Roper Technologies Aktie

Good morning. The Roper Technologies Conference Call will now begin. Today's call is being recorded. [Operator Instructions]

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 first quarter 2026 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 Chief 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.

Now please turn to Page 3. Today, we will discuss our results primarily on an adjusted non-GAAP and continuing operations basis. For the first quarter, the difference between our GAAP results and adjusted results consists of the following items: amortization of acquisition-related intangible assets and financial impacts associated with our minority investment in Indicor. 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?

Thank you, Zack, and thanks to everyone for joining our call. As we turn to Page 4, you'll see the topics we will cover today. We'll start by highlighting our Q1 enterprise performance, then Jason will walk through the enterprise financials, our balance sheet and provide an update on our share repurchase program. Then we'll discuss our segment highlights and outlook and introduce our Q2 and increased full year 2026 guidance. Finally, we'll close with a few summary points before opening the call for questions.

So let's go ahead and get started. Next slide, please. As we turn to Page 5, I want to highlight 3 takeaways for today's call. First, we delivered a strong start to 2026 and are raising our full year debt guidance. Our Q1 results exceeded expectations across every key metric. Total revenue grew 11%, organic revenue grew 6%, EBITDA grew 8%, free cash flow grew 11% and DEPS was $5.16. Importantly, enterprise gross retention remained strong, consistently in the mid-90s area. On that foundation, enterprise software bookings were also strong, core up low double digits on a TTM basis. This continues the momentum from our last call and bolsters our confidence for the balance of the year. On the back of this quarter's performance, we're raising our full year DEPS guidance to a range of $21.80 to $22.05, up $0.50 at the midpoint and more on this later.

Second, we're continuing to accelerate AI velocity across the portfolio. In Q1, AI innovation continued to broaden across our businesses, move deeper into core products and increasingly show up in both product road maps and customer conversations. Businesses like CentralReach, ConstructConnect, Vertafore, iPipeline, Aderant, DAT, Subsplash and SoftWriters all released meaningful new AI-enabled product capabilities during the quarter. The signal from our own portfolio that AI can be a meaningful growth driver in vertical software keeps getting clearer by the day.

On the AI accelerator team at Roper, as a reminder, this is a central strike team that partners directly with our operating company to accelerate AI product development and capture reusable patterns for deployment across the portfolio. The team is ramping quickly. The team's first partnership was with Vertafore, helping deliver AI agents unveiled at their customer conference last week. This is exactly the kind of portfolio impact we envisioned when we invested in this team, and we expect the pace of partnerships with our operating companies to accelerate throughout the year.

And our third takeaway centers on capital deployment. Since November last year, we've repurchased 6 million shares for $2.2 billion, including 4.9 million shares for $1.7 billion year-to-date in 2026. Importantly, our Board authorized an additional $3 billion of repurchase capacity, giving us $3.8 billion of remaining authorization and north of $5 billion of total capital deployment capacity over the next 12 months.

Our approach remains unchanged. We're disciplined and unbiased between acquisitions and opportunistic buybacks, focusing on driving the best risk-adjusted long-term cash flow compounding per share for shareholders. Our M&A pipeline today is targeted, focused on high-quality strategic opportunities where we're developing deep relationships and real conviction, and we expect to remain active and disciplined long-term buyers.

Before I turn it to Jason, one theme you will hear throughout today's call, organizational velocity across our portfolio continues to build. The investments we've made over the past 2 years in leadership, in AI, in modern engineering practices and operational rigor are working and demonstrating meaningful results. Our businesses are releasing innovation faster, executing sharper and moving with more confidence. And that's what gives us conviction in the balance of the year and beyond.

So with that, Jason, let me turn the call over to you.

Thanks, Neil, and good morning, everyone. I'll take you through our first quarter financial performance, starting on Slide 6. As you heard, we delivered a strong first quarter, finishing well above the high end of our DEPS guidance range and ahead of expectations on organic growth. Revenue of $2.1 billion was up 11% with organic growth of 6% and acquisitions contributing 5%. Importantly, recurring software revenue growth across our software segments was again strong at 7%, which continues to be the best indicator of business health and durability.

EBITDA of $797 million was up 8% over prior year. EBITDA margin was 38.1%. Our core EBITDA margin was down 70 basis points in the quarter, driven by lower gross margins in our TEP segment due to mix of more consumables at NDI and Verathon, coupled with higher input costs at Neptune. Core EBITDA margins in our software segment expanded 40 basis points, which includes continued investment in AI. DEPS of $5.16 was above our guidance range of $4.95 to $5 and up 8% over prior year. The upside was driven by the combination of stronger organic growth, a lower tax rate and the benefit of lower share count resulting from our net purchasing activity in Q1.

Free cash flow of $562 million was up 11% over prior year. On a trailing 12-month basis, free cash flow is now $2.5 billion and has compounded at a 19% CAGR over the last 3 years or 15% excluding the impact of Section 174. We continue to view free cash flow per share as the most important metric in evaluating our progress. And on that basis, we were up 15% versus the prior year, given the combination of growing cash flow and a declining share count. Relatedly and for modeling purposes, we exited Q1 with [ 102.4 ] million shares outstanding.

Now if you turn with me to Slide 7, I'll walk through our financial position and capital deployment update. We exited Q1 at 3.1x net debt to EBITDA, which is up modestly from 2.9x at year-end, given the $1.5 billion we deployed towards share repurchases in the quarter. We have $383 million of cash and $2 billion drawn on our $3.5 billion revolver. Importantly, we closed on a new 5-year $3.5 billion revolving credit facility during the quarter, which provides ample liquidity and improved pricing and terms. This also enhances our cost of capital strategic advantage in the face of an increasingly constrained private credit market that other market participants looking to make acquisitions will be facing. Even after significant repurchase activity in Q1, we maintained over $5 billion of annualized capacity for capital deployment, which speaks to the strength of Roper's cash generation engine.

Neil highlighted the share repurchase activity in the opening. To put it in perspective, our cumulative 6 million of share repurchases is about 6% of shares outstanding and brings us back to a share count we have not seen since 2017. Additionally, our Board approved expanding our share repurchase authorization by another $3 billion, which provides capital deployment flexibility and reflects continued confidence in our vertical market software position, enhanced capabilities and execution velocity to capture the AI opportunities in front of us.

On M&A, the pipeline of high-quality opportunities remains very attractive. As we've discussed, we believe the structural dynamics in the PE-backed software market and a constrained private credit market continue to create a compelling environment for Roper. We remain active and disciplined.

With that, I'll turn it back over to Neil to discuss the segment performance and outlook. Neil?

Thanks, Jason. As you turn to Page 9, let's review our Application Software segment. Revenue for the quarter grew 12% in total and organic revenue growth was 5%. EBITDA grew 13%, EBITDA margins were 42% and core margins improved 50 basis points year-over-year. The quality growth here is notable. Recurring and reoccurring revenue, about 85% of the segment grew in the mid-single-digit plus range, while nonrecurring was essentially flat.

Stepping back at the segment level, 3 themes stand out for the quarter. First, enterprise gross retention remained strong, consistently in the mid-90s area. On that foundation, enterprise bookings were also strong in the quarter, consistent with the momentum we described in our January call and supportive of our confidence for the balance of the year.

Second, our SaaS transitions continue to advance meaningfully. Several of our larger businesses made real progress on ground to cloud conversions and on bringing new cloud-native products to market.

And third, AI progress continued to build to signal of shifting from product investment to product shipping and you'll see this clearly in the 3 company highlights to follow. First, Aderant delivered a record quarter, strong revenue growth and a new Q1 bookings record. Strength was broad-based with particularly strong SaaS momentum on Sierra, Onyx and viGlobal. Aderant also launched AI-driven talent evaluation within viGlobal, continued the rollout of a Stridyn AI platform and completed a record number of Sierra Cloud migrations in the quarter. Simply put, Aderant is winning in the legal market and doing so from a position of strength.

Second, Vertafore delivered a solid quarter, steady mid-single-digit revenue growth with EBITDA ahead of revenue. Recurring revenue continued to build across agency, MGA and carrier with MGA again leading on double-digit growth driven by strong bookings and high retention. And last week at their Accelerate user conference in Las Vegas, Vertafore unveiled its new Velocity AI platform, along with a suite of AI agents embedded across the product portfolio from reference connect and reconciliation to submission processing and e-mail agent automation. AI is a meaningful TAM expansion opportunity for Vertafore, and they're quickly moving to capture it. As I mentioned earlier, this is where the Roper AI Accelerator team had its first impact and is exciting to see.

And third, CentralReach continues to execute ahead of our deal model. Recurring software revenue grew well north of 20% with margins expanding, demonstrating the operating leverage in this business as it scales. And most importantly, CentralReach continues to be one of our strongest AI proof points. AI-generated session notes have dropped from 5 to 10 minutes to about 30 seconds, giving clinicians back roughly 8 hours a week to work with autism learners. BCVAs are saving 140-plus hours a year on report authoring and review and daily claim generation is 6x faster. Customers are responding. AI and AI influenced bookings were 75% of new business in the quarter, up from 0 2 years ago. This is a textbook example of how the AI right to win, we believe exists across our portfolio. CentralReach sits inside mission-critical workflows, has proprietary data and is translating that advantage into real growing AI revenue.

Prior to turning to the outlook for this section, I'll provide an update on Deltek and the GovCon market. Importantly, Deltek grew recurring revenue in the mid-single-digit plus range in the quarter, driven by strong private sector demand, partially offset by continued softness in GovCon enterprise. SaaS remains strong with ground-to-cloud conversions trending positively. Consistent with January, we're still waiting for the GovCon inflection. This is not new. We continue to work through the tail of last year's disruption to federal procurement, agency reorganizations and broader budget uncertainty, which has delaying decision-making, particularly on large enterprise perpetual deals.

Longer term, we remain encouraged. The One Big Beautiful Bill is a meaningful positive for defense and government contracting spend, but the benefit reaches us only after our customers win awards and invest in systems, and that takes a bit of time. Consistent with January, we are not baking into our guidance any GovCon inflection or any OBBB benefit and rather we'll adjust as conditions warrant.

Turning to our outlook for Application Software. We expect organic growth for the balance of the year to be in the mid-single-digit plus range, lower in Q2 on some nonrecurring timing, improving in the back half of CentralReach turning organic and easing nonrecurring comps.

Please turn us to Page 10. Total revenue growth in our Network Software segment was 14% and organic revenue grew 5% in the quarter. The quality growth mirrored application software. Organic recurring grew mid-single-digit plus, nonrecurring declined mid-singles as customers move to our cloud offerings and bookings remained strong here.

EBITDA margins were 50.7%, down 460 basis points year-over-year, while core margins held steady, down just 20 basis points. The gap reflects 2 dynamics: our acquisition of Subsplash, a faster growth business with a lower but steadily improving margin profile and our ongoing investment in DAT, particularly Convoy.

Stepping back at the segment level, we see similar themes playing out here that we described in Application Software. First, enterprise bookings were strong and gross retention remained high across our network businesses, together giving us improved visibility into the balance of the year. And second, AI progress is tangible and shipping to customers today.

Let me highlight 3 businesses in this segment. First, DAT is executing well against a mixed freight backdrop. ARPU expansion continues and adoption of our digital freight marketplace solutions remain strong. On the macro, spot rates are up 20% to 30% year-over-year and the carrier side of our ecosystem grew in Q1 for the first time in several years, real green shoots, particularly in the second half of the quarter. That said, a sharp diesel spike compressed carrier margins late in the quarter, and our guidance continues to assume no meaningful freight market recovery.

Our early-stage investment in Convoy inside DAT represents a material TAM expansion opportunity. Today, DAT is a subscription-based 2-sided network. Brokers and carriers pay to access the largest freight marketplace in North America. With Convoy, DAT is evolving into a full end-to-end agentic and ML-powered marketplace, participating in the workflow and the economics of the transaction itself, a meaningfully larger and more valuable business over time. The innovation that enables this transformation exists and is working in the market, and we continue to enhance and extend the tech.

In the most recent quarter, DAT's RateView AI agent moved into live production, replacing manual rate lookups with instant conversational lane rate guidance. Convoy's [ Load Notes ] is turning brokers freeform emails and chat messages directly into bookable loads eliminating manual data entry and Loadlink's voice-to-post is enabling hands-free load posting. [ The AI ] work at DAT is not theoretical, it's shipping in production and delivering incredible value to customers today.

Turning to ConstructConnect, another strong quarter with recurring revenue up double digits and continued breakout from Boost, their AI-based takeoff solution. AI Auto Count, which reads construction schedules, launches this quarter. Most importantly, ConstructConnect has now moved its entire product and engineering organization into agentic coding processes and tools shipping 4x the features versus a year ago. Broadening this across the portfolio to drive multifold product velocity gains is a key priority and an exciting one for enterprise.

And third, Foundry returned to year-over-year revenue growth in Q1 with Nuke closing the quarter at record ARR. Net retention returned above 100% for the first time since the 2023 actors and writers' strikes and our recent Griptape acquisition extends Foundry's leadership into AI orchestration across the visual effects and animation pipeline, enabling studios to securely coordinate multiple AI models and agents in their production and post-production workflows.

Finally, and prior to turning to our segment outlook, I'd like to make a couple of quick callouts. SoftWriters launched its AI-enabled order entry product last week, a meaningful workflow enhancement for long-term care pharmacies and Subsplash released Trends AI, giving ministry customers the ability to generate custom data insights through natural language prompts, a key unlock for this customer constituency.

Turning to our outlook for network software. We expect organic growth for the balance of the year to be in the mid-single-digit plus range. A couple of quick callouts. Subsplash turns organic in Q4 and margins will reflect continued investment in our freight platform acquisitions for the balance of the year.

Now please turn to Page 11, and let's review our technology-enabled products segment. Revenue here grew 9% in total and 7% organic, significantly better than expected, driven by strength at NDI and Verathon. EBITDA margins were 33.6%, down 260 basis points year-over-year, reflecting 2 dynamics: first, input cost pressure at Neptune, principally bronze ingot inflation; and second, a mix shift at both NDI and Verathon towards faster-growing consumables, which carry lower gross margins but more durable reoccurring revenue profiles.

Let me start with NDI. Another record quarter driven by exceptional demand for their electromagnetic tracking solutions across cardiac, neurological and orthopedic precision measurement applications. The EP market, in particular, is a strong multiyear growth vector for NDI. Procedure volumes continue to grow, leading OEMs are introducing new tracking-enabled catheter platforms. NDI has a unique right to win as a sensor layer. Great job by Dave and the entire team at NDI.

Turning to Neptune. Revenue declined low single digits in the quarter, which was better than expected, driven by strong execution from Don and the entire team in [ Tallahassee ]. The market dynamics were largely as expected with lower mechanical meter volumes partially offset by strong static meter growth. Importantly, Neptune's cloud-based software adoption continues to scale nicely, though off a small base. Consistent with our Q4 commentary, we're not underwriting a Neptune recovery in our 2026 guidance, and we'll continue to monitor underlying demand.

Rounding out the segment, Verathon delivered solid growth, supported by strong BFlex and GlideScope demand, and we're optimistic about new product launches planned for the balance of the year.

Turning to our TEP outlook. We expect organic growth for the balance of the year to be in the mid-single-digit range, lower in the second quarter as we face a tougher Q2 comp. We expect net raw material pressure to continue in the second quarter and improving in the back half of the year.

With that, please turn us to Page 13. On this slide, we'll cover our Q2 and full year 2026 guidance. Specifically, we're raising our full year 2026 DEPS guidance to $21.80 to $22.05, up from $21.30 to $21.55, a $0.50 increase at the midpoint, which passes through our Q1 beat and the impact of our already executed share buyback. We're maintaining our full year total revenue growth guidance of approximately 8% and organic revenue growth of 5% to 6%. For the full year, we continue to assume a tax rate in the 21% area and a bit below that in Q2. For Q2, we're establishing our adjusted DEPS guidance of $5.25 to $5.30. To reiterate key assumptions from our segment commentary, full year guidance assumes no meaningful improvement at Deltek's GovCon market or DAT's freight market and modest top line weakness at Neptune versus a year ago.

Finally, on capital deployment, we're entering the balance of 2026 with meaningful optionality. We have $5 billion of firepower available over the next 12 months, a targeted M&A pipeline and $3.8 billion of remaining share repurchase authorization, giving us substantial flexibility to act opportunistically. We will remain disciplined and unbiased between acquisitions and opportunistic buybacks based on what drives the highest and most durable cash flow per share compounding.

Now please turn to Page 14, and then we'll open it up for your questions. We'll conclude with the same 3 takeaways with which we started. First, we delivered a strong start to 2026 with 11% revenue growth, 6% organic revenue and 11% free cash flow growth. Retention and bookings remain strong and position us well heading into the balance of the year. Based on this, we've raised our full year DEPS guidance by $0.50 at the midpoint.

Second, we are accelerating AI innovation across the portfolio. CentralReach, ConstructConnect, Vertafore, DAT, Aderant and others continue to move AI deeper into their products and increasingly into customer activity, and our AI Accelerator team continues to build velocity across the portfolio.

Finally, on capital deployment, as we discussed earlier, our Board authorization of an additional $3 billion of share repurchase capacity gives us $3.8 billion of remaining authorization. Alongside that, we have $5 billion of capital deployment firepower available over the next 12 months, supporting our targeted M&A pipeline. We will remain disciplined and unbiased between acquisitions and opportunistic buybacks based on what drives the highest and most durable cash flow per share compounding.

As we wrap up, some additional color on the M&A market. A quarter ago, our pipeline was at record levels. Shortly after our call, the broader public software valuation drawdown caused sellers to pause most active processes. We remain active and our pipeline leans more proprietary. That said, we expect M&A activity to pick back up, timing of which is still to be determined. But when it moves, a large number of opportunities are likely to emerge and we're in an advantaged position to capitalize on this. We remain very bullish about being a high conviction acquirer of vertical market software businesses with deep proprietary moats where AI accelerates growth. The signal on that thesis from our own portfolio is becoming clearer and clearer.

So in closing, the ingredients for accelerated cash flow per share compounding are coming together. Our portfolio is the strongest it has ever been. Our organizational velocity is accelerating. AI is both TAM expanding and growth enabling, and we're excited to see our product work translate into higher growth. Our capital deployment capacity and flexibility are significant differentiators and our discipline is unchanged. This is how we compete and win and how we continue to compound for our shareholders.

With that, operator, please open the line for questions.

[Operator Instructions] Your first question comes from Dylan Becker with William Blair.

Nice job here. Maybe, Neil, starting for you. I think it was clear in your commentary, you kind of talked about the accelerating pace of innovation and the right to win and TAM expansion -- kind of TAM expansive nature of AI. But if we think about kind of the embeddability piece and monetization of the platform, I guess, maybe how that layers in incremental conviction as well, too, right? Is that something that can lower friction around adoption? Is that something that can increase kind of the likelihood of success and value alignment with customers, but maybe how the platform positioning and embeddability of agents maybe layers in kind of incremental confidence in that right to win around agents?

Yes. I just want to -- so if you're asking about embeddability, I want to make sure you're a little muted on that. I want to make sure I'm answering the right question.

Yes. So the ability to kind of embedded it into the existing platform, right, and kind of the [indiscernible] value.

Yes. So a few things I'd start with on this. So it really starts with what sort of we talk about internally all the time about the AI, the product magic. We're able to create products now across many, if not all of our software businesses or when the customer sees in early betas and early trials like what the product can do, like their eyes sort of pop out of their head. It's like truly like a magical experience. [indiscernible] know software could do that, right? So that's what gets us like really excited. We just saw it last week, for instance, at the Vertafore Customer Conference, just sort of as an example.

So in terms of monetization, generally -- so that's one. I'll start there. Second is we believe that the right to win here is sort of on-stack AI embedded natively in workflows is a winning play, a huge incumbent advantage. So it is the second thing.

Third thing, monetization, I think, for us is -- there's not going to be a one size fits all. There are some businesses today that already price on a consumption basis, think like SoftWriters and pharmacy automation or what Convoy does at DAT. So I think those will be monetized on a consumption basis. Also those customers' unit economics generally are driven on their own consumption, so it aligns with the customer unit economics.

I think more broadly, though, the monetization is going to be one that sort of, as you alluded to your question, balances adoption and long-term monetization. So I think that's going to not be largely consumption-based. Our customers very much are saying very clearly, they need to be able to plan for and budget what the spend is going to be. So it will likely be some sort of a subscription with an overage based on utilization of the AI tools. I think that aligns nicely with adoption because then the customers are going to be focused on how to realize the magic value, if you will, and not be worried every time they press a button, it costs money. But then when that gets fully adopted and there's like deeply embedded in workflows, we'll be able to sort of grow with that utilization.

I would just add that our CentralReach business is furthest along in this journey. They've been out in the market with AI products for 1.5 years or 2 years, and all of their AI is incremental. It's based on learners, which you could say is some form of consumption, right? It's not based on practitioners but learners, but that's been -- and customers are seeing real value, as Neil highlighted on the prepared remarks in terms of workflow efficiency and better revenue realization.

Very helpful. And maybe, Jason, kind of just sticking with you quickly as well, too. Obviously, kind of reiterating the full year revenue guide, 5% to 6% organic. We just did 6% this year. We've got some mechanics kind of layering in and easier comps in the back half as well, too. But maybe kind of just give us a broader sense of how the start of the year kind of layers in conviction and maybe that kind of conservative view that we continue to take to the guidance framework here going forward.

Yes. Yes. Look, it's a strong start to the year, very encouraged by what we've seen. But we're just one quarter in. So we want to sort of see how things play out. As Neil talked about, we have a couple, like you said, mechanical things in the second quarter nonrecurring in AS will be a little bit more impacted than the first quarter. And then we're just -- in TEP, we're comping a high watermark in Q2, but that will ease off in the second half. And then as we've talked about, the second half will improve in software with Subsplash and CentralReach turning organic. And then we have just some easing comps in AS. So all that just sort of blends into our sort of holding the range at this point, but we'll see how it plays out.

Your next question comes from Brent Thill with Jefferies.

This is Leah on for Brent Thill. Neil, just curious to hear your thoughts on the private markets given ongoing volatility. Can you just tell us a little bit more about what you're seeing right now and if it's changed your outlook at all?

Talking about private markets on M&A? Talking about?

Correct.

Yes, sure. So as I mentioned in the prepared remarks, it's definitely been with the public market drawdown. It's been -- it's gone from the busiest we've been in a long time to the least busy. We're still busy. We're still active. As I mentioned, it's more proprietary. It's certainly more targeted. But it's actually -- we think the M&A setup has actually improved a bit for us over the last 90 days in the context that the LP pressure that we've talked about now for a couple of years continues to exist. That does not change in any capacity. If anything, it's maybe increased over the course of the next 90 days.

The other thing that's happened that's been -- everybody is widely reported, people understand is now we got the private credit dynamic that also is putting pressure on the asset class. So for us, it's -- we think the combination of those 2 will likely service more quality assets in the processes, and we're a very advantaged buyer in that regard. But the timing is still to be determined. We're modeling out what these maturities look like on the private credit side. There's not a meaningful maturity cliff this year. But if you're a private equity sponsor seller, you want to think about divesting an asset well before maturity. So that's something that [ Jen ] and her team are sort of lining up. So we think there's an opportunity here to get potentially, I should underscore potentially to acquire AA+ assets at differentiated values given the backdrop and the dynamics here. The timing of this is to be determined, but we'll stay active in process and prosecute the opportunities in front of us.

Yes. And I would just reiterate, we refinanced our 5-year revolver this quarter at a very good cost of capital, sort of tightened up the spread a little bit. So shout out to Shannon and Dave Baker for getting that done this quarter. Just a great job there. And just positions us well. We have a lot of balance sheet flexibility, and we'll be able to move quickly when the opportunities arise.

Got it. That's helpful. And then just on Deltek's government contracting business, did you see any impact in the quarter at all from the war in the Middle East? And is it having any impact on your outlook for the remainder of the year?

Yes. We asked that very specific question on our call down with Deltek. And the short answer is very little, if any. There certainly is a sliver of the sort of aerospace defense subsector of government contractors that are focused on munitions and sort of war efforts. So that's a small sliver of the population of the broader, I'd say, contractor population. So it had, if in effect, a minimally negative impact just in terms of those contractors are focused on the war efforts and not on contracting for ERP software, but it wasn't material in the quarter.

Your next question comes from Joseph Vruwink with Baird.

I think all Application Software is facing this question around whether AI-related spending grabs an outsized wallet share and maybe the incumbents get squeezed along the way. I think the interesting thing about Roper is you have exposure to markets like legal and health care. I think those are the 2 biggest vertical AI adopters so far. And then I think your respective software exposure there is still doing pretty well. What's your take on this topic? And have you seen any changes year-to-date as we've also seen the big ARR numbers come through from the frontier model providers that make you more concerned in coming quarters?

I would say we're -- the punchline on that, the TLDR is no. No impact on sort of the budget budgetary spend that we sort of compete for. I think the double-click on that is the obvious answer, which is -- and this is a personal opinion that I think a lot of these surveys around IT spend are a little misleading because the whole point of the AI effort is we get to go monetize labor spend. So it's about a whole different bucket of opportunity to capture and provide value to the end market. In the particular -- in the -- across the whole platform, we're not seeing sort of an impact to us relative to allocation of budget, especially not in legal and health care as we talked about Aderant, which is amazing in the quarter. It's been an amazing few years here at Aderant.

Great. That's helpful. And then I heard enterprise bookings up low double digits over the trailing 12 months. I'm curious what they were in the quarter? And I think your definition excludes price. Maybe can you just comment on pricing power in the aggregate?

Yes. So it was certainly above the double digits. We had an easier Q1 comp last year. I think the TTM is definitely the right way to think about it. Yes. And then in terms of -- it does not include price, you're right. And prices held up very well. I think what we've said historically, we're very thoughtful across the portfolio about pricing, and you have to earn the right, and companies are doing that as part of our strategic plan work that we do is understanding that dynamic. And so we've continued to do that methodically over the last half decade or so.

Yes, I would -- the only thing I'd add on pricing in addition to what Jason said is we actually think relative to what the market will bear on pricing, we have underutilized that lever in growth. And so it's not like a pan portfolio [ go raise ] pricing. That's not how we operate at Roper. But as Jason said, it's like where you have earned the right with your product, your product value and your customer relationships to take a little bit more pricing then we are doing that. And -- but it's a very strategic. It's a very earned process. And we would hope that we would see a little bit, I don't know if it's 50 or 100 basis points over the portfolio of software and pricing impact or increase over the next couple [ of 3 ] years.

Your next question comes from Terry Tillman with Truist.

I wanted to build on the prior question on legal tech because, yes, it's in the media reports and some remarkable growth from some of these SaaS natives there. But I'm curious, though, Neil, you've called out Aderant, a couple of years of amazing. And it does seem like it's like clockwork showing up in the segment level slides every quarter on record this or that. How much more sustainability is there in terms of just the momentum in terms of getting folks to move to SaaS? And just can this train keep going just on the momentum with Aderant? And then I had a follow-up.

Sure. So it's -- Chris and the team there have done a great job. I mean I'll give you a little bit -- a longer answer here. Aderant has been really good for a very long time for us. But what's been happening underneath the hood has evolved to sort of keep it good. It started with how do we just -- how do we just take it to our competitor and outcompete them in the marketplace. And that's how we went from 35%, 40% market share in large law to 60%, 65%. We just absolutely compete in one, and Chris and his predecessor team did a wonderful job in that sort of era of growth. Well, that era of growth we could see was going to end at some point, so we had to evolve. That's where we sort of said, okay, let's -- we have this installed base of customers, how do we sell them more things? And so we then prosecuted both an organic and inorganic strategy to add the number of bolt-on products that we could or sort of integrate in modules that we could sell to this large law customer base that made strategic sense. So we prosecuted -- are prosecuting that strategy.

