit more selective early in the processes. This could potentially result in lower competitive intensity, but it’s challenging to assert that absolutely.

Okay. And then in terms of Deltek and the general GovCon exposure, a lot of the stimulus in mega projects, a lot of compliance hurdles are gating that process. Are you seeing any increased letting or momentum in that? And what's the implication for those platforms in '25?

I would refer back to our previous discussion about GovCon. It has been slow for about four to six quarters due to uncertainty regarding government spending and operations. However, we have noticed some positive signs in the last quarter or two, particularly among larger enterprise customers who are starting to show renewed interest in Deltek. The factors driving this change may include infrastructure developments, among other things, which are outside our specific focus.

Okay. Thank you.

Yeah, Thank you.

This concludes our question-and-answer session. We will now return back to Zack Moxcey for any closing remarks.

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

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