Then came along cloud, right? This was a constituency that did not want to move to the cloud and COVID happened. So we rapidly cloud-enabled the totality of the product set. And then we're now in the -- still early innings, maybe third or fourth inning, maybe not even that late of moving this customer constituency to the cloud of that lift and shift. And now we have the tailwind of the AI benefit in terms of being able -- so there's -- it's a multiple growth driver story and I think there's quite a long way to go on this. But part of the benefit of owning any business for the long arc of time is you're always looking out horizon 2 and horizon 3 for what you have to build either organically or inorganically to sustain or improved growth rates.

Yes, that's very helpful. And the follow-up is just what we're seeing though is with particularly -- not necessarily generative agentic. I mean, that's a pretty big lift in shift in change management, customers being comfortable having things to go autonomous and even getting it beyond kind of the experimental space. So are you seeing with some of the businesses, you actually have to hire -- put in forward deployed engineers or kind of change how you go to market or help the customers and it does create some kind of incremental costs or just handholding? Just anything about how you help them consume this agentic stuff?

Yes, I think that's -- the short answer is yes. I think we mentioned last quarter that this year is going to be just a massive learning year for us across the enterprise on -- I'll put in like the commercialization bucket of these AI tools, of which FTEs are certainly a component. How do you position it? How do you sell it? How do you price it? How do you get it implemented? How do you get utilization pull-through? How do you drive renewal rates high? I mean that whole customer journey is going to be across the portfolio, a huge set of learnings for us.

We have -- I'll spare you the details on inside the portfolios, but we have portfolios where -- businesses where the uptake has just been very natural. We haven't had to have the 4 deployed engineers because when you press the magic button and you get productivity savings that immediately that productivity savings has taken in the customers' operation is something that they can go do tomorrow.

In other cases, there's some trepidation. If I press this button, do I lose my job, and you've got to sort of go through the whole change management process of that. I think in almost every case, folks don't -- our customers, they don't lose -- it's not -- lose their job. It's how do you sort of do task replacement, task augmentation and they can go play offense inside their customer to go compete and win. But it's certainly sort of an expect -- sort of something you have to overcome in that regard. So yes, we do expect across a certain part of the portfolio to do some version of a forward deployed engineer.

Yes. Final thing I'd say on that is I think it's kind of from an investment point of view, it's probably more of a reallocation or rebalancing of investment from customer support, customer service to FTE. So I don't know if it's like a huge cost increase. It's just a resource allocation dynamic.

Your next question comes from Joe Giordano with TD Cowen.

Just curious on your talk about like embeddability and subscription plus overage in the future. Like I get the view of like I don't want our customers to think every time they click a button and it cost them money. I fully get that. If these things become embedded and like the efficiencies potentially require less people at your customers, like how do you kind of judge the ROI of the investment necessary to kind of -- I say -- maybe not saying to kind of stay in the same place. Like the product is getting better, but you're getting like the same kind of subscriptions and it's like costing you more to maybe achieve that now than it did in the past. So how do you kind of evaluate the ROI on the required spend to kind of get to that place?

Yes. I think it's -- so this is -- these are very hard dollar ROIs. I mean we've said publicly, for instance, at DAT Convoy to manually broker load, it's somewhere between $100 and $200 of labor to do that. You use our load automation, it's somewhere in the $40 range. So it's a demonstrable hard dollar ROI. Similar things can be said that, for instance, at Vertafore, one of the agentic tools they released last week. It's a reconciliation tool, the time and motion study is it's like 17 minutes per reconciliation. Our tool does it in 30 seconds. Then you do these like the scores of these a day. So you can sort of see the time savings and then you can get to a financial ROI. So these are pretty hard ROI and products and that sales teams are taking that message to the market and the customer base.

Yes. And I would just say that -- sorry, Joe, I would just say we're using local smaller language models, maybe even older versions. So you're not consuming a lot of tokens when you're doing this activity. So it's -- and you can continue to change the prompts to make it more efficient over time. And so we've even -- even at Vertafore, we've taken that cost of goods down meaningfully in a matter of weeks. So I think it's still very accretive from a margin perspective.

Yes. That's kind of what I'm getting at more of the ROI from Roper standpoint. I get how -- I get the ROI from the customers. It's more like if we're spending money to develop new AI tools that are then embedded in the product that we're already offering, like how is the ROI on the increased investment do you need in 2026 versus the investment you needed in 2021 to get the same customer and keep the same customer happy.

Well, and I would just say on the development front, I mean, we're seeing demonstrable efficiencies, right, with the frontier models itself. So we're getting a lot more output and a lot more road map to consume. So if you talk about just OpEx investment, we're not assuming -- we're assuming productivity, but we're taking that back into the road map. So I don't think it changes fundamentally our P&L structure and our margin profile.

Joe, apologies for missing the point -- the thrust of your question.

Your next question comes from George Kurosawa with Citi.

On the AI strike team, led by Shane and [ Eddie ] that you put together, it sounded like they completed their listening tour last quarter and have now been put out into the field. It sounds like some really success at Vertafore. If you could just touch on how they ended up sort of stack ranking the opportunities that they see in front of them and then maybe the scope of their involvement and how much it's led to an improvement in Velocity?

Yes. So I'm delighted to double-click into that. So just to remind everybody sort of the 3 objectives of this AI, this Roper sort of accelerator team. One, and first and foremost, is to sort of coach and teach, right? This is about enablement of our 21 software companies to do what they've already learned on their own relative to AI and agentic development and then do it even better. So that's number one. Second is to partner shoulder to shoulder and build. And then the third one is to, where appropriate, build sort of shared componentry that we can -- where we can share some common run time or routines on the AI front across the Roper companies where it makes sense. So that's sort of the goal and focus of this group.

In terms of the -- where we're allocating the team, this is very much an executive leadership team focus. It is basically size of prize and impact is how we're sort of force ranking of this. In terms of Vertafore, it is one of our largest opportunities, if not the largest opportunity we have from an agentic automation point of view. I think there was 6 or -- 6 agents released last week at their Accelerate conference. That is just the very, very beginning.

The model that -- and then we -- this quarter, we'll sort of broaden that from one engagement with one business to be -- it's now 6 as the team grows and we have the now 5 additional businesses that are sort of in the early stages of partnering with.

And the final thing is about speed. I mean, I think the unlock here is, at least, I think Amy and the team at Vertafore would agree is our team, the Roper team sort of partner -- very much partnered. So you can imagine leadership resources in our team working hand-in-hand with engineers on the Vertafore team on how to do this AI development, one, because there's a little bit of art to this and not just science.

Number two, there is a speed coefficient that our team brings given their history about sort of modern day, like current very contemporary practices of agentic development and just the pace. And then there's just good old-fashioned change management. How do you sort of break bottlenecks and barriers to go fast. And we saw literally, I know it's sort of an overused term, but 10x kind of productivity gains partnering with Vertafore on some of this development in terms of speed and quality. So we're super encouraged. It's very early days. I don't want [ Shane and Eddie ] to hear this and think they've manifested fully. They've got a lot of work to do, but it could not have gone better, in my view, in the first 6 months.

Okay. That's great to hear. And then I wanted to ask kind of more broadly, when you look across the portfolio, it seems like AI commercialization is in sort of different stages. You've got businesses like Aderant, CentralReach that seem to be resounding successes. When you -- others seem to be coming up right behind them. When you look across that landscape, any pattern matching in terms of why some of these businesses seem to be moving a little faster than others? Is it primarily customer-driven? Or what would you attribute the relative successes there to?

I think it is -- Jason, I'll give an opportunity if he wants to add anything. I think if there's a pattern match there, when you have -- there's 21 software companies in the business. And while we want everyone to be going as fast as they possibly can, you have an array of where people are in their maturity. And where we're most advanced, they're the ones that got after and we're able to sort of get the agentic SKUs into the just in development first into the market first. And sort of now the next wave of this -- we talk a lot about CentralReach and Aderant and Convoy and DAT, they're the tip of the spear. Now we have like 10 or 12 companies, maybe couple more like just now just getting to market with real agentic magic SKUs versus like chatbots and embedded sort of GenAI search inside of existing products where the value unlock is. And so we can -- and we also think a little bit offline about sort of more deeper operational pattern recognition, but that's what I would say about the commercialization phase [indiscernible] you sort of had product ready first.

That's right. Yes. And I think the benefit of being part of Roper, we set our [ President Summit ] a couple of months ago, and we did an AI sort of showcase for those that are further along. So it just helps with the learning acceleration. But I would agree with Neil, that it's those that embrace and saw a true customer problem early on and they got after it a little sooner, but others are coming up the curve very quickly.

Your next question comes from Clarke Jeffries with Piper Sandler.

I just wanted to follow up on the comments around ground to cloud conversions advancing meaningfully. I'd love to understand the impact of SaaS transitions broadly in the Application Software segment? Is that contributing points of growth today? You made the comment around 85% of the segment is in the mid-single-digit plus range in growth, while nonrecurring was essentially flat. So I just wanted to know if it's something that would be of increasing benefit or already playing out in that segment? And then one follow-up.

Yes, happy to take the question. So just as you think about the percentage of products that are cloud-enabled, it's 2/3 or so today. So we have about $1 billion of maintenance. And we think that, that will convert over, say, the next 5 to 10 years or so, and that should convert at 2 to 2.5x lift from maintenance to SaaS. And so today, we're kind of -- if you think about the percentage that we have to go, we're sort of in the first or second inning of that journey. And so it does add, call it, 50 to 100 basis points of growth a year should for the next 5 to 10 years.

The only thing I'd add is we -- when we talked about this in the past, Clarke, we've also said we are very much pacing this ground-to-cloud conversion at our customers' pacing. We're not like forcing it to them. I'll say with the advent of AI, I should have mentioned earlier on the monetization, another monetization method for AI is embedding the AI sort of features in the cloud product. And that is a very compelling pull to make this transition go a little bit faster. So instead of 8 to 10 years, maybe it's 4 to 6. I don't know what the right number is, but we would expect to see that go a little bit faster.

The other thing is we made a tremendous amount of investment over the last 3 years getting product enabled that was because we're going to our customer pacing, there was an urgency to get products enabled and now we are extraordinarily product-enabled. So basically feature parity, if not more so in the cloud product than on-prem. So I think the setup here is a little bit better than it was a few years ago.

Yes. And I would just say it's mostly -- and it's going to be Aderant is a little further along. As you know, power plants in the early innings, but definitely much more cloud-enabled today than they were. And then when you think about those are a little bit further behind, it's more health care, but that's our Clinisys business and labs. That's just kind of the nature of that end market. And so those -- so we see the areas of Aderant and [indiscernible] being those that will be more near term in terms of cloud migration.

Perfect. All makes sense. And then one thing that kind of stood out to me was the margin impact in the Application Software segment. The margin impact of businesses owned for less than 4 quarters was actually positive year-over-year. Just wanted to unpack that. Is that -- is the takeaway here that even the earlier-stage acquisitions last year are getting to margin parity quickly?

So in Application Software, it's our CentralReach business, and that business is -- it's a very -- the business has ample R&D investment. I think R&D as a percent of revenue is like 20%, but they just have extremely strong incrementals. They're very cloud-native platform. And so as they expand, they have very good incrementals there. And when we talk about the acquisitions in our network software segment, we've talked about our -- the business Convoy that we added on to DAT. It's a technology investment. We're super committed to that investment to automate the spot freight market over time. So that actually has a drag on margins.

That plus our Subsplash business, which is a lower margin, faster-growing business that as they grow, they will scale margins. But you can see in our network segment, it does have a pretty meaningful drag on margins. Now over time, as Convoy continues to grow, that should be a tailwind as we go into the out years. But this year, it is a little bit of a drag on margin.

Your next question comes from Josh Tilton with Wolfe Research.

And congrats on a really strong start to the year. I will keep it to one given the hour. But my question is just basically you're very clear that the guidance still doesn't assume a recovery at Deltek and DAT for the rest of the year. Can you just remind us the confidence that you have in the rest of the application network software business and kind of offsetting that weakness throughout the year?

I'd say just to go through the segments. So that Application Software, we feel good about sort of what's going to happen in the second half. We just talked about CentralReach just having a set a really strong start under our ownership and a lot of that's recurring. And so that's just going to flow through in the second half. We've talked about being 80 basis points or so of accretion in the second half for that segment. We still feel good about that.

And then in network, DAT is looking good in the first quarter. We'll see sort of how things play out. Foundry will continue to be sort of getting better throughout the year. They had a great start to the year. And then some turns organic in the fourth quarter, and that's sure accretive to the segment. So yes, I feel good about the rest of the segment or the rest of the business.

Your next question comes from Ken Wong with Oppenheimer.

Just one for me. sounds like the kind of the downtick in 2Q is just purely due to tough comps, but just wanted to kind of make sure and clarify any geopolitical macro dynamics that you guys baked into that assumption as well, given kind of the current situation that arose?

No, not at all. I mean this is just like timing really in the AS segment. It's our nonrecurring perpetual activity. And so that's squarely what it is. We have clear visibility to that. And then on in TEP, no, I think we're comping 9% quarter as a high watermark last year. So it's just sort of a comp in the second quarter in TEP. It will get better in the second half. So nothing geopolitical at all. We are mostly U.S., as you know. So we don't see anything in the Middle East.

Your next question comes from Julian Mitchell with Barclays.

Maybe first off, I just wanted to try and put a finer point on the full year guidance. So is it fair to say that the sort of core EBITDA guide is essentially unchanged and it's really a kind of share count-driven guide? And maybe help us understand what the share count assumption is now at the sort of guidance midpoint. And I think the guide embeds has no extra buybacks beyond today. Just wanted to check that.

That's correct. Yes. So we had about a couple of hundred million of share repurchase between the end of the quarter and today. And so I think as I mentioned, the ending share count for Q1 is 102.4 million and then you've got some, obviously, dilution to add on top of that. So that's what we're assuming. But yes, you're right, it's -- we've mainly flown through the first quarter beat and then the buyback activity for the balance of the year.

In the first quarter beat for us, Julian, was partially from our [indiscernible] operating and partially buyback.

That's helpful. And within the network business, DAT has had a very tough sort of demand or macro backdrop and it's been executing well within that. Finally, the last 6 months, there's better signals in the freight markets in the U.S. maybe sort of flesh out a little bit more what you're seeing in that business? And sort of what's dialed in for that transport linked business in the U.S. for the balance of the year, please?

Yes. So as we mentioned in the call, we're not in the guide, there's not an assumption for improvement. Also, I'll just double-click a little bit on the prepared comments. So for the first time in -- look -- Jason, in a couple, 3 years, we've had carrier, the carrier count side of the network increased which is certainly a green shoot that we've been waiting quite a time. Now we've had some head [indiscernible] intra-quarter on that number in the past. And so we're going to remain cautious also the input costs or diesel costs certainly not helpful. So carrier margins or profitability would be a little bit challenging. And so -- but we're cautiously optimistic that there might be a freight recovery rejection rates got better, the rates got better as we talked about, 20% or 30% better. So we'll see how it plays out, but we've underwritten no improvement in the outlook.

Your next question comes from Deane Dray with RBC Capital Markets.

This is Kenny [indiscernible] on for Deane. I wanted to ask about Neptune business. So one of your peers have some meaningful project delays disruption in the quarter for their water meter business. Have you seen anything similar in terms of the industry dynamic or even any market share changes during the quarter?

Yes. I appreciate the question. So for us, on our Neptune business, we would say largely no. We've not seen a project -- any project delays. Now the backdrop on that is slightly different than the competitor you described. And Neptune plays in the segments that are on the smaller municipalities. So it's -- we have never had a large amount of project-based work, generally speaking. So it's really not an apples-to-apples sort of question.

The other part of this is we had a pretty decent sort of short-cycle demand in the quarter. I think that's largely because we -- and I'm not commenting about our competitor because we don't know their business the way they do. But we -- Neptune did a good job managing channel inventory in 2025. And so the hope or expectation is we'll be able to ship closer to retail in 2026 on the short cycle side, and I think we saw that play out at least early in the year in Q1.

If I can have a follow-up. If you just if you could unpack the cost pressure dynamics for the Neptune business or even at the overall TAP segment level, either in the magnitude or the time line to offsetting those that will be helpful as we kind of think about the segment's incremental margins moving forward?

Sure. Let me -- I'll take a crack at this, but I definitely want to ask Jason to sort of correct and sort of amplify anything. So in Neptune, it's really the ingot cost. And what we decided to do, I think [ Don and the ] team did a very sort of wise thing here. We did -- if you remember, 3Q, really July of last year, we pushed the sort of, call it, tariff or a raw material sort of surcharge into the market. It really had a negative demand impact in the short run. The signal from the customer was, hey, we certainly appreciate, we've got to onboard sort of global price inflation, but we'd rather do it through regular weight pricing versus surcharging. And so we will sort of -- we expect, by the way, a cost -- the baseline assumption we have is ingot cost is going to stay high. I mean, this is with all the data centers and just the demand for copper, this is a derivative impact to that. So our baseline assumption is this input cost is going to stay high for a while. So it will just be corrected or the margin will be captured through regular way pricing, which takes a couple of quarters to sort of work through backlog and get into the market. So we're taking a longer view on that.

In terms of the balance of the segment, it's really -- it's both Northern Digital and it's Verathon. These are businesses that are per our strategy for the market opportunity are becoming more reoccurring in nature, reoccurring consumables, which is a great thing about the predictability of growth and the absolute levels of growth in the businesses, but the consumables come with a lower GP percentage. So GP dollars are going up, the GP percentages may be a little pressured on those 2 businesses. Now they also do a very good job managing below GP to EBITDA ROP, where we don't think there'll be a lot of OP compression over the long arc of time because they do have natural leverage in the business. Those are the mix at play.

Jason, anything you want to amplify there?

No, I think you have covered it. Thanks.

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

Thanks, 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.

Awesome. So let's get started. Thank you, everyone, for joining us this morning. Kicking off day 3 of the Morgan Stanley TMT Conference for me. Very pleased to be hosting from Roper Technologies, Neil Hunn, President and CEO; and Jason Conley, EVP and CFO. So gentlemen, thank you so much for joining.

So maybe just as sort of to open up the conversation for maybe some people in the room maybe not as familiar with Roper Technologies, a little bit of a kind of one-on-one. This is a little bit of a different story from a lot of the [indiscernible]. What is the Roper story all about?

Yes. Thanks for having us. It's always great to be here, Keith. So yes, those that are newer to our story, Roper is this year, roughly $8.5 billion business, 40% EBITDA margins, 30-plus percent free cash flow margins. And we're a durable, steady, vertical market software compounder. I think that's what's unique about sort of our model versus others. So really a dual thread offense sort of steady organic cash flow generation and then we take all the cash flow generation and deploy it offensively.

Most of the time, historically through M&A, more recently through buyback. When you put it together, sort of we think about how durably and consistently can we compound our free cash flow per share. That's been in the mid-teens area, and we have the strategies and operational rigor in place to try to push that to be in the high teens area. In terms of the portfolio construct itself, it's vertical markets, right? So it's -- all of our businesses are leaders in small markets. We're super vertical-oriented, application-specific, high retention, high gross margins, high cash flow dynamics attached. And we'll get into all that, but that's a flyby of Roper, durable compounding vertical market business.

Got it. And you guys often talk about edge markets as kind of where you're looking for those either market leaders or emerging market leaders. How do you define [indiscernible] market? And within that, what are the key kind of KPIs? What are the key attributes you're looking for in terms of an emerging leader or a leader in that market?

Sure. So just to double-click on the high level. So we love owning businesses that are leaders in small markets. So small market, we mean small, like the largest TAM that we have in the portfolio of 29 businesses is about $4 billion, plus or minus. Like a lot of our TAMs are $1 billion plus or minus. So that is the first thing as it's a very small TAM. So these are TAM like software for early childhood education centers, software for autism therapy clinics, software for large law firms, software for tax accounting for publicly owned utilities. I mean these are niches within niches and very, very sort of specialized. And we like these small markets for 2 reasons. One is they are protective.

So very rarely do we have a new entrant because the size of the prize is quite small, and they're well served by us. But also, I think more importantly, it means we compete on this notion of customer intimacy. Like we are just ingrained in the operations of what our customer does across the totality of the portfolio, our customers can't do what they do without us, right? So we are sort of the backbone of their business, system of record or whatever network that they operate within. So that's what we mean niche and sort of edge market. That's what it is. small markets where we have a clear leadership position.

Got it. I'm going to skip around the question list because I think that brings up a really interesting point. And let's just get straight into what has been sort of the major debate point of the TMT confidence really within the software industry for the last 2 years is the -- how insulated certain markets are or how well positioned certain markets are for AI. So when you're talking about these smaller markets feels more protected, do you guys see that as a more insulated kind of market from an emerging competition from a large language model lab? Yes, that's basically the question.

So our empirical evidence to date is absolutely, right? So again, we have 29 business in the portfolio, 21 are vertical market software businesses. The balance are sort of application-specific product businesses. So relative to the 21 -- it is our -- we're not aware of a model company or an AI native start-up that's attacking the core of what we do. I think there's logic behind that, by the way, which is if you're an investor and you're starting company, do you want to really sort of attack, if you will, a system of record and a $1 billion TAM that's well served, your rate of growth is going to be sort of rate limited by dislodging of a strong incumbent that has all the incumbent advantages. And so we haven't seen any of that across the portfolio in any capacity. So it proves to be quite insular in that regard.

I think more importantly, though, I'm sure in this reading your recap notes for the past couple of days, I don't think what we're about to say is like unique from what other companies are seeing, incumbency has like real tangible advantages as we're trying to develop AI tools at whatever term you want to use, the agentic layer, the task augmentation layer, right? So at the highest level, I've said this for a couple of years, we've said this for a couple of years, it's a combination of 2 things, and everybody focuses on the first one, which is like do you have the data, the knowledge graph, the context to sort of take a sort of a predictive model, make it deterministic because that's what has to happen when you're augmenting and replacing work.

But I think what also is often forgotten about is you have to know where to point that capability to and what problem to solve. And these are like very esoteric "boring tasks" that are repetitive, but it's truly like magic to our customers. Like how do you automate account reconciliations that take 17 minutes into a minute? Or how do you auto verify order entry for pharmaceuticals, which is done by a pharmacist today, a high-dollar pharmacist? Or how do you take 10 phone calls out of matching a freight load in the spot market and do it with no calls? And so these are like it's truly magic, but you have the capability, the knowledge, the data, the context, but the problem to point it to. And in these little niches that we sort of tend to own and that we're the #1 player again in each of them, it's -- that's the magic of what's happening, right? So lots of opportunity.

And back to deterministic, I mean, there's a regulatory compliance overlay in almost all of our vertical market businesses, and that's very hard to replicate. That's your decades and decades of getting compliance. So our customers don't want to sort of violate any sort of regulatory hurdles, and it's harder to get in. It just increases our moat.

Yes. And that was exactly what kind of triggered me to jump down into AI. When you're talking about intimately knowing your customers, software is all about solving your customers' problems and solving the sort of the business problems and making those businesses more efficiently. And you're right, everybody just focuses on the data. And there's a little bit of an inconsistency in that argument because ultimately, it's the customer's data, right? It's not -- you're managing it for them, you have visibility into it.

But what you have is that domain expertise, you understand these domains. And from my perspective, generative AI, the real opportunity is not to displace existing transactional systems is to automate workflows around those systems, and you need to know the problems to be automated. You need to know the business process to be automated. So the question in all of that is, I like it that you think about the world in the same way I do. But how do you push that down into this distributed portfolio of companies?

Yes. So very important context setting. So let me just take a minute to sort of talk about our org structure and why we operate the way we do. And then in this regard, it's -- I'll say it's better to be sort of lucky than good in the context of what we have to do with AI in the org structure. So because of the portfolio we have, like I mentioned, we're the largest player across all 29 of our markets, which means this is over a long arc of time. This has been since I've been at the company 15 years, Jason, 20. We've been in the modern day Roper for going on 25 years. And so all of our competitors, by definition, are smaller, which means probably they're generally a little more nimble.

So our entire organizational structure from the dawn of the modern day Roper been super decentralized, right? To optimize on 2 things: speed coefficient and proximity to customer, right? So 20,000 people in the company, 130 in the corporate center. So every other resource in the organization is closest to the customer, organized around speed. Like that's been the design principle for 25 years. So that's why I say it's better to be lucky than good. If we happen to have been organized for like cost of development or more centralized resources and not on customer centricity and speed based on our heritage, I think we have a real problem in the AI era, but we're not. And so we're -- as soon as the sort of light bulb goes on inside of our organization -- organizations, then the speed coefficient sort of builds on itself.

And so going on now 2 years ago, we said to our organization, all 29 of our leaders, like this AI thing is not a trendy paradigm. It's the next tech wave. We have to lean into it. And we've had each business now 1.5 years ago reunderwrite their entire business model, be AI native to get the thinking going. We've had them sort of change the way they do development. So smaller teams closer to the customer, collapsing product and development, sort of minimizing design, making that part of product, all the things that you do across all 21 of the software businesses. And so we really sort of have this increasing sort of flywheel speed happening at the point of impact. Now what we also identified is this is in the last maybe year, and we just started hiring the team about 6 months ago, where we were hiring sort of an AI accelerator tech team at the center. We'll be small to start, 20 or so people.

We're fortunate enough to have 2 exceptional leaders come from another large application software business to sort of lead the team for us. And what we found is as our businesses were experimenting and learning how to develop an AI, it's a very different development pattern pathway than traditional development, where you can have a -- traditionally, you can have a sort of an architecture and sort of deterministically work your way through. There's a little bit of art in AI development. And so we very much wanted to sort of have a team that has sort of grew up in machine learning, trained in machine learning and trained in AI, had done this at scale in the application layer. And so their mandate in the organization is to accelerate the technical teachings to speed things along even further, but also have a build team like they're going to be a small sort of, if you will, "10x" build team that partners with our companies, and then finally, there's going to be a shared Roper repo.

When you have common functions like whether it is document retrieval or document sort of parsing, that's a common AI sort of run time routine. There will be a central repo of that, so we don't have to multiply that times 21 -- times across the organization. So sort of this sort of perfect storm of our legacy close to customer, have speed built into the organization and accelerating it with the center team.

It almost reminds me a lot of companies that we're talking to have really brought forward the concept of forward deployed engineers, right? You need people who are really skilled in the AI to be able to help the businesses, right, and usually in the customer concept to understand how to utilize these technologies that really don't work very much in the same way the traditional technologies work. You guys do within your portfolio companies. You guys have talked about approximately 25 Gen AI initiatives underway within the broader organization. Any like early wins, any initiatives that are seeing significant or early traction, and on the other side of the equation, where do you guys see the white space? Like what looks most interesting in terms of new areas to go out and automate?

Yes, sure. So when I talked about that and we talked about this 25, that was probably 6 months ago. It was the culmination of the early product development work we've done in the organization. So this is product-oriented, playing offense sort of monetizing in the tech stack. That number is basically not discernible now. It explodes. So we're not going to talk to the 25, then 40 to 50 to 100, but it's much more than that now. Going back to a couple of years ago, we made the early decision that between using AI to drive play offense and put in the product stack and grow and expand versus use AI for productivity, we're tilting demonstrably more towards playing offense. And so everything that we've talked about today has been about that. So that's where the principal amount of our focus is.

Obviously, we're working like every company on coding sort of efficiency and customer service and sales. But that's -- we make -- we have 40% margins. Like we're not about -- we will improve margins over time, take that productivity, put it into the product road map, but the principal of our focus is playing offense. So a couple of examples where we've seen real success there. I'll give you maybe 2 or 3, if it's okay, to make it sort of tangible. I'd start with the best story, which is our autism therapy business is called CentralReach. This is the backbone that autism therapists sort of run their practice on.

To set the context here, there's something like 800 million therapy hours demanded a year in the U.S. and 300 million therapy hours supplied. So a huge supply-demand imbalance, waitlist sort of people -- these families waiting for access to care. And also inside of the care, the people that deliver the care, they turn over 85% a year. So it's a very difficult problem. And so the tools, the AI tools that Central Reach has developed and deployed into the market is a scheduling tool. It's a very complicated schedule. When you're -- you have a demand and your people are turning over all the time, you can't have a blank and schedule. It's -- and by the way, these learners are in between 2 and 8 hours a day for 6 months.

So if you have one person leaving a huge block in the schedule, it's a problem. Also all the note taking and sort of medical records and then all the revenue cycle back in the billing and collections. The punchline of this is the business has increased its growth rate from the low 20s to the high 20s. Its win rate in the second half of last year from the primary competitor went from 75% to 100%. And fortunately, for our customers, the attrition rate for the therapist has gone from 85% down to 40% because it takes a lot of the bad part of the job out. So it's like this win-win-win sort of in terms of customer, the market, the learners, the families and sort of our business.

Another example I would share is earlier days, but we're very excited about it. We have a business that is -- it is the technology that -- and the network that organizes the spot freight market in the U.S. So if you're a broker or a trucker, you subscribe to our network to find out where your load is. And today, traditionally, it takes about 10 phone calls for a load to be brokered. Are you available? Can you pick it up at 3? Will you do it at this rate? Oh, I need you there at 4. Can you deliver it by Tuesday at 3? They take those phone calls. And on average, that's about $100 or $200 of labor to broker a load at the broker level. We now have in place the technology to do that without a human in the loop. We charge a fraction of that cost and of the labor cost, and that's happening in the real world.

It's a magic button that sort of takes that inefficient sort of human connectivity out of loop to sort of accelerate the brokerage, the brokering of loads, which we think, by the way, it's great for a broker, it's great for a trucker, but actually makes the whole spot market a more fluid market. So we actually think there could be more volume that actually comes into the spot market. The spot market won't be the market of last resort. It could be the market of sort of middle resort because it's a more fluid, transactionally sort of dynamic market because -- now this, by the way, is very expensive technology. It's a lot of machine learning. It has to be absolutely deterministic.

You have to have the volume of rate data because part of this is how do you price a lane. We have happened to have in our network because of the scale of it, like 7x relative market share to our largest competitor. We know what the rates are per lane, per day by truck type, and if you don't have that, you can't do the match, right? So it's this combination of technology and data. I can give you other examples, but those are 2 that we're quite excited about.

I think what's exciting is the companies that are farthest along in AI are growing the fastest in our portfolio. So just to give you a sense of like we have this incumbency right to win. And so it gets our other businesses really excited when they see that and it fostered a lot of learning across the portfolio.

Got it. Have you guys had to adjust the pricing model? There's another big debate in software is kind of what happens with pricing models. But have you guys come up with new pricing models, more outcome-based, more consumptive-based to align to the newer technologies?

I mean we're certainly doing a lot of voice of the customer work on this right now in some of our businesses and just looking at where the puck is going and how we should be thinking, especially in the businesses where we have the highest right to sort of win that game and increase the productivity of our customers where you could see some seat degradation over time. And so I think what we're seeing is that there's just pointing it out another direction, like maybe it's a number of customers, maybe it's a number of whatever the driver of that business, maybe a number of policies, that sort of thing.

And our voice of the customer work so far has said that as long as we are capturing value for them, we get our fair share of that value. Our position on this, by the way, is to get the customers really excited about the product and really using the product before we sort of capture our share of value, again, just to continue to protect our moat and then play the long game in terms of AI monetization.

The only thing I'd add on top of that, certainly on the system of work agentic layer, our clients are telling us very clearly like, yes, we'll pay you for the value, but we don't -- we're not that particularly excited about an open-ended pay as you go. So it's probably going to be some sort of subscription with overage or something. So they have some certainty of what they're going to spend.

Tiers.

Some tiers, exactly.

I think it's a part of the equation a lot of investors have over-rotated on the idea that everything needs to move to a consumption model because when you talk to customers, customers don't love...

They don't want to...

Because they look at it as a variable -- a variable cost model, they'd much rather have certainty in terms [indiscernible] and enables them to get leverage on the technology.

And our current cost as a percent of their revenue on average for enterprise software businesses is about 50 to 100 basis points. We're not -- we're not a huge part of their cost part today. So we have latitude if we're demonstrating value to capture that value over in a fixed way if it turns out that way.

And just to double-click or just to round out the answer on the subscription plus. We are fully confident we'll be able to capture like the power users that are just driving token consumption. We're very comfortable with the margin profile of the subscription and then sort of like an old school cell phone plan. You get this many units of work. And if you go over, then you're going to pay, but there's some predictability for the customer.

Got it. Got it. I want to switch gears and talk about sort of recent results and how the company has been operating. We've been having this conversation for a couple of years running now. And I know the center of the Roper story is consistency in results, consistency in sort of the yields that you guys are able to bring to the marketplace. So let's talk about 2025. Revenue growth came in at 12%, $7.9 billion in revenues. Adjusted EBITDA grew 11% to $3.14 billion. Can you talk us through what worked well in 2025? And maybe what are some of the areas for improvement into 2026?

Sure. Yes, I can cover that. So I think as we obviously had some great business building in the year, but our growth wasn't really where we thought it was going to be at the beginning of the year. And there's a few reasons behind that. One is Deltek. It's our biggest business. It's exposed to government contractors. And that, as you know, when Doge hit and then there was nobody to deal with at the agencies with our customers not being able to talk to anybody at the agencies. And then the shutdown, that business was severely impacted in 2025. So you look at a business that has been a steady mid-single-digit plus grower and it was in the low single digits in 2025.

So a big part of our business and a big segment. And then -- so if you look at our Application Software segment, it actually organic revenue improved 70 basis points year-over-year if you sort of exclude that. Of course, you got to own all of Roper, but just to give you some context of the impact of that. Procare was a little off to a lower start. We'll talk about that a little bit later. I think Neil will touch on that. That's a business we acquired a couple of years ago, but we feel confident in the ability to inflect the growth rate there.

And then Neptune, which is in our TEP segment, our products segment, second half just impacted by tariffs and just skyrocketing input costs. And so we had to sort of process that with our customers in the second half of last year. And so again, we own it. We know we're going to do better going forward, but just a lot of things happened last year. As we look forward to 2026, we're sort of -- we're guiding organic growth 5% to 6%, taking a view that at least coming out of the gate, things aren't going to get demonstrably better. But we will have, like in application software, we've got a mid-single-digit plus. We're going to have a better comp just on Neptune alone -- or not on Neptune, on Deltek alone. So we're not expecting a lot of improvement, just a little bit better comp there.

And importantly, our CentralReach business becomes organic in the second half. So that will add 80 basis points or so to that segment. Network Software will be mid-single-digit plus. We feel very good about that. That's just our Foundry business, which was dealing with writers and actors strikes to media and entertainment. That will get better this year. And then we'll have our Subsplash business will also become organic in the fourth quarter. And then our TEP segment, that's sort of a little bit more wider range of outcomes as we sit today. We have guided low to mid-single digits with the first half being a little bit lower. We have Neptune down for the year, but we'll see how that plays out. Neptune, their water meter business, and we're waiting to see when the COVID super cycle sort of normalizes out. So that's sort of the one watch out that could provide some upside. But as we sit today, we're sort of -- that's the approach we're taking.

Got it. That the same conservative. Double-clicking on the Deltek side of the equation. A lot of the executives that I've talked to about sort of the federal disruptions in 2025 see the opposite side of the coin of that. On the other side of the disruptions of DOGE is also the idea that we got to run the government more efficiently and software is going to be a big part of the solution. Do you see an upside scenario in Deltek of that you guys become a bigger part of the solution in terms of how to garner efficiencies in the government?

I mean I think it's -- the value prop for Deltek has been compliance, right? If you're doing highly regulated projects, but also efficiency, how do you run a really tight project and increase margins. So I think we're always on the side of the angels, no matter which way you look at that. For us, though, I think -- and this is the big sort of what's going to happen is the O-Triple-B spending and when that ultimately cascades down to the contractors. We're starting to see some maybe signs of life, not at Deltek, but just in the marketplace in general. And that -- I mean that should accrue very nicely to that business.

And just so there's -- we're all clear, like our Deltek customers are the contractors who serve the federal government, not the government itself. And so O-Triple-B is an unmitigated tailwind for the industry. It's just when is the government going to be functional enough to basically award the budgeted dollars or allocated dollars and then that will trickle into our customers, which will sort of benefit us. But the timing is what the question mark is there.

Got it. Got it. And then on the capital deployment side of the equation, $3.3 billion in M&A in 2025. Could we start to get into the high-level conversation about how you guys are deploying that capital, the shifting mix of acquired assets. You guys have been talking about acquiring assets a little earlier in the life cycle. So why the shift? Why shift towards earlier stage? And should investors be concerned about having to pay a higher multiple for earlier-stage companies for that slightly higher growth?

So hold Jason and I accountable to all parts of that question. We're not avoiding if we forget to round it out. So to focus everybody, so I started by saying our cash flow compounding algorithm is sort of mid-teens, and we aspire to be high teens. That's our mantra, that's our rally cry. That's where we're focused on building a sustainable business. There's 2 levers to make that happen. The first is to improve the organic growth rate of the business by a little 100, 150 basis points, which you go to work every day to do on a sustainable basis. The second is to, if you will, recapture more value or higher returns from the capital we have to deploy, we do those 2 things, we can get to the high teens. So on -- when we look at how to capture more value, have higher returns on the amount of capital we have to deploy, it comes in 2 flavors. One is more tuck-ins. So that is a -- historically, a tuck-in was kind of like a 4-letter word inside of Roper going back to my predecessor.

They're actually the best deals we've been able to do, as you can imagine. We get back in sort of back-office G&A synergies and our adjudicating factor for a bolt-on is we only want to do a bolt-on, it's going to improve the organic growth rate of the company we're tucking into. So they become growthy and they're highly valued because of generally the G&A synergies that happen. But that's going to be -- we think when you do the time and motion study, the size of the portfolio, the digestibility of our companies, we think that could be about 1/3 of our capital deployed over a long arc of time.

The balance of the 2/3 will be platforms. And as we look at the range -- array of platform opportunities, whether it's, call it, a business as usual pre-2022 Roper-style deal, call it, 5% to 7% organic growth business, optimized margins that you pay a certain price for or you buy that same business just one owner earlier. where you have -- you're catching with a higher growth rate and you still have margin opportunity. Yes, on tZERO, it's a higher multiple. But on T5, it's substantially lower, like 30% to 50% lower because you have the value creation of both the growth and the margin improvement that happens. And so that's how we get the compounding flywheel to happen and sort of accelerate the compounding on the capital deployment front.

Got it. Got it. So not necessarily -- maybe a little bit of near-term pain, but long-term gain because you guys get to apply more of your expertise in terms of improving these businesses. And as long as you have patience in that capital deployment, the yield should be higher. So maybe let's apply that framework to some of the recent M&A, start with CentralReach. You talked about that as one of the kind of AI use cases of where you guys could add a lot of value by optimizing what is a really tough supply and demand imbalance. Can you talk to us about sort of those 2 vectors in terms of how do you guys improve kind of the revenue growth profile there? And sort of what are the main levers for margin improvement?

This is a business that is a mid-20% growth business for us. Its margins are -- can -- will be optimized, but this is more about how they scale their margins versus they're being inefficiently run sort of out of the gate. For us, it's about -- when you own a business forever, right, every business we bought has come from private equity and they own a business for 3 to 5 years, and they have to invest in a sine wave, invest for 2 or 3 years harvest, invest 2 or 3 years of harvest. And CentralReach and the others are no different. In our case, we get to have sort of Horizon 1, 2 and 3 sort of investments, and in this particular case, we have great near term, like next 5- to 7-year dynamics in supply and demand of the learners and the caregivers of the market position that we talked about before.

So the next intermediate period of time feels pretty solid. But as the market dynamics in this business shift and supply and demand become more balanced, then all of a sudden, what will happen like it happens in every class of trade in health care is people start discerning on quality of care, not just can you get access to care. So in the first year of ownership, we bought 2 assets, 2 small assets that are leading the industry and how you discern quality of care. And so not only will -- so the vision there is the CentralReach's customers won't just be sort of access to care, but they'll be the highest quality sort of caregivers, and that will sort of drive sort of the extended revenue growth there, for instance, is a way to do that. Again, that's a Horizon 3 investment, but that's where you have a long-term ownership will pay dividends over time.

Got it. Then the next big deal with Subsplash. It sounds like that's more in the vein of the maturing leaders. That's just the traditional Roper strategy?

So no, this is the new strategy. So we consider CentralReach and Subsplash very much the sort of one owner earlier. Subsplash is the software that churches run on. So it's the church management system. It's the engagement, both online and offline. It's the giving platform. It's all that integrated. It's beautifully designed software across all of this. This is a business that has 20,000 or 25,000 churches as customers, there's several million churches in the world, and it's a wildly underpenetrated category from a technology point of view.

So the top line growth is all about the go-to-market motion and just and dialing in the unit economics of that then pouring gas on it. This is also one where we underwrote pretty substantial improvement in margins. So this was run by the prior owner to not optimize margins or even sort of I would say modestly optimize margins. It was like a high 20% margin business. We think in the duration of this business, it can be high 30s to low 40s. And some of the very first value creation levers we pulled were to move margins higher, especially in the payments apparatus. And so -- and we've had some great success in that regard.

Outstanding. All right. And Jason, you previewed this before, Procare. It sounds like that got off to a little bit of a slower start. What are some of the lessons learned there? And what's the plan for turning that one around?

Yes. Well, Procare was our first maturing leader. And I think what we've learned and we've taken that to the next 2 businesses is really just around like if the team sort of got you from A to B, can they get you from B to C. And so we didn't move fast enough, I think. And so we've made those changes when we need to. And that just becomes from our history where we were a little bit more differential to management. And so kind of turning that crank a little bit more.

Our governance and our telemetry and our just cadence around the value creation plan is much tighter now. So we just learned lessons on how to stand that up and how to operationalize that. And so those are the probably the 2 biggest lessons. And then I think the other part is just working with management on the value creation thesis to the value creation plan and having that be really tight. And we did -- I think we did a really good job with that CentralReach and Subsplash such that in the second week of ownership, we know exactly where we need to go, and we know exactly if things are off the track, how do we do countermeasures and how do we partner together to work on those solutions rapidly.

Outstanding. So if you look into 2026, how does the M&A pipeline look? And what's going on with multiples? I mean we definitely see what's going on in the public market with multiples. Is that getting reflected at all into the private markets?

Yes. What has changed since the -- since how long ago we did our earnings call 5 or 6 weeks ago, it was on the call, we're like, hey, this is as busy as we've been in a long time in terms of just the sector of -- there's not a whole lot that happened in the last 4 months of last year, but there's a lot of organizing and a lot of pipeline building and a lot of meetings and a lot of processes that we're launching. And then we did earnings call, that was absolutely the case. And then what's happened in the public markets, just the private sellers have just tapped the brakes on that as you expect. I mean that is -- so right now, there's not a lot of activity and everybody is just trying to understand where valuations are.

If you're a private equity seller and the types of assets that we're owners of, you're under no stress, right? You're not a venture, you're not running out of money. There is some option value to wait to sort of see where the world sort of settles. That said, there is -- this is now we're in the -- solidly into the third year of very serious LP pressure on the asset class. And so that's -- so they will have to -- this will settle itself. It's hard to predict what timing. I don't know if it's second half of this year, second quarter this year or the next year, which is okay. We're patient. We've always been patient.

We've never viewed our capital allocation capacity as a budget because we're owned businesses forever. You have to sort of be patient, find the right asset, the right quality asset at the right price. In the meantime, the markets presented an opportunity for us and a lot of other software companies to be pretty aggressive in the buyback, which we've been. So I think between Q4 and what was then we put in our K, it's been $1.8 billion-ish buyback, is what we've done in the last 5 months or so, and that's what, 5-ish percent of our shares outstanding. So it's sort of a once-in-a-generation opportunity for us.

Got it. I have a couple more questions. I want to take the opportunity to see if anyone in the audience has questions.

Yes. You guys talked [indiscernible] what have you guys learned over time...

Do you want to take that to...

You can start. I have got it up.

Yes. So I think it's -- the process is -- I think if it starts -- a lot of that starts with really talking to the customers, right? So you look at sort of the competitive positioning, you look at the Net Promoter Score, you understand sort of the key purchasing criteria and how each customer -- competitor sort of ranks on that. So generally, we're buying again the largest player that has -- that wins on the key purchasing criteria, whether it's features or integration, whatever it is. And I think that gives you a sense they're making the right investments into the tech stack or into whatever it is or if customer support and Net Promoter Score is horrible, then they may not have enough in customer support will be sort of one.

Number two, when you run a portfolio of very like-oriented businesses, we have internal benchmarks about kind of what good generally looks like from a cost structure in a business. If you're running a $300 million vertical market business, is 3x market share of the next closest competitor. and you have 40% sales and marketing as a percent of revenue, something that's not right about that business. Conversely, if you're like 5% of revenue is R&D, something is not right about that business. And so we've got the internal benchmarks that we throw things against. Those are 2 things that come to mind.

Yes. I mean the other thing is it's really about the focus of the organization. And so the -- it's about reallocating resources where the best returns are. What we found -- pattern is that typically private equity, they do a lot of bolt-ons. Sometimes they don't have -- like we wouldn't do that bolt-on because we get to own the business forever.

They don't have a high right to win.

So it's like a new TAM. So it distracts, I think, the organization around some of these edge businesses. So our pattern is to focus and then get the resources focused on the core. And typically, you don't have to do a lot of -- you don't have to sort of surge invest for that because it's just getting focused on the things that are going to drive the most growth.

Any additional questions?

[indiscernible].

Yes, fair question. So just for those who might not have heard it, like are we over monetizing and sacrificing growth, essentially, is that a fair representation of the question? So the examples we gave on CentralReach and Subsplash, first of all, let me back up. At the enterprise layer, when you look at R&D as a percent of revenue over the last 5 years, it's gone up like 200 or 250 basis points across the entire organization, almost like 11% of revenue today, and that includes the product businesses that are like sub 5, for Apple. So from an R&D perspective, that's been going up over time steadily. The 2 assets that were -- the 2 businesses that we just described, in the case of Subsplash, this is like just wildly under monetized on how they deal with the payments infrastructure.

This is just literally like how they have the relationship with the processors and how you monetize with the processor. It's not taken away from R&D. It's just an under -- under sub-optimized sort of part of that business model that we had a pattern recognition on with 2 or 3 of our other businesses that we monetize through payments. So we're not sort of taking dollars, if you will, out of the company. We're sort of monetizing the environmental sort of factor a little bit better. And on CentralReach, like I said, that is -- that's kind of margin, is going to scale over time. There's not like a cost action that's happening inside of that business.

And we did some tuck-ins for CentralReach. So I mean if you wanted to penalize the P&L for that, but that just got this market probably 3 or 4 years ahead of time with a solution that's all about outcomes-based care. So sometimes we will do the tuck-ins to sort of get us where we need to get to with that platform. And so you could argue that's part of the investment of the business. But these businesses just typically run -- if you think about the go-to-market, a lot of what we're doing is cross-sell or we got expansions, and there's just not a lot of go-to-market costs around that because you already have the relationship with the customer.

Outstanding. Unfortunately, that takes us to the end of our time. But Jason, thank you so much for joining.

Thank you. Appreciate it.

Good morning. The Roper Technologies Conference Call will now begin. Today's call is being recorded. [Operator Instructions]

I would now like to turn the call over to Zack Moxcey, Vice President of Investor Relations. Please go ahead.

Good morning, and thank you all for joining us as we discuss the fourth quarter and full year 2025 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 adjusted non-GAAP and continuing operations basis. For the fourth quarter, the difference between our GAAP results and adjusted results consists of the following items: amortization of acquisition-related intangible assets, and financial impacts associated with our minority investment in Indicor. 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?

Thank you, Zack, and thanks to everyone for joining our call. As we turn to Page 4, you'll see the topics we plan to cover today. We'll start by highlighting our Q4 and full year performance, then Jason will walk through our enterprise financials, our Q4 segment performance, our balance sheet and capital deployment capacity. Next, we'll discuss our segment highlights and introduce our 2026 guidance, and then we'll close with a few summary thoughts before opening the call for questions.

So let's go ahead and get started. Next slide, please. As we turn to Page 5, I want to highlight 3 takeaways for today's call. First, we delivered solid execution in 2025. Revenue was up 12%, EBITDA was up 11% and free cash flow was up 8%. Importantly, enterprise software bookings grew in the low double-digit range for the year, providing strength as we head into 2026.

Second, we continue to invest for our long-term and sustainable growth. That said, organic growth this past year was below our expectations in 2025, and we own that. Our organizational focus and resolve are even stronger coming into this year. We've upscaled talent, sharpened strategy and improved execution across the portfolio, and that work is showing up for the enterprise. To this end, our application software businesses save for Deltek improved organic growth in the 70 basis point area, demonstrating broad-based growth improvements occurring within the segment. Importantly, we're not starting the year assuming organic growth will inflect in 2026 despite the traction we believe we're starting to achieve. We're going to execute and will reflect any improvement in organic growth in our guidance as it materializes throughout the year. We'll have much more to say on this later in the call.

On AI, specifically, we continue to be excited about the AI product opportunity because our businesses sit directly inside mission-critical, high frequency workflows where we already have deep domain knowledge, proprietary data and trusted distribution [indiscernible] can move from productivity to unstack embedded automation that improves outcomes for our customers and is highly monetizable. Importantly, our decentralized model that each business deploy AI with the appropriate domain specificity across our various end markets.

To further accelerate our pace of AI product development, we hired Shane Luke and Eddie Rafael to lead the Roper AI accelerator team. They will coach and partner directly with our businesses and with a small AI development strike team and leverage reasonable elements and best practices across the portfolio. So we can deploy AI with increasing speed and market-specific precision while scaling what works, exciting stuff for sure.

And our third key takeaway centers on capital allocation. During 2025, we materially advanced our portfolio and foundation through capital deployment, deploying $3.3 billion towards high-quality vertical software acquisitions during the year highlighted by CentralReach, Subsplash and several tuck-in acquisitions. Also and importantly, we leaned into opportunistic repurchases, buying back 1.1 million shares for $500 million in Q4.

As we look to 2026, we have north of $6 billion of capacity for potential M&A and share repurchases. We are very encouraged by the size and quality of our acquisition pipeline, and we expect to remain active while staying highly disciplined on price and business quality. And in parallel, we'll continue to use buybacks opportunistically when they represent the most attractive risk-adjusted path to durable cash flow per share compounding.

So with that, Jason, let me turn the call over to you, so you can walk through our quarterly and full year results. Jason?

Thanks, Neil, and good morning, everyone. We'll start off here with the fourth quarter results. To summarize, we finished ahead of expectations on DEPS driven by very strong margin performance. Revenue of $2.06 billion was up 10% over prior year, with acquisitions contributing 5% and organic growth of 4%, which was below our expectations. I'll expand on this shortly.

EBITDA of $818 million was also up 10% over prior year. Notably, our core EBITDA margin expanded 60 basis points in the quarter, representing 54% incremental margin. DEPS of $5.21 was above our guidance range of $5.11 to $5.16 and up $0.40 over the prior year. Shares were reduced by 1.1 million in the quarter for repurchases, which you see partially showing up here in our diluted share count on a year-over-year basis. However, the repurchase did not impact DEPS in the quarter versus our guidance, given the partial quarter share count benefit and higher interest expense.

Now if you turn it with me to Slide 7, I'll walk through the Q4 segment performance. Application Software revenue grew 10% with organic growth of 4% and margins were solid, expanding 70 basis points to 42.2%. It's important to outline some details on organic revenue. Recurring revenue grew 6% in the quarter. However, nonrecurring revenue was down 8% in the quarter and was the primary driver to the lower end of our mid-single-digit outlook.

In our last call, we talked about Deltek being the big swing factor in the quarter. With the prolonged government shutdown, large GovCon commercial activity and perpetual license revenue was meaningfully impacted, leading to Deltek being up at the lower end of mid-single digits for the year as compared to the solid mid-single digit plus grower it's been over the decade that we've owned the business. That said, we are cautiously optimistic about a 2026 improvement for Deltek given both the 2025 disruptions caused by DOGE and the shutdown and the forward benefit of the OBBB appropriations coming into the market. As improvements occur, we will reflect this in our outlook.

For network software, revenue grew 14% with organic growth of 5%. Margins were lower at 52.8% due to the recent bolt-ons for DAT that are currently scaling into profitability. On organic revenue, recurring growth here was also 6%. The recurring performance was consistent with patterns over the last 2 quarters with mid-single-digit growth at DAT despite a muted market backdrop and steady improvement at foundry. However, nonrecurring revenue was down 3% on lower services revenue and some customers electing to move from perpetual to SaaS, which negatively impacts the quarter but benefits long-term growth and customer lifetime value.

For our tech segment, revenue grew 6% or 5% organically, while margins held flat to prior year at 34.8%. NDI outperformed in the quarter given strong demand for solutions in the cardiac ablation space, while Neptune was down slightly as expected, as we comp against a stronger prior fourth quarter and worked through the final surcharge negotiations.

Now let's turn to Slide 8, where I'll summarize our 2025 full year results. 2025 was a solid year in terms of cash flow and DEPS performance despite lower-than-expected organic revenue. Revenue posted at $7.9 billion or up 12% over prior year. Acquisitions contributed nearly 7% growth. Of note, we acquired 2 great platform businesses in CentralReach and Subsplash that will be accretive to 2026 second half organic growth.

We also made 3 strategic bolt-ons for DAT that significantly automate workflow in the spot freight market and will gain adoption in the years to come, which will ultimately inflect the growth rate for DAT. Organic growth was nearly 5.5%, which Neil will discuss in the segment detail.

EBITDA reached $3.1 billion or 39.8% margin and was up 11% over prior year. Of note, core margin improved 30 basis points and represented 47% incremental margin, which is in line with our long-term growth algorithm. DEPS of $20 was up 9% over prior year and reflects the top end of our 2025 guidance range provided in January despite lower organic revenue and in-year dilution from recent acquisitions.

Free cash flow of nearly $2.5 billion was up 8% and represented 31% of revenue, which is in line with our initial free cash flow margin framing for the year. This represents an 18% CAGR since 2022 or excluding the impact from Section 174 in both periods, it was at 14%.

As we look forward to 2026, we expect higher growth than in 2025 through benefits from working capital and cash tax improvements. This will put us safely over 30% of revenue next year. However, Q1 will be a bit lower given timing of coupon payments for new bonds issued in the third quarter of 2025. This, of course, does not contemplate future capital deployment towards either M&A or share repurchases, which brings us to our balance sheet discussion on Slide 9.

We're entering 2026 in a strong financial position with net leverage ratio of 2.9x and ample near-term liquidity with about $300 million of cash, nearly $2.7 billion available on our revolver. With this position and strong forward cash generation, we have over $6 billion in capacity for capital deployment this year. Regarding M&A opportunities, we've been proactive and successful in executing high-quality acquisitions for the last couple of years despite a weak M&A market.

Most anticipate the market to pick up in 2026, which we view as a net positive given Roper is a home of choice for any acquisition target CEOs. Additionally, we have the attractive optionality of a share repurchase program, which was authorized and commenced in the fourth quarter. As Neil mentioned, we deployed $500 million to acquire 1.1 million shares in the quarter at an average price of just under $446. This leaves us $2.5 billion remaining on our current $3 billion authorization. We will remain agile in deploying capital to the best return for shareholders. Given the current valuation dislocation, we are now very pleased to have the buyback option available.

With that, I'll turn it back over to Neil to discuss the segment performance and outlook.

Thanks, Jason. As we turn to Page 11, let's review our Application Software segment. Revenue for the year grew by 16% in total and organic revenue grew by 5%. EBITDA margins were 42.5% and core margins improved 80 basis points in the year. For the segment, we saw recurring and reoccurring revenue growth on an organic basis 7% for the year and total organic revenue improved about 70 basis points save for the Deltek related market weakness, both of which provides evidence of underlying strength for this business -- for the businesses in this group.

Aderant continues to execute from a position of strength. FY '25 revenue grew in the mid-teens area with strong bookings throughout the year. Importantly, they're leaning into the right long-term work, accelerating SaaS and AI-led innovation while modernizing their tech platform and data lake. Deltek was the primary weaker part of the story for this segment and has been straightforward all year with GovCon remaining a challenging market throughout most of 2025.

That said, we view the passage of the OBBB as a positive development for the market. It should drive upside over time, but we've not included any benefit in our 2026 guidance and will monitor customer activity as the year progresses.

[ Vertafore ] had another solid year, with growth driven by strong recurring revenue performance and continued execution on product and customer outcomes. Looking ahead, the team is leaning into a focused set of prior scaling automation particularly AI-enabled workflow improvements, while continuing to deliver steady innovation to the agency and carrier ecosystem.

PowerPlan delivered another strong year with healthy recurring growth and steady progress on product modernization and cloud migration. They continue to invest in product innovation, customer experience and internal operating capabilities, improving their long-term organic growth profile. Shot out to [ Rafi ] for carrying the leadership mantle forward at PowerPlan and great job managing the transition from Joe.

Illumia, formerly known as CBORD and Transact, continues to execute well and is progressing in its integration and platform road map while maintaining solid commercial momentum. And we're excited to welcome Greg Brown, our new CEO at Illumia, who brings a long and successful history of leading scaled software businesses. Congrats and thanks to Laura, Rachel, [ Toran ] and Rob for executing the VCP, driving the business combination and achieving the year one target.

If we look at the broader portfolio of businesses we've acquired over the last couple of years, Syntellis, Transact, Subsplash, CentralReach and Procare, we feel very good about the quality and long-term growth potential of this group. However, Procare did not perform to our expectations in 2025, although we do feel good about the business building that occurred last year.

Specifically, we improved payments execution, upgraded the entire leadership team and continue to win competitively in the market where Procare remains a category leader. The biggest constraint was implementation timing across both software and payments which delayed customer time to value and weighed on payments volumes. Improving implementation speed and delighting the customer base are the top priorities and Procare's leader, Joe Gomes, has executed this playbook before a PowerPlan.

[indiscernible] is off to an outstanding start and ahead of our deal model. The business is scaling well with strong recurring software momentum and expanding profitability and they're building a broader growth engine to cross-sell and a steady cadence of new product releases, including AI-enabled offerings.

Now turning to our outlook for 2026. We expect organic growth to be in the higher end of the mid-singles range. We also expect a modest back half weighting as CentralReach turns organic and nonrecurring comparables ease in the second half. As mentioned previously, we're maintaining a conservative posture in GovCon Deltek until we see sustained improvement in commercial activity. So overall, Application Software remains a durable growth engine supported by recurring revenue momentum and continued product execution across this portfolio.

Please turn with the Page 12. Total revenue growth in our Network segment was 8% and organic revenue grew 4% for 2025. EBITDA margins came in at 54.1%. DAT continues to execute well on what they can control, broker integrations, value capture and trusted network all leading to ARPU expansion. Although the freight recession persisted throughout 2025, DAT is continuing its evolution from a traditional load board into a more automated marketplace where brokers and carriers can match loads with greater trust efficiency and increasingly transacted on the platform. And as this happens, DAT's TAM and monetization opportunities grow. To this end, DAT is advancing its AI-first operating model with concrete use cases across carrier onboarding, fraud detection and freight matching automation. This is a pattern we like, AI that improves customer outcomes, lowers transaction friction and expands our TAM where we have a very high rate to win.

ConstructConnect had another strong year of recurring revenue growth, and the team made material technical advances with their AI-based take-off solution boost. Foundry is making steady progress with year-over-year growth in ARR as the market continues to recover. We continue to be excited about the AI product development at Foundry because it fits naturally in the creative workflows where small improvements can materially improve artists throughput. Importantly, these are high-frequency, high-value tasks that Foundry already sits inside so AI is being delivered as embedded features that customers should adopt quickly given the clear and integrated efficiency gains offered.

[ MHA SoftWriters SHP ] continued to execute well supported by stable end market demand and strong reoccurring revenue models. Each team is advancing its road map with targeted investments in functionality, workflow efficiency and service levels to deepen customer value and retention.

Subsplash is off to a great start in the portfolio with strong execution and solid momentum across the business. We're encouraged by the durability of the revenue model and the opportunity to continue expanding value delivered to customers over time. As we turn to the outlook for the year, we expect Network Software organic growth would be in the higher end of the mid-singles range, representing a modest improvement versus 2025. We expect a stronger Q4 driven by Subsplash turning organic in the quarter. Of note, we remain conservative on DAT by assuming no meaningful improvement in the freight market.

Now please turn to Page 13, and let's review our TEP segment's full year results. Revenue here grew 7% on a total and 6% on an organic basis. EBITDA margins remained strong at 35.7%. We'll start with NDI whose growth is being driven primarily by sustained momentum in its electromagnetic tracking solutions supported by strong OEM demand and program ramps. Importantly, OEM order activity has remained strong, and the business is converting that demand into higher revenue scale and operating leverage. Great job by Dave and the entire team at NDI.

Verathon continues to perform very well with solid growth across its GlideScope and BFlex franchises. Importantly, Verathon is the U.S. market share leader in single-use microscopes, which reflects several years of consistent execution and reinforces the durability of a model as the business continues to take share and an attractive procedure workflow area. Looking to 2026, we're optimistic about several new product launches planned throughout the year.

For the full year, Neptune grew modestly, notwithstanding the year-long backlog normalization supported by demand for its static ultrasonic meters and its cloud-based software solutions. Although the second half commercial challenges tied to our tariff surcharging program eased late in the year, we remain cautious and are not underwriting a recovery in our 2026 guidance.

Finally, the balance of the businesses in this segment, CIVCO, FMI, and Inovonics, IPA and rf IDEAS were really strong throughout 2025 and are meaningful contributors to the segment's results. For the full year, we expect segment organic growth in the mid-single-digit range, with first half being more in the low singles area as Neptune's backlog continues to normalize. Given the more limited visibility in Neptune, we're taking a cautious approach as we monitor underlying demand over the next couple of quarters.

With that, please turn to Page 15. So now let's turn to our Q1 and full year 2026 guidance. Based on what we previously discussed in our segment overviews, we're initiating our 2026 financial guidance to grow full year revenue in the 8% area, organic revenue growth between 5% and 6% and adjusted DEPS of $21.30 to $21.55. Our guide assumes a full year effective tax rate in the 21% area and more in the 22% area for Q1.

To reiterate from earlier, our full year guidance does not bake in improvement at Deltek's GovCon business or in DAT's freight market and assumes modest top line weakness at Neptune versus 2025. As discussed, we expect stronger second half organic growth driven largely by CentralReach and Subsplash turning organic and easing nonrecurring comparables. Our guidance does not assume a meaningful revenue uplift from our AI development work either. We view AI as incremental upside as we scale commercialization across the portfolio.

Finally, we remain positioned to be active and opportunistic on capital deployment. We continue to have a robust M&A funnel, a meaningful remaining share repurchase authorization and substantial financial flexibility, and we'll remain disciplined and unbiased between acquisitions and buybacks based on what drives the highest and most durable cash flow per share compounding. For the first quarter, we expect adjusted DEPS to be in the range of $4.95 to $5, reflecting the dynamics previously discussed.

Now please turn to Page 16, and I'll open it up for your questions.

We'll conclude with the same 3 takeaways with which we started. First, in 2025, we delivered both double-digit revenue and EBITDA growth and solid free cash flow. Enterprise Software bookings grew in the low double-digit range, which positions us well entering 2026.

Second, we're investing for long-term sustainable growth improvements while staying disciplined in our expectations. Throughout 2025, we upskilled talent, sharpen strategy and improved execution across the portfolio, and we are accelerating AI product development. We're not baking in an organic inflection in 2026, and our guidance will reflect improvement as it materializes.

Third, we materially advanced our portfolio through capital deployment. We deployed $3.3 billion into high-quality vertical software acquisitions, executed opportunistic repurchases and maintain more than $6 billion of forward capacity. As we look ahead, Roper remains an advantaged and preferred buyer for both management teams and private equity sellers, and we believe the M&A backdrop remains constructive as private equity firms face increasing pressure to generate liquidity for limited partners.

Our pipeline is robust, and our team is deeply engaged, and we will remain disciplined and unbiased on valuation and business quality. In parallel, we'll continue to balance acquisitions with opportunistic buybacks, allocating capital to which ever path drives the best risk-adjusted and long-term cash flow per share compounding.

As we turn to your questions, please flip to the final slide, our strategic compounding flywheel. What we do at Roper is simple, we compound cash flow over the long arc of time through a disciplined strategy anchored on 3 things: first, we earn market-leading vertical focused businesses, application specific, deeply embedded and mission-critical. These are durable franchises with highly recurring revenue and organic cash flow growth that can improve over time.

Second, we run a decentralized operating model, so our teams stay exceptionally close to customers and their workflows so we can consistently compete and win. That customer intimacy is a core competitive advantage, and it's also how we win in AI. In our markets, AI isn't a generic overlay. It has to be grounded in a real workflow context, tuned to domain-specific [indiscernible] cases and deploy through trusted embedded relationships, so our AI delivers measurable value and better customer results.

Third, we paired that with disciplined [indiscernible] capital deployment, focused on high-quality M&A and opportunistic share repurchases, allocating capital objectively to maximize durable cash flow per share compounding. [indiscernible] businesses decentralized operations close to customers and disciplined capital deployment, that's our long-term compounding flywheel. We're excited to compete the win and continue delivering long-term and improving cash flow compounding per share.

So with that, thank you for your continued interest and support. Let's open it up to your questions.

[Operator Instructions] Your first question comes from Brent Thill with Jefferies.

Neil, regarding Deltek, I'm curious if you could just give everyone a sense of what you're baking into the '26 guide? And how you're protecting against another potential government shutdown?

Yes, go ahead, Jason.

Yes. So I think we are not assuming an improvement this year. The fourth quarter was depressed by the perpetual license revenue, as I talked about, most of GovCon Enterprise still buys perpetual licenses. So that's what drove our lower organic in AS in the fourth quarter. So we don't think that's going to repeat next year. So we do have a comp benefit. But otherwise, we're not really assuming improvement in that market until we see it.

Okay. And on Procare, Neil, what do you think needs to happen to get that back meeting expectations?

I think it's -- just to go through a little bit of what we talked about in the prepared remarks and then add a little bit more to it. So hey, the business is the leader in the marketplace. It is the clear leader. We've done a lot of good things there. We sort of cleaned up and fixed the payments, cost infrastructure and processing capability. We fixed and improve the go-to-market. So we're competing and winning in the marketplace. We're winning a majority of the jump balls versus the primary competitor.

And so the problem now is just pushed to the right. So now we're winning these opportunities, and we're slow to implement the software, which means we're slow to implement the payments. And that's the next sort of objective in front of the team there. So once we get that done, we feel much better about that. It's a completely fixable problem. It's one of the problems that you don't like to have problems generally, but when you do have [indiscernible], the larger problem would be if we had a competitive situation, something like that, which we do not have.

Your next question comes from Clarke Jeffries with Piper Sandler.

I wondered if specifically on the GovCon business, you could maybe give a rank order of the kind of procreation builds, what would have the most impact or within Deltek's exposure, what segments of the government getting those appropriation bills passed would be most significant?

Yes. So I'll just draw back to the OBBB. And this is, as you know, we're not -- Deltek doesn't have direct exposure to the government. It's our customers that are the federal [indiscernible] that have the direct exposure to the government -- just reminding everybody. The OBBB is heavy on defense -- Department of War, Department of Defense and DHS funding and spending that tend -- those categories tend to have larger percentage of contractor spend. It could be north of 50% of the whole category can be contractor spend, so that's definitely a tailwind. The civilian programs tend to have lower percentage. So it's not necessarily a bad thing for Deltek customers, but it's certainly better on the current appropriation of the OBBB.

Perfect. And then the last 2 years hovered around $3 billion deployed towards acquisitions. Wondering if you could talk about expectations for how much you might deploy in '26? What scenario might push you towards a number closer to $4 billion or a number closer to the $2 billion? Sort of what are you factoring into the deployment outlook for '26?

As I mentioned, there's about $6 billion sort of is what the forward capacity is over the next 12 months. We have the 2 levers available to us on the capital: the M&A and the buyback. On the M&A side, the thing for us, I mean, I've been here 15 years, Jason has been here 20 -- when you're building a business that has an M&A lever, we never view the amount of capital in the next 12 months of the budget or we got to spend it because we're building a business that's going to own businesses in perpetuity. So you have to buy very high-quality businesses at an appropriate price. And so that discipline guides us. So it's hard to set an expectation that says we'd be we're going to get X dollars deployed against the $6 billion, excuse me, in M&A or buyback, but we like having both levers available to us, and we're just going to do what's best objectively to compound cash flow per share at the best rate we can.

I will say that we think this -- coming into this year, I think the market is ripe for more assets to become available. I mean we've been very proactive in the last couple of years with -- in a very muted market. So as I mentioned, I think it's a net positive for us, but we'll just stay disciplined and focused.

Yes. Don't mistake anything I'm saying. Like let's -- just as Jason said, the opportunity, the number of deals, the number -- the amount of [indiscernible] pressure on the GPs and private equity just continues to mount. There's going to be -- there's an aging portfolio of very high-quality assets, a number of those assets that were have relationship with and are meeting with management teams and becoming the preferred owner. All that is very, very ripe for opportunity, but we're going to remain, as we always do, discipline.

Finally, on that, over the last really 3 years, 2.5 or 3 years, we've really leaned in and built capacity for tuck-ins and bolt-ons. That's a more predictable pace. I think we did 7 or maybe 8 small tuck-in acquisitions last year, that will be more sort of predictable because it's a lower dollar per transaction but more of them.

Your next question comes from Joseph Vruwink with Baird.

Great. On AI, when would you expect to get to the point of quantifying what AI means for Roper at maybe a more precise level? I think it's evident in certain areas already. The Aderant call out, they're mid-teens growth, they're 10 points above the segment. I would imagine customers want the cloud as part of their AI initiatives. And so there's an inherent uplift and positive correlation between Roper and AI for the legal space. Can you do that more holistically and attribute some of the organic improvement ex Deltek you're already seeing and say that's directly or indirectly related to AI investments?

Yes. So I appreciate the question. We spent a fair amount of time talking about that internally. Just a couple of guiding principles that we have internally is one, we're not going to AI wash or allocate revenue like other companies have done, are doing. We're not going to say X dollars R&D, so therefore, Y dollars of revenue is AI related. So we're not going to AI wash our revenue stream.

That said, we do aspire to be able to report a number -- AI revenue, SKU related is X or Y. Unfortunately, if we do that, I mean, we're going to monetize AI in more ways than just AI SKUs. It's going to be cloud uplift. It's going to be in packaging. It's -- there's going to be lots of ways that we monetize this. So this is actually -- it says simple, it does pretty hard from how we're going to be able to sort of report this or it's credible.

At the end of the day, Joe, you highlight the most important thing, which is we believe this is a TAM -- meaningful TAM expander for us, which means it should be a growth driver for us, and you'll see it show up initially in bookings and eventually into the recurring or reoccurring base. So we see that Aderant, we see CentralReach, we'd expect to see it across several of our businesses starting this year.

More broadly, as we sort of write the chapters on Roper, 2025 [indiscernible] will be how we learned to develop the initial set of products across our software business. Essentially, every one of our software business is either hazards right on the precipice of having AI-related product to deliver to our customers. '26, I think that chapter is going to be how we commercialize, how do you sell, deploy, drive implementation and ultimately sort of monetize all of the product. And so that's going to be the journey of learning for us across the portfolio organization. We look forward to providing updates on that as we get through the year.

Great. That's helpful. On your approach to guidance this year, I think it's very clear that you're going to let the upside come to you and future changes are going to happen as you see it. Can you maybe put some guardrails in magnitude of what that could ultimately mean? And I'm thinking in the past, you've talked about how your current portfolio could be capable of 7%, in a best case scenario, 8% to 9%. That's more of a long-term framework within FY '26. If things go right and you get some redirection and where the pressures within the portfolio have been, what sort of upside possibility could there be?

Yes. So I would say the long term -- to first point, the destination for the longer term, certainly not a '26 comment. The longer-term entitled growth in the portfolio, we still have conviction is north of 8%. We go company by company, about what they're entitled realistically achievable growth can be. And so that number, sort of the target this nation has not changed. We are definitely, as you've heard from our commentary, taking a much more appropriate and balanced view for the initial guide here. No improvement at Deltek on the government contracting side, no DAT market recovery, actually underwriting a slight decline at Neptune. And so if you sort of thumb each one of those, I don't want to get into order of magnitude of what it could look like, but I would say it definitely tilts more conservative than this past year, for instance.

Your next question comes from Dylan Becker with William Blair.

Appreciate it. Maybe kind of following up on one of Joe's questions too. I think the Deltek perpetual piece makes sense but you also called out some softness on nonrecurring due to some of those cloud migrations and maybe that's just kind of rev rec upfront for ratable. I guess, as you think about kind of AI opportunity to accelerate this modernization and cloud journey, given kind of the heavy maintenance space you still have there, how do you think about kind of that trade-off in those long-term economics? It seems favorable. I think it's kind of evident in the subscription bookings in that low double-digit framework. But maybe kind of walk through some of the nuance between those as well, too, if you can?

Yes, I certainly appreciate the question. I think we've seen some of this just in our AS segment over the last years, nonrecurring revenue has been sort of flattish, up a little bit here and there because some of our businesses have moved more to the cloud, be it Aderant or in recent years PowerPlan. We see that Deltek is going to be a significant opportunity. So that's a part of our thinking in '26. Deltek really put a lot of AI functionality into their cloud product. And so some of these large government contract customers are contemplating going to the cloud and they have a big push for that.

So you're right, that will obviously increase customer lifetime value, but it will have a more muted impact in year. So we thought through a little bit of those dynamics this year. And I think that's probably the biggest area where we will see that because a lot of our -- the rest of our businesses are sort of on their cloud journey, but they will continue, to your point, to include only AI features in the cloud. And so that will just increase adoption as we go forward.

Yes. And just to add to what Jason said, we don't expect a pronounced J-curve because we have a very large installed base that's on-premise. That's going to lift -- that is lifting and shifting at 2 to 3x recurring. So it's the J-curve is less pronounced and because you're converting an existing recurring base at a higher level and as you sort of, if you will, [indiscernible] convert net new perpetual to a recurring. So they offset one another, and we think we have that harnessed in our guidance.

Okay. Great. And then maybe, Neil, for you, too, on the topic between platform and bolt-on M&A, I guess could you kind of give us a sense if you see any opportunity, maybe as a part of AI, maybe not, but given kind of the current backdrop to accelerate some of the initiatives in one effort? I know we've built out kind of the bolt-on team. There's a little bit more visibility into those platform valuations maybe have come down to a particular level as well. But just kind of think about kind of the mix between capital deployments between bolt-on and platform, if you can?

Always hard to predict mix. I can tell you that if there is -- generally speaking, if there's a rank order, bolt-ons or tuck-ins are going to be first quarter because they are advancing sort of the organic growth and strategic direction of one of our platform businesses. At the same time, you always have a little bit of back office G&A synergy, which is able to sort of buy down the initial purchase price pretty quickly, and then you get to the growth orientation. So that continues and will always be a focus of ours.

What we see, by the way, on that front is it takes a little bit of time as we added the resources, they get to know the company, they build a relationship with their companies, they build a relationship with sponsors and targets and founders, I think something like of 60% of our pipeline for bolt-ons, either proprietary or founder driven. That's a completely new motion for us that would not have been the case 3 years ago. I think that bodes well, but these things do take time to maticulate through the system and mature to where they can become actionable.

On the platform side, it's the number of opportunities and the quality of assets is very interesting. The question on the table is going to be what happens relative to valuation? We've never been a short-term next 12-month multiple arbitrager, so we're not going to do that. But we definitely have to sort of -- we have to look at buybacks versus bolt-ons versus platforms on what is the best long-term compounding in terms of value creation opportunities for us.

Your next question comes from Brad Reback with Stifel.

I know you guys gave the software bookings for the entire year. Can you give us what it was in 4Q?

Yes, it was up high single digits, and that is with Deltek being down in the low double-digit area. Actually, Deltek's SaaS was strong, but like I mentioned, perpetual was down meaningfully. Yes, the rest of the portfolio performed pretty well. Vertafore had a strong quarter off of a really tough comp last year. So they're continuing to just have success in 2025, and that should be good for them for '26. And then as I mentioned, last quarter, health care has been really strong for us, and that was the same in the fourth quarter.

Great. Neil, this is the second quarter in a row you've missed expectations, and you're guiding to a back half acceleration in '26. So maybe take a moment and help us understand where the incremental conservatism is in the '26 guide versus the last couple of quarters?

Sure. So we did say -- and we're certainly disappointed over the last couple of quarters, but we did say this time last quarter, we had a wider range of outcome, [indiscernible] of outcome, especially because of the uncertainty of Deltek. And so while disappointing, we try to be sort of very straightforward in that regard.

I think for this year, I said it before, I'll say it again, when you look at where we're exiting this year, look at '25 compared to '26 and you just go -- and let me begin back up. When you look at '25, the initial guide versus where we ended up, it really reconciles to 3 things we talked about. It's Deltek because of GovCon, it's Neptune because of the dynamics we talked about and it's Procare. That almost fully reconciles the difference between the initial guide where we ended up.

You then have that in mind, you take it to -- carry it forward, we're assuming in 2026, there's no improvement in Deltek, there is no acceleration at DAT, there's actually underwriting a modest decline at Neptune versus '25 and the only thing that sort of then you get the accretion to organic growth from Subsplash and CentralReach turn organic this year. And then we have this easing second half sort of nonrecurring. So optically, it looks like an acceleration through the year. But when you look at the pieces, it's actually pretty steady, safe for the things that we just said.

And just to remind you, all the CentralReach and Subsplash becomes organic second half. So it's got to create some of that ramp. And I would just call out, too, just again, just a small comp, a couple of comp issues. Foundry gets a little bit better this year, and I know it's small dollars, but in network it matters. And then we had the first quarter of '25 a pretty depressed network number because we were comping against a bigger number in '24. So that comp goes away. So there's some math to just going from '25 to '26.

Your next question comes from Terry Tillman with Truist Securities.

The first one is going to be on Deltek, the second one -- the follow-up is going to be on the DAT. But on Deltek, and I know these months or these part of the quarters are probably less seasonally strong. But did you actually see any improvement in order volume for perpetual in December or January? And also with Deltek, are the effects of DOGE kind of lessening or is that still impactful? And then I had a follow-up. .

Yes. So Terry, this is Jason. I think the December is always stronger than the other months, and that's just the natural kind of inertia of how orders flow in Deltek. I will say we had 2 large contractor -- government contractor deals that slipped. So it was like right at the end. And so we think they both land in the first half of next year, but we've also sort of hedge that just in case. But -- so usually, we get some big deals, and they were right at the finish line, and they didn't close, but they're still in the queue, and we still think we're going to...

Close the rest this year.

Yes, exactly.

And just to pick up on that, Terry as well, just to add, the -- while the signatures on paper are slower because of the shutdown, the commercial activity, the pipeline build has actually been encouraging. It's been encouraging throughout. It's because all the -- this is an environment, unfortunately, that our customers live in and they sort of -- they're subject to the vagarities of what's happening in the government, but they have a business to run, and they have contracts that are likely going to get awarded, and they have to sort of manage sort of are software in that regard. And so there's no competitive issue here at all. Let's take -- I mean it hasn't been asked, but 0 competitive issue here. It's just deals that are building that are pushed to right a little bit given the uncertainty. .

DOGE, I would say is, to your question, is lingering impact, but it's not the topic that anybody is talking about the way it was in the first third, the first half of the year of last year.

Got it. I appreciate that. And just a follow-up is on DAT. Do you see ARPU lift continuing to play out through the year? And are you on track for that autonomous kind of load matching technology innovation to play out in '27?

Yes. So we do expect ARPU to continue improving and growing in 2026. There's a couple of reasons for that. One is you just have like-for-like pricing opportunity that will sort of get cascaded in during the year as it normally does. But the second reason is we have more value to sort of sell to both sides of the network. And so you're going to get -- in the past, it was just load board, so it's [indiscernible] pricing. Now it's loadboard and automation. It's load board and data, it's [indiscernible] a number of things on both the carrier and the broker side.

In terms of the automated matching, we're -- it's early days, but we're encouraged by the progress. unambiguously the technology does the job. Let's just be clear. It is the ability for a broker to tender to the DAT1 platform and automatically match a load and have a carrier pick it up and complete the commerce with payment sort of overlay across all that. It works and it's working every day in the marketplace. The #1 focus of that business is to build both sides of the network. That starts on the broker side by getting native integrations with their TMS systems. And you have seen, will continue to see during 2026, a cascade of announcements about the various TMSs that we're integrating with. That allows the brokering or tendering to our platform to be native in the work for the brokers. And then we continue to build the carrier side of the network. It's got to be a high trust, no fraud environment. That's part of the core technology that we have and we're integrating.

So early days, but we like the tendering percentage, we like the completion percentages, we like the factoring percentages, and we'll want to see that business scale as Jason and Shannon and Satish and the team at DAT look at this on a monthly basis.

Your next question comes from Ken Wong with Oppenheimer.

You guys are guiding to 5% to 6% organic for '26. As we think about 1Q first half, with a lot of faster growth businesses coming in second half 4Q and no Deltek tailwinds, like is there a possibility that you could be below that 5% low end? Any context there so we could properly level set our numbers?

Yes. No, I don't think so. We're kind of thinking for AS, we'll be sort of in the mid-single-digit range with nonrecurring being flash and the recurring reoccurring being like mid-single-digit plus, which is consistent with Q4 levels. I mean you're not -- we're not going to have the same nonrecurring decline like we did in the fourth quarter. And then as you mentioned, the second half gets better on the CentralReach turning organic, and we've got this -- the nonrecurring -- as I just mentioned, we get a better comp in the fourth quarter. So not a lot of -- I would just say, not a lot of go get in that second half number.

And then on NS, I think sort of the recurring revenue will be just sort of continue to be mid-single-digit plus out of the gate. And as we go throughout the year, Subsplash comes in, in the fourth quarter, so that will be helpful. And so I think that's sort of how it sets up, nothing outside of that to call out.

Got it. Really appreciate the color there. And then perhaps just any additional context you can provide in terms of what the new business activity pipeline conversion look like versus maybe the renewal business term expansion contraction? And any details would be helpful.

Ken, is that a broad portfolio question or specific to a business? Broad, broad question?

Yes. Yes, just like -- yes, correct. It's more of a broad kind of software selling kind of trends that you guys are noticing across the group.

Yes, fair enough. I understand the question. Yes, I would say we're broadly encouraged by what we saw in the finishing the year as the bookings and retention statistics were quite good. As you know, our enterprise, our gross retention is in the mid-90s for our enterprise businesses that's steady to ticked up a little bit during 2025. And then in terms of the bookings activity, hey, while there's a little -- we expect there to be volatility quarter-to-quarter, low double-digit bookings growth in the year. and being pretty broad-based with sort of weakness at Deltek, I think, is all you need to see. We -- and so it's been pretty good.

Your next question comes from George Kurosawa with Citi.

You guys brought in some new AI leadership, Shane and Edward. I would love to hear a little bit about the team they're building out, what you have them focused on and if there's any kind of low-hanging fruit that learnings they can apply across the portfolio?

Yes. So we're excited to have Shane and Eddie joined and the team that are starting to build out to you the 3 things they're generally focused on. First is, it's all in pursuit of accelerating -- the top line goal is accelerating sort of our pace of AI product development and ultimately shipping, selling monetization. That's where the focus is. So 3 subcomponents to that, it's coaching and teaching, right? Our businesses did a meaningfully above average, above expectation job in 2025, late '24 or '25, learning, making mistakes, learning, making mistakes, learning around AI development, what works, what doesn't and getting products into the hands of customers. That was great to see.

But some of these -- a lot of these AI tasks are quite complicated, complex from a technical point of view and also unlike regular way software development. There are some art in this AI development. And so Shane and Eddie and the team are bringing -- really bring history. These are people that study machine learning and AI in university quite a while ago and spent their entire career. So they've seen a lot of pattern recognition. They're going to coach and teach our leadership teams, our technical leaders, our product teams on all things, AI, ML related. That's one.

Number two, they are going to build an AI sort of development strike team or accelerator team to where when there are a company might have more than it can do from its internal resources, and we'll supplement those teams to accelerate in some pockets.

And then third, there is in their first quarter with the business and they met with most of our software businesses. There is a clear opportunity for some reuse inside the portfolio, certain AI-based sort of capabilities we can sort of produce and sort of have a, if you will, a Roper open source model where we can reuse some components and componentry. And so we're going to focus there. And early days, it's been just really great. They understand our culture. Our teams have really engaged them, and they're just looking forward to scaling the team and getting to the work.

Okay. Great. I did also want to touch on the margin side. Core gross margins were up over 1 point in the quarter. Maybe just talk through the tailwinds there. How should we think about any sustainability to improvements?

Yes. I mean I think we've always said in our long-term incremental margins at the EBITDA line is around 45%, did a little bit better this year. I think as we go into next year, I think AS might be up a little bit. Network is going to be down just because we've got the full year of Convoy and our ALCO rolling through. And so that will accrete up over time, but a little bit of a drag in '26. And then I think our -- in our [indiscernible] segment will be for the full year sort of flattish. We've got more consumables rolling through next year than normal, which has a little bit lower margin. And that's really more pronounced in the first half, so maybe down a little bit in [indiscernible] in the first half and then it will improve throughout the year.

Your next question comes from Josh Tilton with Wolfe Research.

Maybe just first kind of a simple high-level one on the guide for next year. I appreciate all the color that you gave on Deltek and DAT and Neptune. But if you were to take those 3 businesses aside and treat the rest of the organic businesses, one, like what would be the one line color on the rest of the organic business? Does the guidance assume that everything x DAT, Neptune and Deltek gets better, stays the same, gets worse? Like how would you characterize what the rest of the business has to do that's baked into the guidance? Does that make sense?

It does. Yes. So I mean, I would say, broadly, it gets a little bit better, but not a lot, not meaningful enough to draw inflection. So that's baked in. I mean, when you think about -- we finished around 5.4%, the deals are a tailwind. This nonrecurring in AS is going to be somewhat a tailwind. Foundry does get a little bit better. And so maybe 10 basis points or so to the enterprise. And then really, the swing factors, I talked about the [indiscernible] in Q1 of '25, it didn't repeat. Then if you just talk about like the swing factors, it's all within Neptune, and that's what our low single digit to mid-single-digit guidance has for TAP and that's what kind of bridge you to the -- from the low to the high end.

And then maybe just a quick follow-up. I understand that some businesses go organic in the second half. Is there any, I don't know conservatism is the right word, but is there any conservatism? Is there any learnings that you saw following like kind of the little hiccups that you saw in Procare that you're kind of applying or embedding or assuming will happen as some of these inorganic businesses convert to organic in the second half of next year?

Yes, Josh, it's Neil, I'll take that one. So short answer is yes, there's a lot of learning from our Procare governance, what work, what didn't worked and how we're governing both Subsplash and CentralReach. And we can spend more time talking about off-line. But in essence, when we see a small variance in a monthly reporting package relative to one of the key levers in value creation plan, in Procare, we observed that variance for a longer time before we decided to take action to correct it. Now we immediately jump to a corrective action and countermeasure. And we don't let small variances turn into large variances. And as a result, you have CentralReach that's ahead of the underwrite model and Subsplash is on the underwrite model for the outlook for those businesses. Just -- we can get in much more detail when we have more time offline, but that's the essence of it. .

And I would just say that for CentralReach and Subsplash, feel good about the contribution in the second half. The path that we're on, bookings momentum, they're recurring, the gross retention, just the path to get to that accretion in the second half. We feel very good about that.

Your next question comes from Deane Dray with RMC Capital Markets.

This has come up several times today about the M&A bias and looking for a durable cash flow compounding. I'd be interested in hearing your thoughts about how do you rank looking at absolute dislocations in some asset prices today versus what you perceive as where there might be a wider moat against AI in these assets. So how are you weighing those?

I'm going to reframe Deane, the question to make sure that we answer the right question. If not, you can correct us. And so the question is looking at both private and public companies that have a valuation dislocation. Are we looking at that? And then how does the AI moat influence are thinking. Can you just reframe that? I want to make sure we answer the right question.

Yes. So I wasn't specifically talking about public valuations, but that would be great to hear that as well because you've done those in the past versus thinking more strategically about where there might be wider moats.

Yes. So I would say -- so -- again, feel free, we won't, Deane, you on one of your questions, if again, I answer it and [indiscernible] the wrong question. We're always -- for the long history of Roper, we're always investing in these vertical market application specific businesses with deep moats, right? And so that does not change. We believe in the AI world, these -- the moats where you're intimate with the customer, you have a unique and proprietary data, you're embedded in high-frequency workflows, where on stack AI is easier to implement, easier to monetize and ultimately translates to the automation of tasks, which is this TAM expansion we really like and are leaning in it. We're seeing it playing across our 21 software business today, so we'll continue to lean in that thesis from a capital deployment point of view.

That's really helpful. That's what I was looking for there. And just a quick one on Neptune. We've talked about the order delays -- is there -- how much of an impact is the spike in copper play? Is there a sticker shock? Is that -- does that need to be kind of ripple through the market to reprice? Just what's the impact there?

I would say that -- what we talked about last quarter, largely in the bucket of tariffs, but it's tariffs, it's copper pricing, generally, the shock to the cost structure of a water meter when we started in really July of last year, pushing a surcharge to accommodate for that increase in cost of goods. It was definitely a shock in the system in Q3, and it really abated during Q4. So I think our base case assumption is that is really in the rearview mirror and step aside and moving forward, it's just about the normalization of volumes in the market sort of on the very tail end of the COVID spike in volumes and now we're on the backside of that spike into a more normalizing range of volumes in the market.

Your next question comes from Joe Giordano with TD Cowen.

I'm just curious how you're now weighing like in terms of capital deployment, like different like timing horizons here, right? Like you have -- stock today is, I don't know, 15% below the average price of the buyback in the fourth quarter. You're trading at like almost a high single-digit free cash flow yield now. And it's a portfolio that you're intimately like close to relative to something that you might buy that drives top line that is something that inherently has more risk as you don't know it as well. Like how are you weighing something that like the certainty of what you know versus like the risk reward or something you don't know at the price that you're paying?

So I'll take a first pass of that. I'm sure Jason will have some color you may want to add. So again, just to -- we've said it, it's going to repeat, we'll say it again, the objective of M&A versus buybacks sort of the levers available to us is what's the best risk-adjusted path to long-term cash flow per share compounding, period, full stop. We're totally objective and passionate about the allocation of the 2. There's $6 billion available, so a big sort of a large amount of capacity.

On the buyback, we just -- the valuation dislocation is just silly. And so we leaned into it in Q4 and we find it obviously more attractive today. And it's a great opportunity to drive long-term cash flow compound that way. On top of that, we're very excited and confident about our future, right? And we get the growth, the eye, the leadership, the strategy, execution prowess. I mean, all of it feels very, very good to us and what we see internally. At the same time, M&A is a real lever. I mean there's not -- to somewhat to my surprise, we introduced the buyback last quarter, there is commentary about, oh my gosh, is the M&A thesis not on [indiscernible] one of those absurd things I've heard in my 15 years at Roper, we are a preferred buyer of vertical market software leaders. We're absolutely preferred from a management point of view or preferred from a seller point of view. The pipeline is enormous. The LP pressure is legit. The number of assets in private equity portfolio have to get liquidity or at levels we've not seen. So that thesis just needs to be eliminated from the top track because it's not real.

And so for us, it's balancing those 2. Buybacks are great in the short run. M&A generally is going to be in the long run, and we like having to balance between the 2 options in front of us.

Yes. I would just add that around the confidence and we've had just these unusual things happen with 3 of our businesses. But like the underlying quality is getting better. So there's that. And I would just say the AI -- we have 21 different businesses working through AI right now. We had our annual operating plan reviews and came out with a decreased level of conviction that we're going to win relative to AI. We're just -- we're so -- our customer intimacy has really proven to be a competitive advantage, and we've got the tools and resources to get after the AI just as fast as anyone else. So we feel really good about that. And so buying ourselves in that scenario where there's this dislocation makes all the sense in the world. But it's also going to be an incredibly active year on M&A. So we're just really -- we've got an abundance of opportunity in front of us this year.

I know you brought in this AI talent on the accelerator team, were there any instances where like negative instances where these guys coming in as experts kind of identified that maybe parts of your business where you thought you had more of an opportunity is going to be harder to drive? Or -- and I'm sure they're identifying places that you have opportunities, but was there any unlike the negative side where something was like, well, maybe this isn't as attractive as I thought in a particular part of the company?

Yes. So I would say on balance, the reviews and early takes are quite positive about the opportunity market-wise, technical-wise, the prowess of the teams that we have in place. But we also -- and we had them sort of do a short read out to our board last week. And then there was a few bullet points of things that were on the constructive ledger. None of it was market opportunity, lack of market opportunity or lack of opportunity to win. Again, these are more technical resources. They might not have like the best acumen in like these vertical market spaces to judge that anyway.

But it was like, as you'd expect, maybe there's -- we definitely need to improve the quantity of AI talent in the businesses. I mean that's a little bit of while we're adding the central team to sort of spark some acceleration. And it's just going to take some time because we've got to build these people. It's not something that we're going to be able to hire in mass. We got to build these people. And we did a good job last year. We'll continue to scale that and compounded learning on that this year.

Yes. I think the ideas have been well received by Shane and Eddie. I mean they understand the specificity of what we're trying to sale at the individual sort of vertical level. And that's -- they view that as very unique, right, coming from a horizontal player. So I think they see the opportunity just like our businesses do.

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

Thanks, 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.

Good morning. The Roper Technologies Conference Call will now begin. Today's call is being recorded. [Operator Instructions]

I would now like to turn the call over to Zack Moxcey, Vice President of Investor Relations. Please go ahead.

Good morning, and thank you all for joining us as we discuss the third quarter 2025 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.

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 if you please turn to Page 3. Today, we will discuss our results primarily on adjusted non-GAAP and continuing operations basis. For the third quarter, the difference between our GAAP results and adjusted results consist of the following items: amortization of acquisition-related intangible assets; transaction-related expenses associated with completed acquisitions; and lastly, financial impact associated with our minority investment in [indiscernible]. 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?

Thank you, Zack, and thanks to everyone for joining us, and excited to be with you this morning. As we turn to Page 4, you'll see the topics we plan to cover today. We'll start with our third quarter highlights and financial results. Next, we'll review our segment performance, our AI progress and momentum and our most recent set of bolt-on acquisitions, then I'll get into our guidance details and of course, wrap up with your questions. So with that, let's go ahead and get started. Next slide, please.

Turning to Page 5. Let me run through the 4 key takeaways for today's call. First, we had a strong third quarter. Total revenue grew 14%; organic revenue grew 6%; softer bookings grew in the high singles area; and we continue to deliver impressive free cash flow, with free cash flow growing 17%. And of note, free cash flow margins posted at 32% for the TTM period, really impressive financial results.

Second, we're super encouraged by the progress and momentum we're seeing across all of our businesses as it relates to our AI enablement and our product stacks and our internal operations, and more on this in a moment. Third, we're announcing today our first share repurchase authorization, $3 billion in total.

And lastly, we continue to execute on our M&A strategy of acquiring faster growth platforms and bolt-on or tuck-in acquisitions at a high fidelity rate. In the quarter, we deployed $1.3 billion, $800 million for Subsplash, which we detailed this time last quarter, and $500 million on a series of tuck-in acquisitions. Also, more on this later, but worth highlighting here, we are very encouraged by this recent capital deployment execution and the future growth potential that's being layered into our enterprise.

Importantly, we remain very well positioned for the continued execution of our M&A strategy, and continue to have north of $5 billion of capital deployment capacity available over the next 12 months or so.

As I turn the call over to Jason, reflecting on the quarter, I'm quite bullish on most of what we're seeing: a very strong 3Q; real demonstrable AI progress, which is a long-term growth driver for us; excellent execution of our higher growth, higher returning capital deployment strategy; and the announcement of our first ever buyback authorization. This all bodes very well for the future. That said, we'd like to see some of our markets start to cooperate a bit better, namely the government contracting and freight markets, and we have some delays in Neptune, much more on this as we walk through today's call.

So with that, let me turn the call over to Jason to talk through our P&L and our balance sheet.

Thanks, Neil. Good morning, everyone, and thanks for joining us today. I'm pleased to take you through our third quarter results and strong financial position.

Turning to Page 6. Q3 and TTM results reflect the long-term financial profile of Roper, which is to compound cash flow in the mid-teens area. We'll start with revenue, which was 14% over prior year and surpassed the $2 billion mark. Acquisitions contributed 8% led by the final quarter of Transact before it turns organic, and CentralReach, which we acquired in April of this year. Of note, these businesses are tracking very well against our acquisition expectations.

We printed 6% organic growth, both for the consolidated enterprise and across each of our 3 segments. Our Application and Network Software segments were in line with expectations, while TEP was a bit below given near-term timing at Neptune, which Neil will discuss further.

EBITDA of $810 million was 13% over prior year, with EBITDA margin of 40.2%. Core margins expanded 10 basis points, and segment core [ margins ] expanded 30 basis points, led by our software segments. DEPS of $5.14 was 11% over prior year and $0.02 above the high end of our guidance range, despite absorbing $0.05 of dilution from Q3 acquisitions that were not reflected in previous guidance.

Free cash flow was outstanding at $842 million, up 17% over prior year, and representing 32% of revenue on a TTM basis. Our software businesses captured strong renewals, and we drove great working capital performance across the board.

Broadening out a bit. TTM cash flow of over $2.4 billion is a 17% CAGR over a 3-year period. And for those looking at per share metrics, you'll note that our share count has compounded at about 0.5% over that same time period. At Roper, we have been and will continue to be relentlessly focused on cash flow and shareholder value creation.

Now let's turn to Slide 7 and discuss our very strong financial position. Our net debt to EBITDA stands at 3x, which is up only modestly from Q2 at 2.9x despite deploying $1.3 billion towards acquisitions. This places us in a great position with over $5 billion in the next 12-month capacity for capital deployment.

Regarding M&A, you can see that we've been quite active this year in acquiring high-quality growth businesses and several strategic bolt-ons. This is against the backdrop of a muted PE deal environment. The pipeline of high-quality acquisitions continues to build as access mature in PE portfolios and a return of capital to LPs becomes paramount.

Additionally, as Neil mentioned, we're pleased to announce another capital deployment lever that was previously unavailable. Our Board has authorized a $3 billion share repurchase program with an open-ended time period to execute. While M&A will continue to be the majority of our capital deployment allocation, our share repurchase program will allow us to opportunistically complement our M&A program.

Over the last year or 2, we have talked about the great business building taking place across the Roper portfolio, from strategy, to talent, to execution, all now greatly turbocharged by AI. Our repurchase program reflects both confidence in our strategy and our commitment to delivering long-term shareholder value.

So with that, I'll turn it back over to Neil to talk about our segment performance. Neil?

Thanks, Jason. Turning to Page 8, and before I get into our segment details, we want to discuss why AI is a powerful and durable growth driver for Roper.

To start, AI represents a meaningful expansion of our TAM across the portfolio. We can now deliver transformational software solutions that automate labor-intensive work adjacent to our existing platforms. This creates substantial new value streams for our customers and correspondingly facilitates long-term growth for Roper and our businesses.

Importantly, our businesses are uniquely positioned to win in AI. In fact, having a very high right to win in the AI world. Our software solutions are deeply embedded system of record applications with workflow-oriented domain-specific architectures. The decade of cumulative workflow knowledge built into our platforms combined with the proprietary vertical market data provides the precise context needed to develop agentic AI solutions. Because of this, our businesses have been exceptionally high right to win as we deploy these capabilities across our VMS end markets.

Internally, we're becoming AI native across all functions to drive productivity gains. We're excited to reinvest these gains to further accelerate our product development and go-to-market initiatives. It's important to note, we've always had more great ideas than resources needed to execute, and AI has the potential to attack this challenge.

Finally, we have tangible proof points, though it's still early. [indiscernible] has claimed the technology leadership position in Legal Tech, accelerating their bookings growth. CentralReach now has roughly 75% of their bookings attributed to AI-enabled products, which have automated 100 million reimbursement rule evaluations, over 3.5 million learner appointments and over 1 million clinical summaries being generated. Great real-world examples of the power of AI. Deltek has released over 40 AI features into their cloud offerings, driving increased cloud conversion activity. And DAT has industry-leading AI/ML-enabled freight matching capabilities, which I'll detail shortly. These are but a few examples from across the portfolio. Very exciting times for sure.

With that, let's now turn to our segment review, starting with Page 10 and our Application Software segment. Revenue for the quarter grew by 18% in total and organic revenue grew by 6%. EBITDA margins were 43.4%, and core margins improved 40 basis points in the quarter.

Starting with Deltek. Deltek delivered solid performance in the quarter, with particularly strong results in their private sector end markets: construction, architecture and engineering remain robust throughout. The GovCon business experienced softness in September as agencies pause activity ahead of the pending government shutdown. This timing is unfortunate. Pipeline activity and commercial momentum has been building nicely, following the passage of the One Big Beautiful Bill in July, and we are seeing increased engagement across our customer base heading into the new fiscal year. The fundamentals remain strong. The [ OB3 ] authorized significant increases in defense and infrastructure spending that will flow through to our customers once appropriations are finalized. This is simply a timing issue, not a demand issue. Finally, retention levels across the entire Deltek franchise remained very high.

Aderant continues to be incredibly strong and continues to post impressive bookings and recurring revenue growth. The booking strength is broad-based, fueled by their AI-enabled solutions, especially as it relates to AI-enabled compliant time capture and billing, and is a combination of market share gains, cloud migration and SaaS growth.

Vertafore continues once again to be steady and solid for us. We continue to see consistent ARR growth and strong customer retention and strength across our agency, MGA and carrier solutions. This growth is enabled by their strong go-to-market capabilities and their long-term commitment to product strength.

PowerPlan's performance has been terrific. Their success is a result of several years of business building and the product stack, the go-to-market capabilities, their service delivery really across all functions. In addition, to remind everyone, they serve power generation customers, which are adding capacity as quickly as possible to handle the AI workloads. The setup here should be quite good for a long time.

Also in the quarter, we completed the acquisition of Orchard, a tuck-in acquisition for our CliniSys business. Orchard brings additional clinical laboratory capability to CliniSys with particular strength in reference, physician offerings and public health labs.

Finally, the balance of our application software portfolio continues to execute very well. CentralReach was awesome again in the quarter, driving accelerating adoption of their AI tools and capturing [ ABA ] therapy capacity additions.

Procare made a great installment of progress with new bookings continuing to be strong, posting low double-digit growth in payments with improved gross margins, though still work to do, in particular, with faster implementation time frames and share wallet expansion, but meaningful progress for sure.

Finally, Strata and Transact were steady and solid in the quarter.

As we look to the final quarter of the year, we expect to deliver mid-single-digit organic revenue growth. This outlook reflects high single-digit growth in our recurring revenue base, offset by declines in nonrecurring revenue, primarily due to anticipated softness in our Deltek business stemming from the ongoing government shutdown. Given the uncertainty surrounding the duration impact of the shutdown, we see potential outcomes across the full range of our MSD outlook, from the lower to the higher end. That said, our businesses in this segment continue to compete and execute exceptionally well. The primary variable remains a higher level of market uncertainty than we typically experience for our Deltek business.

Please turn to Page 11. Total revenue in our Network segment grew 13%; and organic revenue, 6% in the quarter. EBITDA margins remained strong at 53.7%, with core margin improving 60 basis points.

As we dig into the individual businesses, we'll start with DAT. DAT was solid in the quarter and had strong ARPU improvements. DAT continues to execute exceptionally well on their core strategy of driving enhanced network value for both brokers and carriers. This dual-sided approach positions DAT to better monetize their entire network ecosystem, and more on this when we turn to the next page.

ConstructConnect was solid again for us in the quarter. The growth was fueled by strong customer bookings activity and improved customer net retention. Of note, this business continues to make good progress with our emerging AI-enabled takeoff and estimating solution.

Foundry is turning the corner on growth, posting continued sequential improvements in ARR, and we expect our Q4 exit ARR to grow year-over-year in the HSD area. Really happy for the team there as they've had to work through some tough market conditions.

Next, our network health care businesses, MHA, SHP and SoftWriters were very good in the quarter. Of particular note, SoftWriters is executing at an exceptional level, winning a few very large pharmacy customers and making substantial progress on a high-impact AI solution, which is being beta tested in the market currently. Congrats to Scott and his entire team for their success.

Finally, Subsplash. Our most recent acquisition that closed on July 25 is off to a great start, delivering financial results in line with our deal model expectations. Of note, they saw very good market traction with their AI-driven [ sermon ] content offering, Pulpit AI, as they deepened its integration with their core engagement platform, driving strong product-led growth. Exciting stuff.

As we turn to the outlook for the final quarter of the year, we expect to see organic revenue growth at the higher end of the mid-singles area.

As we turn to Page 12, we'd like to spend a few minutes describing the strategic evolution of our DAT business and while we're so excited about its future growth prospects. To start, our legacy DAT platform is the largest freight-matching network across the U.S. and Canada. The scale is remarkable. Over 1.2 million loads posted and 15 million rate views every single day. DAT is the clear market leader, delivering tremendous value to both rate brokers and carriers, both of whom pay to participate in this powerful network.

As strong as the legacy business is, we're even more bullish about where DAT is headed. To bring this vision to life, DAT is building capabilities across the entire freight automation workflow, from carrier vetting, to broker carrier matching, to AI-driven rate negotiation, load management tracking and finally, payment and settlement. Through deep customer partnering with the brokerage community, DAT is working to fully automate the freight matching process. As this happens, DAT will generate $100 to $200 per load in savings for brokers, while giving carriers greater predictability and faster payments on their invoices.

What sets DAT apart is this end-to-end product capability and its role as a neutral trusted partner, a switcher and light player that equally serves the entire freight brokerage market. This is a truly unique position in the market. This evolution also highlights the Roper DAT partnership at its best. We work closely with the DAT team to craft this strategy, then we execute a focused M&A program to strengthen it through 3 strategic tuck-ins: Trucker Tools, Alco and Convoy. With the deals complete, DAT is now fully focused on delivering against this strategic opportunity. Important to note, Convoy is an unusual transaction for us as it currently is not profitable. We expect the financial returns over the next several years to be extremely attractive.

The key to success is scaling efficiently, leveraging DAT's advantaged customer unit economics for both brokers and carriers to drive sustained growth and profitability. We are confident in this strategy, market position and DAT's ability to execute. I know this was a bit of a deep dive, but I wanted to share with you why we're so excited about the growth opportunity that sits in front of DAT through AI-based freight automation.

Now let's turn to Page 13 and review our TEP segment's quarterly results. Total revenue here grew 7% and organic revenue grew 6%. EBITDA margins came in at 35.2%.

Let's start with Neptune. As we said before, Neptune continues to execute really well, particularly around its ultrasonic meter strategy, and we're seeing strong traction in its data and software billing solutions. The new copper tariff that took effect on August 1 caused some short-term disruption. Neptune responded by implementing surcharges to offset the tariff impact, which temporarily slowed order timing. These actions reflect the benefit of being part of Roper, doing the right long-term thing for customers and the business even when it creates near-term headwinds.

Verathon continues to perform well. In particular, during the quarter, Verathon saw continued strength in single-use recurring product lines, both BFlex and GlideScope, which remain key growth drivers.

NDI also delivered an excellent quarter. As we discussed previously, NDI provides proprietary world-class precision measurement technologies to a range of health care OEMs. These technologies, in turn, enable guidance enabled solutions across multiple clinical markets, including orthopedic surgery, interventional radiology and cardiac completion.

Finally, we saw strong execution and growth across CIVCO, SMI, Inovonics, IPA and rf IDEAS, rounding out a solid overall performance for this group of companies. Looking ahead to the fourth quarter, we expect organic growth in the low single-digit area, given the very difficult prior year comp and the timing we discussed at Neptune.

Now let's turn to Page 15 and review our Q4 and updated full year 2025 guidance. Starting with the full year outlook, we continue to expect total revenue to remain in the 13% area. Also given the delays at Neptune and the temporary impact of the government shutdown, which is slowing year-end commercial activity at Deltek, we now expect organic revenue to land in the 6% area versus our previous 6% to 7% range.

Relative to our full year DEPS outlook, we're tightening guidance to the high end of our prior range after adjusting for $0.10 of dilution for the $500 million of tuck-in acquisitions completed during the quarter. Specifically, we now expect adjusted DEPS to be in the range of $19.90 and $19.95. We expect to see our tax rate at the lower end of our 21% to 22% area for the full year. For the fourth quarter, we're establishing adjusted DEPS guidance between $5.11 and $5.16, which includes $0.05 of dilution for last quarter's tuck-in deals.

Now please turn with us to Page 16, and we'll open it up to your questions. We'll conclude with the same key takeaways with which we started. First, we made a very good third quarter with exceptional free cash flow. Second, we're super excited about the pace of AI innovation and the growth potential in front of enterprise. Third, we're announcing a $3 billion authorization for a share repurchase. And finally, we remain super well positioned for further M&A activity. Relative to our financial results, we grew total revenue 14% and organic revenue 6%, grew EBITDA 13% and delivered 17% free cash flow growth in the quarter.

AI is a significant growth driver for Roper, expanding our TAMs by automating tasks and work across our vertical market offerings. With deep workflow integration, proprietary data and vertical market-specific architectures, our businesses are well positioned to succeed in AI, in fact, have a very high right to win and are already seeing measurable yet early product and commercial results.

DAT exemplifies this strategy in action, evolving from a traditional freight matching network, to a fully automated freight marketplace powered by AI. Through this transformation, DAT is unlocking significant efficiency and economic value for brokers and carriers alike, positioning itself for improved high-quality growth.

As Jason mentioned earlier, we're excited to announce a $3 billion share purchase authorization, which we'll deploy opportunistically, enabling us to take advantage of dislocations in the market. We're super confident with our talent advantage, our strategy and our execution capabilities, and this first ever buyback is evidence of such.

Importantly, we remain exceptionally well positioned to execute our M&A strategy. We have north of $5 billion of available firepower over the next 12 months and a very active, large and attractive pipeline of opportunities. Importantly, Roper continues to strengthen its position as an acquirer of choice for both target CEOs and their private equity owners. As always, we'll pursue these opportunities whether consistent, unbiased, patient and disciplined approach.

Prior to turning 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 executing a low-risk strategy and running our dual threat offense. First, we have a proven powerful business model that begins with operating a portfolio of market-leading, application-specific and vertically oriented businesses. Once the company is part of Roper, we operate 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 sustainable organic growth rates and underlying business quality.

Second, we run a centralized process-driven capital employment strategy that focuses in a deliberate and disciplined manner on cultivating, curating and acquiring the next great vertical market-leading business or a tuck-in acquisition 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, meaning we double our cash flow every 5 years or so.

So with that, we'd like to thank you for your continued interest and support, and open the call to your questions.

[Operator Instructions] Your first question comes from the line of George Kurosawa with Citi.

Great to be on the call here. I wanted to first touch on kind of the high-level organic growth picture. I think you can -- took a step back this quarter, but I think you can certainly argue there's some onetime or short-term dynamics at play here. Maybe just if you could frame your confidence in a reacceleration from here, particularly as we start to sharpen our pencils for '26.

Yes. I appreciate it. Thanks for being on the call this morning. So the -- yes, I think you're right. I mean the reason that was a little rough this quarter was the 2 reasons we talked about, the commercial activity at Deltek with the government shutdown and then this tariff-related impact at Neptune.

As we think about '26, I mean, it's a little early for us to get super detailed about '26. But if you sort of roll sort of segment by segment, it's been pretty -- an application has been pretty consistent trends there throughout '25. Deltek and government contracting should improve next year, given the passage of OB3. I think the timing of when that improves is still up in the air a little bit. We'll see that as we get through our planning and roll the next year. But there's definitely sort of improvement happening in that market given the spending attached to OB3.

In the Network segment, it's been pretty consistent over the last 3 quarters. There is a sort of a comp thing in the first quarter. So pretty consistent over the last 3 quarters. Despite the sort of the headwinds in the freight market, we'll have to see how the freight market evolves next year, but really like the business building we're doing at DAT, as I talked about. As I also mentioned, Foundry is going to be better next year.

And then on TEP, the Neptune order patterns likely continue normalizing the pre-COVID sort of lead time levels. Orders there have been pretty good. It's just the lead time -- the lead times are going to continue to shorten. NDI is poised for a couple of strong years, but we really need to get through our planning process to have more clarity on how TEP's going to play out next year. But all in all, the -- feel pretty good about the trends in GovCon, Foundry, CentralReach and Subsplash turning organic in the second half of next year in the general business building. But as usual, we go through a pretty exhaustive Q4 planning process, which we kick off in a couple of weeks.

Okay. That's super helpful color. And then maybe just one quick follow-up here on the AI strategy. I think you disclosed 25 products last quarter. I'm curious if you have an updated number just to give us a sense for the pace of innovation. And just more generally, how you feel businesses are coming up the AI curve here?

Yes, we feel very, very good. I won't rehash all the prepared comments about why we feel that way. But -- we're going from having a large number of products and key features. We talked about the [ 40 ] AI features in the Deltek core that's driving sort of the cloud migrations and SaaS. But increasing, we're seeing sort of AI SKUs. So we feel real good about that.

Now we've got to get through the commercial activities. We release these SKUs across essentially every one of our software businesses now and in the first half of next year, that we got to go sell them and commercialize them and give them the momentum will sort of pick up from there. But feel very good, very high right to win, a lot of compounding of knowledge about how to do all this stuff internally. This is -- you can hire some talent, you're going to build it. So we feel real good about that. A lot of internal sharing that's going on, which is great to see a lot of momentum. So we can certainly talk more about that, but feel great about where we are on the AI front.

And the next question comes from the line of Brent Thill with Jefferies.

Just on the buyback, I guess maybe walk through the strategy, why not leaning harder into M&A versus -- I believe this is your first buyback ever. What drove that decision?

Yes. Appreciate it. The -- so just to be clear on what it is. So it's $3 billion. It's open-ended timing. It's opportunistic and no way shape or form and change in our strategy. Set this in the context of the amount of capital we have to [indiscernible] over the next 3 years is somewhere in the $15 billion to $20 billion range. So it's not a change in any way, shape or form.

The rationale for this is pretty straightforward. We just have a ton of conviction in what we're doing. And in terms of the talent we have on the team and the leader companies, the strategies, the AI execution, the general continuous improvement in execution, the business building we're doing, and we think this buyback is just clear evidence and support for our conviction there.

But we're going to maintain a strong bias towards M&A. The compounding nature of the numerator is better than the denominator. It's just straight math. We're super active on the M&A front. We cultivate every day. In fact, our Janet Glazer leads our capital deployment efforts had a fantastic meeting 3 or 4 weeks ago, I think with [ 18 ] CEOs of companies that are in the pipeline, so marketing event, and it was -- this was met with great reviews, and we're really becoming sort of a buyer of choice, both for the CEOs of companies and also the private equity sellers. So we feel real good about the execution of our M&A strategy, and this buyback is just a small complement to the overall strategy of Roper.

Okay. Neil, I know the last couple of years, we've had a couple things that maybe haven't gone away you wanted to. The question is just how do you derisk this out of the guide, and I think investors have looked at the portfolio and said that you get the diversification aspect. But why do we keep having kind of the setbacks if we're that diverse? So that's the question I'm getting.

Yes. So you're right. I mean we built this portfolio to essentially take as much cyclicality and cycle risk as you can take out of an enterprise. If you look back over our long history, before we sold and divested all the industrial businesses, we cycle up or down 5 to 10 points. Now we're cycling like 1 point here or there. So we've essentially beaten out extensively all those cycle risk you can in an enterprise. In this case, it's just it's frustratingly bespoke situations. Government contracting, normally, you're in GovTech because of the stability of the end market here has been anything but that the last couple of years. Transportation, who would have predicted like a 3-year freight recession. And so it is frustrating these things are stacking on top of each other, but they're bespoke and we like the construct of the portfolio for sure.

I think the cash flow generation continues to be strong and consistent with what we thought. Obviously, we've had some new deals come in that have been dilutive, but we've been able to sort of push through that. Our guidance is -- [indiscernible] dilution is pretty close to where we were before. So despite some of the softness we've seen, we've been able to sort of maintain the bottom.

The next question comes from Brad Reback with Stifel.

Software bookings decelerated a little bit sequentially, I think, from the mid-teens to the high singles. Was that predominantly Deltek or are there other drivers there?

Yes. It was mainly Deltek, a little bit of Frontline. We've talked about some of the funding from the DOE. We don't get a ton of funding down to the states, but at the margin, it does slow down a little bit in [ K-12 ], but yes, it's Deltek, Frontline. Outside of that, it's very strong. So if you look at our TTM, it's also a very lumpy dynamic, right? Software bookings are -- can be lumpy quarter-to-quarter. TTM is up low single digits -- sorry, low double digits. So feel good about that trend.

And I would also just call out that health care has been particularly strong this quarter. Our Strata business, we combined Strata and Syntellis a couple of years ago, and that's really starting to take hold in the market. So bookings really strong there. And actually, our CliniSys business is doing quite well to in Europe and even in the U.S. with some of the bolt-ons we've done for them to get outside of the hospital, that's starting to gain traction as well. So some color behind the bookings this quarter.

Great. And then, Neil, I think 2 questions ago, you talked about the rollout of the AI SKUs happening now through the first half of '26 and then needing to sell it. That all seems like we should be thinking about this more of a '27 and beyond organic driver as opposed to '26?

I think that's a fair -- we're certainly viewing it that way. I think it's a fair assumption. We'll certainly see progress in bookings throughout next year because again, this is across 20-plus software companies and multiple products across 20 software companies. And so we'll see building momentum. But before it has a meaningful impact, I think, it's '27 because of the commercial activity has to go along with the innovation.

The next question comes from Ken Wong with Oppenheimer.

Fantastic. I wanted to maybe drill in a little bit on just the organic growth. Any way for you guys to help kind of splice what you might have seen from maybe the same-store sales versus maybe the net new organic that's coming on to the P&L? Hopefully, that question makes sense.

We want to make sure we're framing or branching the right questions. Essentially, what's the cross-sell versus sort of net new mix? Is that your question?

No. I guess what was coming from, let's say, the portfolio, let's say, prior to, let's say, like a Procare Transact versus the stuff that is now kind of flowing in as incremental organic. What was once inorganic coming in as organic. Does that make a little more sense?

Yes. Like what's the impact of Procare coming into organic. A little bit of accretion from Procare, not as we talked about -- not as much as we I thought when we did the deal, but it's certainly accretive to the segment.

Okay. Got it. And then on the TEP business. I think going into the quarter, I think the expectations were high single digit in the back half. I guess -- only 6% in the quarter, low single in Q4. Was that isolated to any particular piece? Or was it a little more broad based? Is it just Neptune? Or should we think about any other pieces that contributed to that slight weakness?

Yes, it was Neptune predominantly. I mean, you had -- it was an acute impact on Q3. We always had a little bit of a tougher setup in Q4. But even aside from that, it was definitely [indiscernible] in both quarters. Neptune, sorry, Neptune.

The next question comes from Joshua Tilton with Wolfe Research.

Guys, can you hear me?

Yes.

I've been bouncing around on a few earnings this morning, so I apologize if it's already been asked. But I guess the #1 question for me is just, is there anything you can give us on the guidance front, specifically for organic revenue growth that could increase our confidence that you -- like you derisked it enough? Maybe you can just like walk us through a little bit further on where the derisking is coming from Deltek versus Neptune and kind of what gives you the confidence that this is a good base to start for the rest of the year?

Yes. I mean I think we've given the outline by segment. And so I think Neil had framed, at AS, we've got it at mid-single-digit growth. There could be a range there, and it really depends on Deltek's perpetual license activity and a little bit, to a lesser extent, there's a couple of projects in our Transact business that might hit this quarter or next quarter. So that's sort of the range there. And so I think we've given you that.

Network is going to be sort of mid-single digit plus. I think we've -- a lot of that's recurring revenue. And the only thing that can move around is truckers, right? They can come in and out of the DAT on a monthly basis. So we think we've sort of -- we've got that sort of boxed.

And then on low single digits for TEP, I think we've identified where the challenges are for Neptune's tariff activity. NDI works on mostly backlog for the quarter. The others are a little bit less backlog. But just based on the trends and the call downs we had with the business, we feel like that's an appropriate number for the quarter.

Really appreciate the color. And just maybe for a quick follow-up. I really appreciate all the color you guys gave on the AI positioning that you guys have and some of the examples. I guess what I'm trying to understand is, it feels like every company that we talk to is trying to race to be a winner in this AI world at a pace that we've kind of never seen before. Is there a dynamic? Or do you feel that maybe you guys have this unique AI think tank going on inside of Roper because you have a group or a portfolio of companies that are all marching towards the same AI goal? And then if that's the case, maybe could you share with us how they're sharing knowledge and best practices and what they're seeing across some of the use cases that are already being successful to kind of set up the rest of the portfolio to be just as successful in their AI endeavor.

Yes, I appreciate that. So I don't know if I would go as far as say like there's some think tank sitting in [ Sarasota ] that's like crafting all this. What it is, is we have clarity of purpose, right? So when your vertical market, system of record and you're going to evolve like system of work, it's everybody -- the portfolio construct is so similar that we're running basically the same play across the 20-plus software companies. So there's common purpose and common understanding about that.

Then there is a lot of information sharing. Every 3 weeks, there's an AI sort of showcase inside of Roper. We have a few hundred people sort of talking about 1 company or 2 companies to highlight what they're doing internally or externally architecture, commercial, whatever it may be. We send a weekly e-mail about sort of where the state of the technology is, the state of the evolution of AI to galvanize the leaders. There's telemetry putting into our planning process that we're looking for, for both the product road maps and internal productivity.

The group executives who, as you know, coach 6 or 7 businesses each, those businesses are together all the time on all things related to business, AI being a big topic of it. And I could see us in the not-too-distant future, sort of adding some resources at the corporate office at the center that are an overlay to all of that, that are really sort of scanning the horizon for the -- enabling technologies are going and how to apply that technology. Because at the end of the day, this stuff is hard. I mean, it's what we're trying to do to identify tasks and work where you have to be deterministic and not probabilistic. It's hard to do.

Now it's good that it's hard because when you do something that's hard you create this magical moment for your customer, and that's where you can sort of have this win-win relationship on value. And so we're super excited about all that, again, have this high rate to win because of all the context and data and decades of sort of accumulated knowledge about how these verticals work.

And the final thing I would say is the real unlock for really anything inside of Roper is our org structure, right? Where this highly decentralized, high-trust autonomous structure, taking $8 billion P&L, it's put into 29 units. You have super talented leadership teams that are highly motivated, intrinsically and through our financial reward system to compete and win in the marketplace, and this is the new frontier on how to do that.

Sounds like a good setup for AI success.

The next question comes from Terry Tillman with Truist Securities.

Two questions. The first question is on software bookings and specifically with Deltek. The second one is going to be DAT. So first, in terms of software bookings, I think you said high singles in 3Q. So what are you assuming in 4Q? And the second part of that first question is -- and maybe this is wildly optimistic, but assuming at some point, the government shutdown thesis, could you actually get those licenses in still in November or December? Or are you just assuming that doesn't happen? And then I'll have that DAT follow-up.

So yes, so thanks for the question, Terry. So I think for the fourth quarter, we'll see how it plays out. We had a very strong Q4 last year. So the comps are a little tougher. But I think it's the end of the year, and obviously, the pipelines look very strong across our businesses.

You're right about Deltek. We're not assuming that's going to hit this year. But we've also seen customers make very quick decisions in the last few days, especially if it's sort of -- they've got an internal budget dynamic that they can utilize. So we're not assuming that at this point. But I will say, just for '26, we do feel really good about what [indiscernible] is going to mean for Deltek. Additionally, I mean, just Deltek had -- the markets haven't been cooperative with just in general, for the last couple of years. So the demand is definitely there. Deltek's done a lot to their cloud product. They're incorporating a lot of the new AI features that are going to be cloud only. So that should help drive some higher conversion. That's one of our -- I think it's our biggest maintenance base at Roper so excited about the future, just need to get past this quarter of sort of uncertainty.

Got it. And then, Neil, on the Slide 12, I like that slid shows kind of where you've delivered on the platform. I know what DAT, pricing and packaging was an important kind of growth unlock an improvement this year. But now you have this idea of one-click automation and then newer areas that seem like they've expanded the TAM around management and payments. Like, is there any way you can frame like how much you can garner now per successful load or transaction going forward with some of this newer technology versus the past or the present as you laid out on that page?

Yes. I appreciate it. So yes, you're right. So the strategy of DAT, and I've called this out for a few quarters, if not longer, is we have this remarkable business that's a network between brokers and carriers, and we monetize both sides of the network on a subscription basis. And we have -- what we have is the market captured, and we have very favorable go-to-market unit economics especially on the carrier side because of the carrier, you get your authority first, then you probably subscribe the DAT second, so you can understand we're going to grab your load from. So they -- it's a very efficient go-to-market motion and capture there, very unique go-to-market motion relative to the unit economics. So then the strategy is how do you just scaffold more value on both sides of that network.

And then the ultimate value creation is -- and what you're talking about, which is how you sort of take the labor -- the task labor out of the matching of a broker transaction. As we mentioned today, we broker about -- there's about 1.2 million loads a day on DAT. There's about $100 to $200 in task labor savings for each one of those is automated. So you can apply whatever percentage you think is fair. I'm going to leave that open at the moment. We have a good indication internally, but some small percentage of the total loads and then some small percentage, a fair percentage of the labor task savings and you'll get a very large sort of opportunity. Now that's the opportunity.

Now we have to go equip it. You've got to make -- we've got to integrate this capability into the TMS of every broker, so it's native. They've got to onboard a large portion of the carrier base into this, which we're actively doing. So we're super excited. The early results were like sold out on the broker front, so the early results for integration is great, but there's a business we've got to build here. And the reason that we're unique in this is that we're truly [ Switzerland ]. Like we don't -- we're not competing with the broker or enabling the brokers, and it's a huge value savings for both the brokers and carriers.

Next question comes from Deane Dray with RBC Capital Markets.

Just want to get a clarification on the timing delays at Neptune. Our experience has been, especially recently going through COVID is once a utility is ready to place an order, they're unlikely to switch. It's already gone through the rate case. It's all a pilot study and so forth. So have they lost any of these orders? Or this is strictly delay at this point?

No, no, just be super clear. This is pushed to the right. So what we've done, and I alluded to this in my prepared remarks, is that we have this tariff coming through. We -- Neptune decided we concurred fully that they're going to assess a surcharge, which then you've got to go essentially recontract or renegotiate with all the open orders about how to do that, and it just puts some gum into the system.

The -- it's a little bit easier when you're going through distribution to do that because you have a distribution partner, you can sort of share some of this surcharge with. But when you're doing the direct business, that's a little bit more difficult to do and a little bit slower. So this is 100% pushed to the right. In fact, Neptune reports, I mean, there's a little market share gain in the quarter for Neptune, but these sort of market share quarter-to-quarter are sort of 1 point here, 1 point there, 0.5 point here, 0.5 point there, but the latest report is the share has actually improved a little bit with Neptune in the quarter.

That's really helpful. And then follow-up and I'll echo the -- how much you appreciate that spotlight on DAT. And just the idea, can you talk about the implications of making the investment in Convoy? You added that, if not profitable, but just the willingness to subsidize, make that investment so you have this end-to-end automation. But just the implications of a bolt-on that's not profitable.

Yes. So I'll just -- I'll start, and I'll ask Jason to add a little bit of color. In our case, it was very -- it was a unique situation for us. It was very much a buy versus build. This is very complicated. It sounds very easy. It is very complicated, complex algorithms to do this. They have to be absolutely deterministic. It's more ML than AI. There's a very large group of talented engineers that came with the acquisition. They are now part of the DAT sort of franchise. And so it's unique in that it's money losing at the moment, but it's like the final piece to sort of manifest the strategy of DAT. And because of what we've talked about earlier, we have such high conviction of what was going to happen here.

Yes. I would just add that, I mean, most of our strategies call for tuck-ins that are adjacent and they sort of fold them in, like we just did Orchard for CliniSys, that's sort of the bread and butter that we would do for bolt-ons. This is really a technology acquisition that was -- it's really to create a new market. And so I would say that's very rare for us, but we think it's a great opportunity. And so we're willing to make that technology investment.

The next question comes from Dylan Becker with William beer.

It's [ Faith ] on for Dylan. Maybe expanding on the DAT question. It seems like this end-to-end platform has been in the making for some time. So can you talk about where you see DAT growing as you continue to build out this network and the long-term potential there? And maybe even how this can drive durability despite some of the headwinds we're seeing in freight?

Yes. So we want to -- so the DAT core business is a low double-digit growth business when you get the benefit of some unit growth versus just packaging and price. So that's a long-term sort of organic growth rate of the core business. We talked about this sort of this entire sort of track automated business. We're talking about adding a capability that doesn't exist in the industry that is multiples of the existing TAM. And so we want to see actual momentum in there before we quote sort of what the acceleration magnitude could be to DAT, but it's exciting for sure. So I know that's a little bit of a -- not an answer you're not looking for at the moment, but we want to actually see the growth in the field before we call the -- how much accelerated growth rate is going to be there.

All right. No, that's helpful. And then maybe just double-clicking on Deltek. Can you maybe remind us what you guys saw during past government shutdowns and the impact to the business and any potential insulation there?

Yes. Happy to do that. So just to remind everybody, Deltek is 60% GovCon, 40% non-GovCon. We're talking about the 60% of Deltek that's in GovCon. What we've seen is when you have the government shutdown, it's the pending -- the potential of the shutdown and the actual shutdown that just -- it just pauses commercial activity. The activity is still there. The pipelines continue to build. There are still discussions because everybody knows the shutdown will end. The government will be operational again, and we have this OB3 spending where we have to -- all that will be awarded and has to be delivered. It just -- in the height of the uncertainty, there's just not a lot of signing on of the purchase orders or the contracts.

If this were -- hypothetically, if this were happening in March, we would probably not be calling down the year because there'll be time left in the balance of the year to sort of for the commercial activity to sort of resolve itself. It's just we're sitting here in the last 2 or 3 months of the year, we're going to run the clock out of the year roll in the next year.

The next question comes from Joe Giordano with TD Cowen.

Just looking at App Software, I mean if we strip out the Deltek GovCon stuff for a second and just think about like the acceleration of organic here, what's the catalyst for this? I mean you look back, I mean, it's been small variance, but we're kind of like 3 years around 6%, give or take. So like what in your sense is like really the catalyst to bring this into like a high single to -- more like a high single framework?

Yes. So it certainly will help when your largest business -- the largest segment, our largest business can sort of grow at its normalized growth rate. I mean we're a couple of years into sort of a slowdown with the uncertainties across all the government sort of spending. So that helps quite a bit when you look at that.

We've had -- just going through the businesses, Vertafore is steady for us, a lot of AI opportunity in front of that business. Probably takes -- I mean we'll see some early green shoots of that next year, but as we said earlier, probably more 27. Aderant has been just killing it to PowerPlan doing a great job. [indiscernible] will turn organic, which will help. Frontline has been a little sluggish for the last couple of quarters, a couple of years -- couple of quarters, largely because of some uncertainty around the funding coming from what's happening in Department of Education. You've got the hangover from all the COVID spending. And it's just now that's getting more normalized. So Frontline reaccelerating, which is in the offing in the next couple of years will be super helpful to that regard.

And then finally, our CliniSys business for the U.S. part of our laboratory business, the legacy [ Sunquest ] has just lagged for all the reasons that everybody knows for 8 years, and now that's turning here, that's mid-single-digit organic growth enterprise for us now. So that starts to help. So we like what's happening here in terms of the growth optionality, growth capability.

When you think about the buyback now and you think about the multiple of your stock, like what's the thought process when you're weighing like, okay, here's a $1 billion opportunity here or $1 billion of deploying capital? Like you kind of be pretty straightforward with where the multiple of your stock was versus the multiple of what you're acquiring and now it's kind of -- it slipped a little bit. So maybe talk us through how much that's informing your decisions on where to allocate at a given moment in time?

Yes. For us, it's never been about the multiple of our stock. It's been what's in the compounding math for a cash flow acceleration, what's the best deployment of capital to optimize the long-term cash flow compounding of the enterprise. And now we just have another lever and a buyback to put into that consideration set.

The next question comes from Julian Mitchell with Barclays.

Just wanted to start off with the outlook for TEP and Neptune in particular, on the top line. So you had the backlog declining there for sort of 2-plus years. The revenue growth is slowing a little bit. So I just wondered sort of what's the confidence that, that organic growth on revenue doesn't continue slowing into next year just given those backlog dynamic?

Well, I think we got -- so let's just be clear about the backlog dynamic. This is about the buildup from the COVID period. I mean pre-COVID, this was -- you might have a couple of quarters of visibility to an order backlog. It wasn't quite a book-and-ship business but much more book and ship than it was when you ran up through COVID, and then all the customers gave us blanket orders that were a year plus out. Now we're normal. When I spoke earlier, we're normalizing the order lead times slowly over time. So we -- the backlog grew, and it's bleeding down based on this order timing dynamic, set that apart from the demand environment, the market share environment. So that's point one.

Point two, on the more normalizing piece at Neptune on the demand environment is -- we're just in a cycle now this year, probably next year where we're just in normalized growth for that business, where the prior 2 or 3 years were accelerated growth because of the hangover from the COVID period.

That's very helpful. And then just my second one might be around sort of with all this effort around sort of AI, just wondered what the implication for that might be on your, let's say, core R&D? Is that -- could that be a bigger headwind to core margin expansion in future? Whether there's been any view to sort of looking to acquire more AI intensive businesses within your overall capital deployment framework?

Yes. So actually, this is Jason. I think the it's interesting. We're getting quite a bit of activity using some of the frontier models out there, [ quad code codex ] cursor. And so we're not really seeing -- obviously, we're going through our planning this year, but it's creating a lot of opportunity to just do more with less. And so that's the -- that's our posture that our R&D envelope will probably stay the same, and we'll just get more out of it.

And when it comes to acquisitions, yes, we'll look for small tuck-ins that we can do. We just had a really small one for Aderant. And that's not necessarily buying any talent, but it's providing an AI solution that gets us faster to market. So we'll do those occasionally, I think. It's not going to be our primary way to get after AI faster, but certainly will be an option.

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

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

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

All right. Well, good morning, everybody. My name is Joe Ritchie. I co-run our industrials and materials research. I know odd to have me at the tech conference, but I do happen to cover a company that is mostly a software company called Roper. So we're excited to have Roper here today.

With me today on stage, we have President and CEO, Neil Hunn. We also have the CFO, Jason Conley. Guys, thanks so much for being here today.

Thanks for having us.

So why don't we kick it off, Neil. There's still probably some folks in the room that are still getting to know who Roper is. So why don't we start with the story? What are the basic tenets of the Roper business model? And how do you compound cash over time?

Sure. And thanks for having us. It's great to be here for all these years. So Roper, $8 billion business, principally vertical market software. We consider ourselves a software compounder. So we run a sort of dual threat offense. The dual threat offense is a sustainable and increasingly -- or always increasingly improving organic growth rate. I'll come back to that in a second. And then we run a very structured M&A motion.

So dual threat about cash flow generation on the organic side and capital deployment on the M&A side. On the cash flow generation side, it's, as I mentioned, $8 billion business. It's 29 P&Ls. So 29 businesses. That's a very decentralized org structure because we need each one of our businesses who are the leaders in their vertical market to compete and win in that market. It's a high-trust autonomous structure. We have 29 of everything, 29 leadership teams, 29 strategies, 29 ERP systems. They're organized around speed and the speed coefficient and accountability. And that generates the cash flow a little bit north of 30% free cash flow margins in the enterprise.

And then we have a very centralized capital deployment structure to go find the next best business to put into the portfolio or the next best tuck-in or bolt-on acquisition to integrate into one of our existing businesses. When you put it all together, we're a mid-teens cash flow compounder. We have aspirations to become a high-teens cash flow compounder or take our rate of double from every 5 years to every 4 years, plus or minus. So I know you're going to ask a lot of detailed double-click questions from there but...

Yes, let's double click. So look, that's great compounded growth over time. Just talk about why this has been the right strategy for your company, how the strategy has evolved. And then we'll get into -- like there's been a lot of -- there's been plenty of success stories, but maybe just give some examples so there's some tangibility to why this has worked.

So our history, I mean, we grew up as an industrial compounder, as you know...

That's why I'm here.

And we closed that chapter of the transformation in November of 2022 when we essentially divested 40% of our business in a series of transactions to become a -- principally a vertical market software business. But what's been consistent across Roper over the arc of the portfolio transformation is a decentralized structure, having businesses that are leaders in small markets, having durable sort of organic growth, having -- continuing to invest in the talent and the people and the skills and the capability to drive enhanced organic growth in the top line that leverages to the bottom line.

Also what has been consistent throughout is a very centralized capital deployment structure. So what's changed is the nature of the portfolio over time, not a lot of the underlying sort of capabilities but as we became definitively more growthy 4 or 5 -- 5 or 6 years ago is we built capabilities at the center to promulgate best practices around talent and team, how do you do strategy really well, how do you run a structured operating environment, increasingly, how you think about using principles of continuous improvement.

Now obviously, a lot around artificial intelligence. It's sort of the, if you will, the pattern recognition that we have at the center and then we promulgate those throughout. I'll ask Jason to add a couple -- some success stories. It's really about each business getting a little bit better. So we have a business in the legal vertical, the business of law. That Aderant has gone from sort of a mid-singles to a low double-digit organic growth business. Gross -- net retention has gone from the 103, 104 to the low 110s over time.

We have a business in the energy utility space, PowerPlan, very sort of esoteric accounting tax sort of software for a very complicated customer base. We underwrote that business when we bought it 7 or 8 years ago, -6 or 7 years ago -- 5 or 6 years ago, I should say, in the mid-single digits, it's very much a high single-digit organic growth business. Our freight matching business, DAT has been in the portfolio for almost 20 years. It was sort of a market -- a transportation market growth business. Now it's very much a high single, if not low double digits organic growth business. So it's about just slow, methodical, systematic improvements to market position, product capabilities, go-to-market capabilities that drive that result.

Yes. I think the other thing that's evolved, just to your earlier question, is on the M&A motion. And so we've invested in significant capabilities at the center to do a lot more sort of deeper dive market research. So we brought on some folks from the buy side. And that's just enhanced our capability to get more proactive, both on the platform side, but importantly, on the bolt-on part of our acquisition strategy.

So historically, where 10% of our M&A was towards bolt-ons. We just see a tremendous opportunity now that we have -- Neil talked about talent as one of the things that we've spent a lot of time investing in our field leadership. Now that we have the right talent, we have an inorganic strategy for all of our businesses. So most of them are now turned on for bolt-ons. So we would love for that to be 1/4 to 1/3 of our M&A going forward. It's only constrained by the ability of management, but we think there's a ton of opportunity to increase the organic growth of the platform.

That's super important. So we're not just doing a buy and build, our multiple arbitrage strategy is to sustainably have a higher growth set of platforms. And you're obviously going to get some synergies, back-office synergies from those deals, too. So they are our best-returning deals. So that's the other part that, I think, has been a significant shift over the last 5 years.

We're going to get to the bolt-on piece of the story in a minute. I do want to ask you like maybe in light of the Procare of the past year. When things potentially go sideways, what do you guys do? What's the governance process to course correct? What are some of the actions that you guys typically take?

Maybe I'll sort of set the table and let Jason sort of add some -- a lot of details and color. So as we deploy capital, we very much are slope investors, right? We spend a lot of our diligence sort of understanding market structure, competitive intensity and the slope of the growth rate. If there is a mistake that we make from time to time is we might get the intercept wrong, right?

So in the first year, we might undershoot our model for revenue by a little bit. The good news is we also probably overshoot sort of spending, so margins come in a little bit higher, so cash flow is closer to being on plan. So we spent a lot of time trying to get the root cause about why that's there. But rarely do we have a slope problem where if we underwrote 12% growth business, it's 7%.

And so in Procare's case, this is a short-term sort of intercept, if you will, operational challenge that we talked about in the last quarter. The slope, we underwrote to mid-teens growth, and we very much believe it's a mid-teens growth business. But why don't you get into some of the intercept problem?

Yes. I think -- so obviously, Procare was the first deal, and it's a tremendous business. They've -- one of the things we talked about when we first bought is we had to make some changes on the go-to-market leadership because part of the some of this was going down market and competing there, and we are now having success there.

We had our best bookings in their company's history in the second quarter, but it took a while to ramp that team. So that was sort of one factor. The other is just we have -- now we have a value creation team as myself, Janet Glazer who heads up M&A; Shannon O'Callaghan. So we are super focused on whether management is going to be able to hit the expectations. So we're having just much more tighter governance around that. And that really starts with diligence. So just our signals are there, and we do countermeasures, probably much more rapidly than we did before. And so since then, Transact, our CentralReach business, Subsplash, we're just -- our process is super refined now. And so we feel really good about where we're headed with that.

Yes. And so maybe just digging a little bit deeper into the governance process. I know that you have business-specific EBITDA growth metrics. Talk a little bit about how you ensure that you're hitting those metrics. And again, we talked a little bit about course correcting at times, but you've had a good repeatable process and good track record over the last 2 decades. So just -- maybe just for the benefit of...

I think governance is a -- a lot of people like, what is government. There's like this ethereal, what is it? So I'll try to put the subcomponents to it. First is, I think very important to our governance structure are the leadership -- the innate leadership attributes of the people we have running our businesses. And so we select people that are hypercompetitive, that are insatiable, curious learners that think super long term and can bring that into the urgent today and then are just totally geeked out to build things, right?

So we -- those are -- they're either in your DNA or they're not. And so when you have a competitive builder, learner, long-term-oriented leader that's the beginning of the governance system. The second thing is, we couple that with an incentive system that is totally aligned with growth, organic growth improvement, shareholder value creation. In our case, it's very simple. It's based on organic EBITDA growth. Now that might sound like a very simple idea, and it is, but we have -- there's no compensation in Roper tied to budgets or plans, which is unique to most enterprises.

In our case, if we -- and I think this goes to more of a cultural thing than anything else in that if we did provide compensation based on budgets, then every year, we -- all 29 leaders would have an incentive to lie to us, and we'd have a filter not to believe anything they say. And so in that case, everything is construed around sort of compensation. In this case, every company is on a curve, the curve has not changed, a growth curve. And if you're able to get sort of into the money and you're earning 150% or 175% of your target every year, year in, year out because you're above the high end of your growth curve that's awesome and are not going to move the curve.

So the incentives are totally aligned. And then as it comes to these new sorts of either early -- maturing leaders or higher growth platform businesses or bolt-ons, now we have very prescriptive value creation drivers that are identified at the point of acquisition. So in the first 12 to 24 months, there's very discrete value creation levers that are being pulled, and we have much tighter accountability and governance around that. So it's layers upon layers upon layers and the execution has followed as a result.

Got it. Maybe we'll just touch on the maturing leaders and why that's the correct strategy. It seems like a pretty good unlock, both top line and bottom line, but maybe walk through your thinking.

Yes. It goes back to the opening statement where we aspire to go from the mid-teens cash flow compounding ZIP code to the high teens. And so we're hunting for 300 or 400 basis points of cash flow compounding, which we think then will accrue into TSR and shareholder compounding. And we looked at all the options available to us, the full menu of strategic options, we settled on 2. One is improving the organic growth rate of the portfolio by 100, 150, 200 basis points.

And then I'll simplify it by saying capture more value from our capital deployment sort of strategy. And so on the maturing leader side, so on that branch of the tree, we found that there is -- versus our historical legacy, we'll call it business as usual, buying near perfected businesses at [ garp-ish ] sort of prices, there's between -- there's 30% to 40% more cash flow that we get in year 5, deploying a bolt-on strategy or buying a business that's growing a bit faster, has margin improvement opportunity than there is BAU. So we get a couple of hundred basis points of cash flow compounding in the algorithm by running that strategy.

And it's as Jason said, 1/4 to 1/3 will be tuck-ins or bolt-ons in the model and the balance will be these faster-growing businesses. Subsplash would be a good example, our most recent acquisition of church management software space. It's a high teens organic growth business and its margin profile will go from the high 20s to the low 40s over a 3- to 5-year period of time as there's some very discrete cost actions that we can sort of levers we can pull as well as it's going to scale into its revenue base, and it will drive sort of the double whammy or double benefit of not just top line but bottom line growth, so you have mid- to high 20% cash flow EBITDA growth in that business. So there's a lot more value creation there than there is from the business as usual strategy.

I think what's important to highlight though, these businesses are still in niches, and we have a clear understanding of where -- the kind of how the market is going to perform, right? That's usually still like 2 or 3 players in the space, and there's no -- it's too small for sort of larger player disintermediation or interest in the market.

So I think all the patterns of the things we bought for the last 15 years are the same. It's just earlier. And we have -- again, we've seen the story book long enough to know that there's not any sort of risk on the horizon. So we're not underwriting sort of market risk. We just think there's an opportunity. And most of the time, it's the fact that whatever that industry has not digitized yet. So we have white space to digitize otherwise pen and paper type solutions that the customers are sort of behind the technology curve.

Got it. No, that makes a lot of sense. You talked a little bit about 150 to 200 basis points of potential organic growth expansion versus your historical, call it, 6% to 7%. Can you do that with the current portfolio? So you talked a little bit about getting there with additions. Are there maybe some subtractions as well to help try to drive that growth rate?

I think -- let me sort of break that down. So our -- if you look back at this portfolio 7 or 8 years ago, this was a mid-single-digit, 5-ish percent plus or minus organic growth business for the current fleet -- the current assets we have today, excluding the divestitures. We've improved that into the 7%, 7.5% range sort of through cycle. And we think there's another 100 to 150 basis points of opportunity as we just operate and optimize the product portfolios, not the company portfolio, but the product velocity and the go-to-market strategies.

And each business has very bespoke things they're doing to do that. It's the whole operational sort of organization, our operating executives, all 29 leaders are focused on pulling that lever for sure. Now we are buying businesses that are more growthy. So when you look at Procare, Subsplash and CentralReach, the last 3 platforms, I think plus or minus, they're about 80 basis points accretive once they become organic to organic growth rate. And so in a perfect world, they stack on top of each other. The reality is there's probably a little bit of hedging between the 2, but sort of skid our chain on sort of the very high end of the high single-digit organic growth range.

That's helpful. So clearly, something that's unique about Roper specifically and probably to a lot of folks in the fintech world is the fact that you do so much M&A, right? Talk a little bit about your sourcing process, talk through like the pipeline. One of the things that has come up numerous times over the past decade of covering you guys has been like when are they going to run out of room, right? So maybe just kind of talk through your process and why you believe you've got plenty of runway from here.

Sure. I mean there's multiple vectors. First of all, I would say the market is never static. There's always some product market fit. Somebody -- some founder figured something out that we're always just wowed that just came out of nowhere. Next thing you know you've got a $100 million EBITDA business that some founder...

In a niche -- you didn't even was a niche.

You didn't even know was a niche, so I'll start with that. I think we've always had a motion to have conversation with sponsors about the portfolio. I'd say we've gotten much more sophisticated around that. And so not only at the sort of the large sponsor, but the mid-market sponsor, we're having a lot more conversations with both the principals there, but then also more importantly, the management teams.

And so -- and in this period, we'll probably talk about what's happening in private equity right now. We're getting a lot more looks to and access to management. But it's really about getting up to speed on the business, developing relationship with management, specifically the CEO. And because they -- ultimately, they want to come work for a place where they're going to like where they land. They're going to -- they know we're going to invest.

So we've become a good home for a lot of these businesses. And if the CEO has a say in it, which is more times than you would think happens then we're going to have a good shot at the business. So that's at this sort of platform level. And then on the -- I started talking about this a little earlier on the bolt-ons, it's developing an inorganic strategy and then working closely with management, the M&A team working closely with management on a cultivation process.

How are we going to outreach to that founder? We're going to go to a trade show. We're going to start to talk about how the benefit of coming to selling your business to Roper is going to be wonderful for you and your employees. And so that motion has been going for the last 2 years, and we're starting to see some benefits. It takes time. The first one we did with Neptune that was a software company, and we've been cultivating that for 2 years. So -- but that's a super important part of the strategy. So anything you want to add?

Just the punchline, the headline, I'd say, is of all the constraints in our compounding model, the availability of assets is not one of them. I mean we're $5 billion a year in capital deployment. It compounds, 7 years from now, it's $10 billion we have to deploy. So it's the equivalent of running a $20 billion or $30 billion private equity firm in terms of scale of what we have to deploy, and it's a drop in the bucket in terms of the assets that are in the marketplace.

How do you guard against getting the right -- like getting the wrong assets?

Yes. So we've alluded to it through the conversation, Jason certainly did. So in our case, again, we're looking for leaders, the leader in a small market. We're looking for the competitive intensity is low. So oftentimes, we have 1 or 2 primary competitors. We're looking for the basis of the competition is identifiable. And so if there's -- if we identify zeros in the Monte Carlo -- if we can't answer those questions and there's a 0 in our sort of mind in the Monte Carlo, we're out because we can't afford to have nothing go backwards. We can afford for something to go a little bit slower than we thought. We cannot afford in a compounding model for anything to go backwards. So we're really tuned to be existential risk identifiers, and it's not a valuation question. It's we're not going to buy the asset question. And so that's how we think about that.

Fair enough. Subsplash is interesting for a variety of different reasons, the least of which is that you're selling into 20,000 religious organizations. I never thought I'd be covering an asset that was selling into that group. But also because you talked about the financial projections where you've got strong double-digit growth, this really massive margin opportunity within the company as well. When you look at the pipeline of deals today, like how unique is Subsplash versus what you see across the pipeline?

So I think the -- the attributes are not that unique in that you have a market that is -- that has for whatever set of reasons, a market -- the market is growing 10% to 15%. The reason the CentralReach market and autism therapy software market is growing at its pace and Subsplash growing at pace for different reasons, but they're structural and they're quite long term.

The fact that the business is the leader in a category or the space, and they're using their distribution advantage and their scale against the competitive set to drive product velocity is common, but the exact product road maps and product features are different. And so those are -- that's essentially what we're looking for in terms of the acquisition, the attributes. The specific details are very different from deal to deal.

And then because you did make a recent acquisition with CentralReach, do you want to maybe just talk about some of the proof points there, the early proof points on how that's going?

Yes, sure. So CentralReach is a leader in the autism space. So we provide ABA therapy to hundreds of thousands of...

We don't provide the therapy, we're the software for it.

Software to provide therapy to millions of patients or they call them learners. So it's a leader in its space. It's definitely had just a tremendous success so far. I think what we talked about during diligence or when we announced it was that the supply-demand imbalance is there, and we're seeing that. So the growth in seats for the therapists has been tremendous. Importantly, too, we talked about the AI opportunity at CentralReach. They had launched new AI products probably a year before we acquired them.

And so the cross-sell, both the direct cross-sell of the AI solutions has been just on track, if not a little better. And they're also getting a halo effect because of the AI kind of first positioning in the market, they're starting to attract new logos as well. So they're winning new -- they're gaining share. And so on all metrics, they've really been tracking gross, net retention, new logos, it's tracking on plan and margins have been flowing just as we thought they would.

So it took 23 minutes before AI was actually said in this discussion, but it's a good segue. Clearly, a lot of focus on whether it's an opportunity or a threat. So why don't we start with how you're thinking about the opportunity versus threat perspective and then we can get into the specifics around like what you're doing internally.

Happy to do it. Well, I'll first say it is an incredibly fun and exciting time to be in technology and leading a larger vertical market software business. We've come to conclude, and we try to be as objective as we can on this. We've concluded that this is just a huge TAM unlock for us and as a result, will be a meaningful growth driver for us. The magnitude and the timing is still very much to be determined because I think all software changes go a little bit slower than what the initial hype would suggest.

The reason that we like it is we're -- and I think most people will agree with this conceptually is we're fortunate to have a vertical market software portfolio. I'll start with that. It's better to be lucky than good. Back in 2008, when we did our first software investment, happened to be in a vertical, and we continue with that trend. Why is that important? So we have enormous -- and it's also important to have a portfolio of leaders.

So we have leadership. We're vertical oriented. So we have enormous data advantages that are very, very specific to very small slivers of the economy, and we have massive distribution advantage. I think unlike other technology disruptions, Internet, mobility, cloud, where innovators dilemma reared its ugly head, the incumbents thought that next technology wave need not apply to them so they gave all the start-ups a huge sort of advantage timing-wise.

I think incumbency in this case matters a ton because we were sort of -- well, the incumbents were donated speed by the technology, right? So we can develop just as fast as a start-up, but then we have distribution to put it into when the start-up was not donated sort of distribution or customer base. And so it is a very, very exciting time for us.

The other thing is, one of the things we've invested in, just going back to that growth opportunity, the TAM potential is to be selected to be part of the Roper portfolio, we're buying leaders in small markets. So by definition, we're constrained by TAM. Like we like the constraint because it's protective. But now we've got the opportunity to sort of have software eat labor and sort of upstream and downstream from what we do. So it's hugely TAM expanding. And we have, we believe, an enormous right to win, and we're getting after it. I'm sure you're going to ask questions about how we're getting after it.

Yes. We're going to talk about that, but I mean, it sounds to me like you're not concerned really about any of the horizontal players coming into the space and trying to encroach upon any of your businesses because...

That's been a -- I mean the horizontal or vertical debate, I think, has largely been asked and answered historically. I mean it's the -- if anything, I think the market is getting more verticalized, not more horizontalized because of the data advantages, the workflow specificity, the very bespoke questions, like answers or problems are solved. I'll give you like a very simple example, like a generic question or problem is how you create a professional services bill accurately. That's a very generic unspecific problem that a horizontal player will sort of try to address.

What we try to address is how do you create a King & Spalding bill to Roper Technologies in the legal space that's compliant with how Roper pays for the month of August. It's a very specific problem that's a snowflake of complexity that our software solves. And I just multiply that times all the various verticals that we have. It's -- we're not -- we haven't seen sort of horizontal encroachment in any -- if anything, it's the other. At the very, very, very tippy top of our markets you might see horizontal players and they're generally slowly being displaced by us or our competition.

That's great to hear. Look, you guys called out CentralReach just a couple of minutes ago is already having some AI-enabled products. On your recent earnings call, you were highlighting Aderant. Maybe just talk about where you're seeing some wins on the top line. What is the opportunity here?

Yes. So maybe I can set the table, and then I'll have Jason sort of talk about that. So this is one of the advantages, I think, of being part of the Roper enterprise. So again, 29 relatively small businesses that have a huge right to win. But what's happened over the course of the last 18 months or so is, and again, we're built for speed because we're divided by 29. So -- but once -- but we got to prime the pump.

So once the pump is primed and it becomes the front of the prefrontal cortex for all of our leaders and their team, then the engine just sort of runs itself, but we've got to prime the pump, and we started doing that 1.5 years or so ago around AI, really sort of turned up the pace this year. So we've asked every one of our businesses has fundamentally re-underwritten or reimagined their entire business model to the AI native.

This isn't like incremental thinking about fast forward 1, 2 or 3 derivatives out from a customer value chain point of view, how your customers -- industry can be reshaped, how can we do the reshaping, how can we drive product there. Same thing on the internal productivity front. And so we have very clear vision and direction of travel to be AI native for all of our businesses. We've certainly made it easier for them by doing enterprise layer agreements, so they don't have to worry about contracting with the large models or the Cursors of the world so they can try to get to speed. We've helped them with organizational structure about how do you sort of pull out pods of AI native teams that can iterate very, very fast versus be in the slower sort of development sort of chassis of our businesses.

And what you're seeing is early results of that. I'll say early, but a year ago, maybe we had 5 or 10, sort of 5 products, plus or minus of any consequence. Now there's 25 plus or minus products that will be either in market now or in market by the end of the year. That number will continue to sort of, I'll dare to say, explode as we head into next year because there's so much opportunity in front of us. And so we feel really good about the forward-leaning posture of our companies, especially against our relatively small competitors, right, in the markets we serve. And then Jason can give you a couple of early data points on that.

Yes. I think there's several vectors where we're going to see opportunity. We think about like a Deltek where they're creating new AI features on their Costpoint product, and that's only going to be available in the cloud. So they have a huge ground to cloud tailwind ahead of them that we thought was going to take longer. It's probably going to be pulled ahead. So that's just sort of one vector. The other is just AI and AI-influenced solutions.

So we talked about CentralReach, Aderant. You're seeing a little bit of that at iPipeline now. They're starting to see some new products. So I think it's going to happen slowly over time. But the key is really to make sure that the customer is enjoying those features so that when you come to contract renegotiation, you have the opportunity to upsell those solutions. And it will take the form -- I think the sort of the current thinking is in terms of pricing is you're always going to have some fixed component of this. I mean most customers want a predictable budget. And by the way, we're very...

It's kind of like subscription-based model...

There's always going to be a fee and then it's a consumption or outcomes-based model on top of that. And so again, we're usually about 1% of the cost bar of our customers. So -- and if we have the ability to obviously provide productivity to them, there's ample opportunity to take price there.

Are there any of the 29 platforms that don't lend itself naturally to AI?

I think they all lend themselves. There is 1% -- there's -- of all of our businesses, there's one where there's some -- there is potential existential risk to that business. It's 1% of Roper. It's our media entertainment software business called Foundry. But there's a -- I think for the next 3 to 5 years, I think this is nothing but a growth tailwind for the business because it will be more of this business composites, it basically takes live action, anything computer generated and puts them in a single screen. So think Game of Thrones like the people and the Dragons and our software puts those things in the same screen.

There's just got to be more CG, way more CG and still live action that gets overlaid. The question for 10 years from now is, is there any live action? That's -- I think the answer is -- we all think the answer is yes, it's how much is there going to be. But that's the only asset in the portfolio where we see sort of a potential existential risk.

You could have some government contractor customers that have classified projects that we may never because they may stay on-prem the whole time. So that being another, but small sliver.

yes. And then just -- so we talked about the top line opportunity. You mentioned a little bit around like the operational and productivity opportunities. Does this result in higher margins for Roper over time?

So we've asked our businesses to all the productivity gains that they harvest, we want to play offense with that and put it to the product road map velocity or go-to-market. That's the mindset. I think Jason and I, when we're sort of chatting in his or my office, we think we'll probably not be able to spend at all. And so probably if you look forward 5 or 7 years, it is a higher-margin business. But the short term, we hope that it drives the growth engine.

Makes sense. Just maybe we've got a couple of minutes left, just closing it out on just this year. And look, you've got this really nice tailwind with your enterprise bookings being up mid-teens, I think, or high teens actually this past quarter. How are you thinking -- what's really driving that? And how are you thinking about demand levels like exiting the year and into next year?

Yes. And I think we always think of it as sort of over a longer period. First half, I think was up low doubles because we're a little -- after coming off a strong Q4 last year, we were low singles in the -- or mid-singles in the first quarter. So really, that's sort of on plan. So what we thought sort of informed our second half guide and into a little bit of next year. So demand has been -- it's been pretty good across -- outside of government contracting.

We mentioned Aderant, it's been really strong. They have their largest ground to cloud conversion in the second quarter booking as well as continuing to sell AI. Health care in general has been solid across Strata, but even our lab software set of businesses have been up nicely. So I think that the hangover of budgets in the health care space has certainly abated now. And now for us, I think our DAT business is not necessarily bookings driven. That's been sort of bouncing along the bottom. So -- but we're still growing as we've been able to create more value for customers, we've been able to charge for that. So I would say the environment in general has been pretty decent.

I know that we still have a few months left in the year, and there's a lot going on in the background, a lot of discussion around the big beautiful bill as well. As you kind of take everything that's occurring, the fact that your business right now is running at very healthy levels, how are you thinking about maybe just like early framework for next year?

So -- there's been 2 of our larger businesses have sort of had some economic headwinds attached to them. So our Deltek, our government -- 60% of it is federal government contractors. The other is our freight matching business. So we organize the spot freight market in North America. There's been now a 2-plus year freight recession. So both those businesses this year have been below trends. The big beautiful bill, we think, is the unlock for the government contracting.

It's a very large spending bill in categories that are large contractor spend categories, DoD, DHS. It will take a quarter or 2 or 3 for that to sort of play into the bookings momentum. We think that sets up well for at some point in '26, exactly when we don't know. And we're very much wait and see in DAT. I mean we -- in the freight, it's -- we're very much reflective of what's happening in the market in that regard, and it's been a freight recession. And so we continue to be conservative in our outlook there. But when the freight -- when the market does turn around, we're poised to grow with it very nicely.

It sounds like from an M&A standpoint, plenty of deals in the pipeline to do over the next 12 months.

It's -- there's always plenty of deals to do. Yes, It's -- we're very active.

Great. Neil, I'll turn it back to you if you have any closing remarks before we...

I just really -- we appreciate being here. We're very excited about the story about the durability of what we do, about the cash flow compounding nature of it and the tailwind of AI. So we're very excited for where we're going.

Great. Neil, Jason, thanks for joining us.

Thank you.

All right. Good afternoon, everyone. Welcome to the 2025 Oppenheimer Virtual Tech Conference. I'm Ken Wong, software analyst. Very happy to have with us Jason Conley, EVP and CFO of Roper; also Zack Moxcey, VP of IR at Roper. Welcome, guys. Thanks for joining.

Thanks, Ken. Thanks for having us.

Jason, Zack, maybe first off, while I think some are familiar with Roper, there probably is a fresh set of eyes, especially from our tech software audience. Perhaps just give a quick overview of kind of what Roper does, and then we can move on from there.

Sure. I'll try to make it brief. But -- so Roper is a vertical market software and technology compounder and what I mean by that is we compound cash flow in the mid-teens, sustainably over a long period of time. So we're kind of end of 1 in the software space, we sometimes get compared to Constellation, but they have a completely different motion in terms of their decentralized capital deployment and lower organic growth.

And so speaking of that, we get to growth in 2 ways. One is through organic growth of our existing portfolio. So we own 29 businesses today that are leaders in their niche vertical markets. We choose small towns because of their protective nature. And with market leadership, that provides like multiple paths to grow and a high rate to win in terms of new solutions that we can cross-sell to our customers.

So today, we're sort of in the 6% to 7% range. We think our normal range or kind of if you adjust for some of the items this year, we're sort of in the 7% to 7.5% organic growth, and that converts to around high single-digit cash flow. And really, the second part of that is we take all that cash through and we invest into acquisitions. Same sort of profile that we just talked about leaders in their niches. And we fund that with -- like I said, with our cash flow and a little bit of investment-grade leverage, and we've decided to buy the next vertical leaders. So you get this continuous growth flywheel from there.

And then I think it's just a unique opportunity for investors to own businesses that they couldn't otherwise own in the public markets, right? These are sort of great businesses that were in private equity, and we create value based on our long-term investment horizon. And so we have this proven track record of making businesses, buying at a reasonable price and then making them better over a long arc of time. And I think the punchline today that we want to talk about today is we think we can do even better. We're in the early innings of improving our organic growth of the portfolio and capturing more value out of M&A.

Got it. Perfect. And Jason, I want to maybe touch on 2 of the things that you called out. So focus on vertical software. I guess, one, why did you choose that particular pocket of software? There's obviously a lot of great opportunities in the software ecosystem, something like 200-plus public companies and 1,000 privates. And then what's Roper's special sauce to managing this portfolio? Why do you feel you guys can extract this excess value that perhaps wasn't being recognized either in a private setting or in PE?

Yes, yes. Thanks. I mean the reality is Roper has been focused on niche markets and kind of verticalize specialized solutions way back 20, 25 years ago. We got -- but we got into vertical market software back in 2004 with our DAT acquisition. So I mean, what we love about is that we stay close to our customer. We have customer intimacy. So we're really sticky long-term relationships that gives you the high gross retention. And then obviously, just really great business fundamentals that you can -- the go-to-market is a little bit lower because you're sort of -- a lot of it's cross-sell that you continue to invest in product innovation today, like our Application Software businesses are in the sort of mid-teens as a percent of revenue. So you're still investing back in the business, you can still continue to grow.

They have wonderful cash flow characteristics. So we love that a lot of our businesses pay annually in advance, so that helps perpetuate the growth flywheel. So I think it's just that we -- and there's a longer reason we got into software that has to do with just buying businesses that were better than what we own, but we sort of got into it that long ago, but it's helped us give pattern recognition on what defines a niche market, how it can't be disintermediated and disrupted and just how protected it is. So we love all the things about vertical market software because of that.

I mean I think the secret sauce, it's like a little hokey, but I think it's a lot about structure and culture. And on structure, it's -- we have these decentralized -- the decentralized operations, we think, helps us like our speed co-efficiency is very -- is a competitive advantage. We're typically competing with other small companies. So being able to be nimble and having that high accountability at the business unit level, we think really is powerful. And then when you complement that with the resources we bring to bear with the businesses and sort of this, we're here to support you. We pay you based on growth as there's no like -- there's no shenanigans in terms of them doing things that are sort of incentive based. And so we have the sort of culture of high trust and mutual respect. So I know that sounds hokey, but it really does work.

And then like I said, we bring a lot of resources to bear. We're continuing to bring new resources around generative AI. We're doing a lot around that to help our businesses win in that area. We help them with strategy. Just best practice sharing around pricing, our continuous improvement of product velocity. So this has been -- and this has been like a real pivot for us, probably a little above 3, 4, 5 years ago, it really started with getting better talent in place in our businesses and then enabling that talent to succeed as presidents and then as their direct reports.

So -- and then I think the other thing is that like it's just all harnessed through our group executive role. So these are seasoned operators that maybe they would go be an operating partner in a private equity firm, but they don't want to sit there and just try to optimize for the exit. They don't want to just be the -- put the hammer down on their presidents on OpEx spend and just grind on them. They really want to think. We're going to own this thing forever. I want to create value. How can I help my presidents and their direct reports, that would be the best that they can be. So that's sort of the punchline, I think, on our culture and secrete sauce.

Got it. So it does sound like it's still enabling maybe a start-up culture as if maybe too aggressively worded, but it allow them to still be what made them successful, but just with the resources of a large corporation such as Roper.

Yes. And I think our maturing leader businesses that we've acquired, we bring a ton of sort of maturity and again, doing it not in a sort of standard way, but just like what are the areas where that's gotten to this point, but it can make them successful in going from like -- going from 50 to 100 is different than going from 100 to 200. So bringing just some disciplines around that where it makes sense. I think it's like really powerful.

Got it. Got it. And earlier, you touched on this transition from your current organic growth rate, say, mid-singles plus to something more aspirational. Can you give us a sense of kind of where you hope organic growth can settle? What are some changes, both operationally and just how you go about your acquisition strategy that you think will help facilitate this move?

Yes. So I mean -- and just to ground anybody on why we're doing this. I think historically, Roper was able to -- they basically get 400 or 500 basis points of TSR through multiple rerate and we're not -- we clearly think the current environment we're maybe undervalued there, but we're not kind of bank as a strategy that we're going to compound through multiple appreciation.

So as we looked at how we're going to accomplish and just through cash flow growth, sort of mid- to high teens free cash flow compounding, we said, really -- we never really even asked our businesses to be ambitious. And these are very successful businesses, but we said, just don't go backwards, send us your cash and we'll keep the flywheel going. So that was really the reason. And then like as I mentioned before, it really started with just improving the talent. So around selection, engagement and development, we've been really focused on that for half a decade now.

We also aligned compensation. We've always been paid based on growth, but we now have -- we now have instruments that allow the business if they grow above and beyond their kind of normal run rate. And that -- and you have to do that over a 3-year period to basically have a 3-year CAGR of organic EBITDA above and beyond their normal growth rate. They can have significant equity grants. We granted day 1 and then they vest in the third year. And so that gets us like -- that could be like private equity-type returns for these folks. And now really, it's about like how do we make. So now they've got -- we've got the right people, we've got the right incentives, how do we make them successful?

And so that's where you'll start to see we have resources at the center now to help with continuous improvement. So we have a Roper Enablement System that we're building out. One of our leaders at our Verathon business is now leading that function, we've hired a couple of people. And we're really trying to be like super pragmatic about which businesses, are they ready for it? Do they need it? Are there other competing priorities? We don't want to like get in their way too much. So we've got like 2 or 3 businesses that are going really deep on everything and continuous improvement.

I've mentioned before, we're doing a lot around pricing. So we've got a couple of businesses that are going through an engagement around pricing that we ultimately want to harness and expose that across the portfolio, seeing a lot of just really interesting opportunities there. We just finished 1 with Deltek and it's super encouraging in terms of what that could mean for their forward growth algorithm.

And then just I think that -- so that's kind of where we're at in this. And so the point is like when we buy a company, we're trying to sustain -- build sustainable processes and capabilities that compound over time. This isn't like PE where it's just like a onetime surge. And so having our home -- forever home ownership as a competitive advantage is how we think about that. And that ultimately will be going from 7% to 7.5%. We think there's a an opportunity to go to high single digits -- the higher end to high single digits with the portfolio prior to 2023. And then of course, we're buying businesses that are growing a bit faster. So that will just be additive to that.

Got it. And getting to that high single digits, I guess, is there a way to think about how far you can get to that goal with the existing portfolio versus how much will have to be supplemented by things that you guys bring on to the platform?

Yes. I mean I think that's what we really are aspiring to have the sort of pre-2023 -- 2023 and before portfolio, get to that high single digits and then the Procare, there's the Subsplash, Transact, CentralReach, those would all be additive to that number.

Got it. Got it. Okay. That's very impressive. So now you touched on CentralReach, Subsplash. We'd just love some kind of initial feedback, what drew you to those businesses? What have you seen so far in the early days of having those under your wing?

Yes. And just -- I mean, I think our observation over the last 10 years is -- we got the question from investors. And I think it was a very astute question is why aren't you buying some of these businesses that are private equity firms. And I think we just -- we had this sort of -- we were in this period of buying stable businesses, but with -- the math doesn't pencil out that you're not buying as much cash flow if you don't take a little bit of a sort of measured risk and these businesses all have great gross retention just like the other businesses we own, they're just a little early in their life cycle. So it's like first turn in PE is not fully optimized from a variety of aspects. And so we just think it's an opportunity for investors to realize more organic growth and really outstanding conversion to cash as we drive that higher margin and higher EBITDA.

We think it's going to be 30% or more versus like the 2018 to 2022 era. That's what we've underwritten and that's how we're sort of tracking. And then just like on CentralReach, it kind of clicks all those -- checks all those things off. In addition to being a great vertical market software business that we have had in recognition around that. It's just a little bit earlier, but we understood the competitive landscape and sort of how it's being formed and how their position was in that.

So it's just a great business that has a lot of market tailwinds. So just good level set, it's leader in the autism services space. So it enables workflow and administration of what they call ABA therapy. So we've got 200,000 professionals already using the solution and it provides the care to individuals with -- on the spectrum or related disabilities.

And so just from a market perspective, there's a lot of tailwinds there. There's a persistent gap in care between the demand and the supply side. And so we see that being playing out for at least the next 5 to 10 years. The ABA is a standard of care across the autism space. So that's super helpful. There's reimbursement coverage has been established, reimbursement coverage across states and on the commercial side for some period of time.

Not a lot -- by the way, not a lot of impact on the OBBB in terms of what that does. Medicaid more -- it addresses more adults than children and obviously, children of the biggest learner population is that's where you can have the most impact on individuals. And then I think just lastly, what we've seen, and it's been phenomenal as the clinics get bigger and get more successful, they end up coming on to our solutions. That's 1 way. And then also if our customers are buying others, then we're tending to win with the winners. So just a great business, and I can continue to go on about that.

Subsplash too, it's just -- I think it's another example of buying first-term private equity. We've had a relationship with K1 now for probably 2 years and they're definitely mid-market and they go and they buy from founders. So we are able to by this business, that's an emerging leader but certainly a proven leader within the church management software space, sort of leading with digital and giving and then pulling the church management software through with that.

And -- so today, they're serving 20,000 faith-based organizations. There's a ton of tailwinds in terms of how engagement and giving our more value drivers within that space, higher growing than other parts of the space. This is again another example of where we established good relationships with K1, but more importantly, really won the heart over of Tim Turner, who's the founder there. And so he's staying on with the business, and that was certainly helpful to get that process through.

We did that on a proprietary basis, feel really good about what they're doing there, and then they have an AI, it's kind of first strategy that will permeate through all of their solutions too. They bought a company called Pulpit AI about a year ago, and they're using that and then Cascade to the rest of their portfolio.

Perfect. Maybe circling back on the organic growth, the acceleration. I think 1 of the biggest questions we get would be with this change in strategy, kind of what are the downside risks? I think recently you guys called out maybe some early execution dynamics of Procare, which you have quickly course corrected. But would love to kind of hear from you guys, maybe what are some of the potential hiccups? What are you guys maybe changing or adapting to make sure that you guys minimize those risks?

Yes. Yes. Thanks for the question. I'll kind of start with what we're doing and then we can touch on Procare. I think, yes, as I mentioned a little earlier, what -- the diligence around the market, how the market behaves, I think, is largely the same. We have pattern recognition around the niche in the vertical and the size of the market, whether it's going to be interesting enough for a major player to come in and spend the capital to get in there to develop product and get distribution.

So I think that's pretty much all the same. The only thing I would say is, we're a lot better on market diligence now because we have these investment partners we brought in who came from the buy side, and they really just helped challenge our outside advisers. They're very highly complementary and I would just say, have made us a lot smarter on thinking about markets.

And then I'd say also what we've gathered more is the forecasting just much more sophisticated around tying our forecast to a value creation thesis that's going to have multiple levers to realize the growth potential. So we're not like single-threaded on 1 thing. And we do a lot of stress testing on these levers and we bounce it against what we have to believe if 1 of these doesn't work, what else has to index to offset that to mitigate that risk.

So it's not complete risk mitigation, but it certainly limits the range of outcomes a lot more. And I would just say, lastly, we're much more aggressive now on people and process. Sometimes it's hard in diligence to get in there, but we're really making a point to get in and have -- we have some diagnostics. Again, we have pattern recognition around just how management is responding to certain questions or how we perceive some of their systems and processes, how quickly they can get information back to us to know that, "Hey, when we kind of risk score that and we have countermeasures like on day 1 so that we can help supplement those resources where there may be some gaps. And so that's on diligence.

I think on execution, we built up functional expertise over the last year across PMO. I talked about that Roper Enablement System. There's PMO capabilities in there. We've added some really strong folks on finance and accounting and cyber. So really, the goal is to do like a full court press in the first 100 days to assure the teams are focused on the most important value drivers, and we provide the resources where needed.

And I'd say just on Procare, we did not get into the people and process fast enough. I mean you have to remember, this is our first maturing leader. And so I think we got the strategy -- we got it right 100%, like we feel -- I feel better about that business today than I did a year ago in terms of like their right to win in that market is really strong. There's like 1 competitor that's -- it's okay, but they've had -- they've actually had 1/3 of their workforce laid off. So they tried to do this like just crazy go-to-market motion, but they've had a lot of folks turn out because the product just isn't as good.

So I think just in that time, too, we were like straddling the old and new way of governance around being differential to our company's CEO, and she was a little unwilling to help, and that put us behind a little bit. So I think the good news is we've applied those processes now that we have for Transact and CentralReach and now Subsplash. And so they're all tracking Transact and CentralReach, obviously, CentralReach is early, but they're off to a great start. We feel good about their performance and trajectory.

Got it. Okay. Perfect. And took -- it probably took me longer to get here than expected. But 1 common question across every company that's presented today is obviously macro. You guys are both extremely diverse. So arguably more resilient, but then also all sorts of potential macro risks that could surface across 29 businesses. So would love to just hear what you're seeing macro-wise in terms of impacts on your businesses, things that may be are a little more urgent that you're focusing on? And maybe where maybe things are overblown?

Yes. I mean, I think we've tried to highlight on our calls, like the big sort of lagging from an end market perspective has been our Deltek government contracting space. Having said that in the last call, I think we're really excited about what OBBB can do for the business because, first of all, we've had 2 years of somewhat malaise. So we know there's some pent-up demand in the second. The mix -- both the volume that OBBB provides and then the mix of where it's going to go, plays right into the strengths of Deltek.com because it's more cost-plus contracts, is going to defense.

We're like tracking project accounting is like super important. It gets audited. It's not just for profitability tracking. It's for actual compliance reasons. So just feel good about that. It's just been like -- the question is on when that's going to free up, but we know it's there. We know it's going to happen.

DAT, the freight market, it's been a very, very long freight recession. And obviously, we're not one-to-one with that business, but it's -- and we're still -- we're tracking sort of mid-singles right now, but that business is a double-digit grower. So that's just been -- we're waiting -- we've been bouncing on the bottom from a carrier perspective. Brokers have been fine too. So we've been kind of realizing more on price to get us to that mid-singles. We think that we'll exit the year a little bit higher than that. And then if we get any cooperation from that market in terms of freight, then that will do better.

And then our Foundry business is starting to rebound from an exceptional situation with the writers and actors strike. So that's been just challenged but certainly trending in the right direction. We think it's going to have positive growth in the second half. And so that will be good. And then I think just like health care generally has been strong. Our solutions are kind of on the right side of the equation, especially when you think about Strata, managing costs in the hospital, super important. Insurance has been great. So that's a very fair insensitive business to the macro overall, both at Vertafore pipeline.

I'd say education has been pretty -- it's been very good on the higher ed side. I think K-12 has been a little softer with some of the -- just the noise going on where the money is going to actually ultimately transfer from the DOE to other avenues. But those -- yes. So those are probably the 2 areas, Deltek.com, little bit of K-12 and then nothing worse at DAT, just nothing great right now.

Got it. And I guess on the freight market, it looks like you guys at least are somewhat validating comfort there. I saw a recent acquisition of Convoy, not sure to what extent you can comment on that, but love any early feedback in terms of the -- maybe the intent, what you guys see as a synergistic there?

Yes. I mean we're really excited about DAT. We talked about this a couple of years ago in terms of like that's a great platform for us to do more value-added acquisitions. We haven't done -- we've only done 1 in the first 20 years of ownership. And so we bought Trucker Tools about whatever it is, 9 months ago, and then we acquired Alco last quarter, first quarter, and now Convoy. So it's basically taking DAT that used to be a hitching post, a craigslist, literally like no transactions. It's just a way for parties to get together and figure out what they're going to do off the load board, right? It's just a way for them to -- it's information sharing.

They pay a subscription. It's a super great business, but how do we essentially turn this into a marketplace where transactions can happen, a carrier can get its financing that it needs for a load throughout go. It can -- brokers can now track carriers in the marketplace via the Trucker Tools solution. And now brokers, because -- I mean, this is like a really good time for us to do this Convoy acquisition because the brokers are really trying to figure out how to save -- cut costs. And so you can do that through certain loads or they can automatically match them for more simplistic loads, and that's -- Convoy brings that capability to a broker that they didn't have before.

And just for background, Convoy was owned -- it was -- its own brokerage and that failed because you need neutrality in that. If they're -- how could they sell brokerage solutions to another broker like that doesn't work and DAT is the ultimate Switzerland. So we just -- we're really excited about what this is going to mean for the business long term. There's obviously quite a bit of integration work that's going to go on and -- but this just leaves us forward a lot. And it doesn't come at the expense of the load board. There's always going to be a need for both of those solutions within the spot marketplace.

Got it. Okay. Perfect. Sounds super exciting. More to look forward to there. And then on the topic of M&A, you guys have consistently called out the $5 billion of capacity. Maybe just refresh us on kind of how ambitious you guys are looking to approach the market, kind of why you feel comfortable with the pipeline? Obviously, lots of puts and takes in the markets right now, but would love your view on how attractive the environment is.

Yes. I mean it's been just -- it's kind of a weird environment for the last couple of years, as you know. And so I think it's been interesting for us because we've had the opportunity to have proprietary looks in portfolios that other PE sponsors wouldn't have. And the reason for that is that we -- we're not really -- like if we end up taking a peak of a deal and doing a few weeks of work and then saying, no, it's not looked at as a failed process.

Whereas if another sponsor does that, it kind of gets out into the market and then that can kind of like junk -- it makes the -- it sour -- it make the asset sour in the minds of. So then it's like they can never sell it. So for us, it's like -- there's quite a bit of abundance. There's been a log jam for 3 years. It's -- we think it's going to emerge at the end of this year and maybe early next year. But right now, it's really interesting for us because we're getting some unique looks. We have a couple of big ones right now that could -- it might happen or might not. But it comes down to price, too, of course, just being super disciplined around valuation and paying relative on a sliding scale of growth. That's always an important part of this.

We also think that some interesting deals where great business, but the AI opportunity is actually not as interesting. So it's not necessarily they're going to go out of -- there's 1 business we look at is super, super sticky. And I don't see them getting displaced by AI, but we also know that they don't have rights to -- any rights at all to even use the customers' data to even improve the product because the nature of the end market is so risk averse. And so we said, well, that's not interesting at all. So like that's not going to be a growth catalyst, so we walked away from it. So it's just an interesting time as we look at deals where certainly our AI lens on both the opportunity and the risk is much higher than it used to be.

Would you say that, that AI lens has intensified over the last year, 1.5 years, or that could arguably be a deal breaker in some of these transactions out?

Yes. I mean it's intensified. I think we've always been looking for ways that a business can be disintermediated. And I think we've been obviously in the AI -- gen AI flow of -- in knowledge flow and where it's going for the last 1.5 years. So I wouldn't say it's intensified. Candidly, there -- as you know, there hasn't been many assets that we've transacted. So it's like we quickly can understand that maybe something is not going to be as attractive and sort of -- because everybody puts gen AI in their sales slides now, and then you've got to click down, you got to pierce through like what the real substance of that is. But yes, I'd say it's been on our radar for 1.5 years to 2 years. I wouldn't say it's intensified, but we're probably getting smarter, if anything, yes.

Got it. Understood. And another question that comes up a lot on this particular topic, and it's obviously a very fluid market, but is a open IPO window closed IPO window, I mean, should we view that as good, bad for Roper?

I'd say just sort of indifferent because most of what we're acquiring probably is too small to go public. I mean, especially if it's owned by PE, I mean, we've seen how that doesn't really work out too well. They don't -- they have that overhang and it's kind of dead money. I saw MeridianLink finally got bought today. So that was a ton of Bravo business had been out sort of languishing for a couple of years in the public market. So I just don't think it's especially in the sponsor world like doing an IPO is very attractive, especially for the types of things that we would be interested in.

Got it. Okay. Perfect. And this is kind of building on that prior topic. But I guess what is your kind of the Roper view on AI? How are you guys rolling that out across your various business units? And then obviously, from your seat, any thoughts on internal use cases? Like, how does that potentially translate to leverage for some of these businesses that you guys are looking at?

Yes. I mean, I know it's like every company says this. Everybody goes, yes, I don't believe you, but, we're all going to be winners, right? So -- and then certainly, obviously, across our portfolio, there are some that are more at risk, we've talked about Foundry than others that have a tremendous opportunity like Deltek. Luckily Foundry's orders of magnitude smaller than Deltek, so we feel good about that. But we do think -- I mean, we have all of our businesses right now going and looking through their value chain and how the value chain is going to change over time. And really, it just points to this like massive TAM expander for us if we can replace or augment labor with agents.

So I think we're excited about -- the pace of innovation is picking up. The pace of learning is picking up across the organization. AI mindset shift is happening. I mean, we're quite decentralized in our operations, and I talked about all these resources. But on this one, Neil is definitely leaning in much more. And I don't think the presidents are getting annoyed with it. Like he's setting stuff every Monday, I'm like, here's some thought leadership. Here's how you have to think about things.

So we're not being prescriptive, but we're certainly providing a wealth of information that we get the benefit of sitting in our seat, we're spending a lot of time with venture capital like we went out to meet with Andreessen Horowitz a few weeks ago, we have constant dialogue with them. We've had an MIT learning day for all of our presidents who went out to MIT and did a whole day through that.

So we're just -- I think it's -- we see a lot of opportunity of selling products separately, be it like a CentralReach said that today, Aderant has their own solutions that are separate. ConstructConnect has its own takeoff solutions separate or like this halo effect modernization and other places like -- now we'll put all -- the only AI features in the Deltek cloud. So these stubborn government contractors are going to have to finally get off the on-prem solution and get to the cloud. So we'll have sort of like an accelerant a blip there or even Hatteras being able to cross-sell things that are AI today but are going to be AI faster. So they're sort of tracking that.

So -- and then internally, I think when we're doing more of these like learning 7 hours, but Deltek -- the CTO of Deltek did 1 a few weeks ago on productivity and some specific use cases using Quadcode and like they're going to have a product, they were going to release in 1.5 years that now looks like it's going to be first half next year just because they've been able to get the MVP out, iterate on it, like just continue to use the modern kind of code development.

I think the 1 area that we're still -- we really are trying to figure out is how to refactor code and rewrite it, like we've been using quite a few experience with quite a few solutions out there. And I think we're positive that it's going to happen, but that's taking more time than we would like. So that would be -- that's a real important part is getting everything into a modern code base and refactored.

But yes, we think -- I mean, the way we're thinking about it right now, I think it's probably going to be a little bit half and half how this plays out, but Neil's instruction in the business like take those productivity gains and develop right back into the roadmap or wherever you think the investment needs to be to help accelerate growth. I think realistically, we'll probably see a little bit of margin expansion as well because it will be hard to do that all at once. But that's certainly what we're telling our businesses is to the extent you are seeing productivity like get after that roadmap faster than you normally would be able to.

Got it. And I realize I was negligent on seeing if there's questions from the audience. If anyone has a question, feel free to send it through the portal or shoot me an e-mail, [email protected]. And I'm not sure if there is a raise hand function, but if there is, feel free to go up that route as well.

And then while that gets sorted, I guess 1 more thing I'll kind of ask you guys more on a near-term basis as you kind of forge our path towards accelerating organic growth, and you talked about seeing an -- projecting an uptick in the second half. What are some of the factors that are going into that math? How much of that is mechanical? How much of that is execution on your end?

Yes. I'd say most of it is mechanical. We have a little bit setup -- a better setup for a comp in both our TEP segment to a lesser extent and our network segment and the networks more for the second half, Q3 more for TEP. So I'd say it's mostly mechanical. We had good second quarter bookings that help support, I'd say, our second half versus anything else just when you take the first half in general and our first half bookings that supports the second half. So yes, it's mostly mechanical. I mean, DAT and Foundry will continue to get better. Some of that's mechanical. Some of it's just getting like better growth, too.

Got it. Perfect. And just do have 1 quick question that popped into the clarification. I guess as you think about growth coming in to the extent that you end up on kind of above expectations, is there a situation where that upside trickles down to margins? Or is that something better suited for reinvestment?

Well, I would say it's -- if we end up having higher growth, our standard sort of framework on incrementals is 45%, it's probably going to be more like 40% to 45%. I say that sort of in a pre-AI lens. With AI, it could be back to 45%. I'm not a perfect forecaster for 29 businesses, but that's sort of -- I think that's how we thematically think about it.

Got it. One other question here, you guys typically have -- again, you talk about it in forever home terms. But again, lots of unknowns with AI. I guess, to the extent you guys determine something might be a little more at risk than maybe initially anticipated? I guess what -- any thoughts on -- is there going to be a quicker hook for? Do you guys approach it with divestitures in mind? Like how do you think you go about troubleshooting 1 of those types of scenarios?

Yes. I mean it's a good question. I think we -- because when we get to this, is there even a market for more kind of dilemma. The only thing I could say is that our businesses in these niches can be really creative on ways to continue to capture value and not have like something go out overnight. And I'll give you just a -- this is like a prior portfolio example, but we used to own a business called TransCore's in the tolling traffic space.

And they -- the cost of an RFID tag was going down with ASICs like Moore's Law was definitely taking over that space. And we were able to sort of manage that cost decrease in a way that we still were able to eke out sort of low- to mid-single organic just on pricing, packaging, optimization, contract negotiations. So I -- and then we did that for 12 years.

And so I think it's like you can be industrious around this. You can continue to innovate in other ways, I think, like a Foundry has got multiple products, like a Foundry just comes to mind, but like we're still going to be indispensable for a long period of time. So my preference would probably be this is so small, would be to ride that out and optimize value versus trying to do some sort of exit in. Obviously, it's decretive growth, but it's the right sort of -- I think about it just from a peer MPV standpoint at that point.

Got it. Perfect. And then last question for me. Look, I think the -- maybe the biggest concern for constant kind of free cash flow compounders is maybe you kind of run out of runway in terms of stuff to buy. I guess what's your view on that opportunity set? I think 1 of your -- you mentioned Constellation earlier, granted they were talking about from a longer-term time frame, but maybe that they were kind of exhausting some of the opportunity on the software side out there. Yes, I would love just your quick view on how that could play out.

Yes. Well, 1 thing that's true is that the market of opportunities is never constant. Like, there's always new things coming in. I mean, there was a business that just got acquired a couple of weeks ago that we looked at, a public company acquired it. And we never -- I mean, this thing got to $100 million of EBITDA, and we didn't even know about it until by 6 months ago. So it was a founder-run business and everything. So I always see this thing as being as long as there's entrepreneurs out there and there's capitalism that we'll continue to see new deals, I just don't think -- it's never -- that has never been -- I've never lost a minute of sleep over that in the last, say, the last 10 years.

There was a point in time where I was a little -- I was a little concerned about it because our -- some of this was like our filter was so narrow like management had to convey and all these other things, but we've opened the TAM up but also open the opportunity up. So I just see -- we just have more opportunities than we can ever execute on.

Got it. Perfect. And with that, I think we're right up on time, Jason. Again, thank you for participating. Zack, really appreciate you taking the time out of your day as well. Hopefully, you guys have another kind of set of meetings that will keep you busy. But best of luck to you and appreciate the audience for dialing in.

Yes. Thanks, everyone, and thank you.

Thank you.

Bye guys.

Bye-bye.

Good morning. The Roper Technologies Conference Call will now begin. Today's call is being recorded. [Operator Instructions]

I would now like to turn the call over to Zack Moxcey, Vice President of Investor Relations, please.

Good morning, and thank you all for joining us as we discuss the second quarter 2025 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'll 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 second quarter, the difference between our GAAP results and adjusted results consists of the following items: amortization of acquisition-related intangible assets, transaction-related expenses associated with completed acquisitions; and lastly, financial impacts associated with minority investments, including cash taxes paid resulting from the sale of our minority interest in Certinia. 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'll take questions from our telephone participants. Neil?

Thank you, Zack, and thanks to everyone for joining us this morning. As we turn to Page 4, you'll see the topics we plan to cover today. We'll start with our second quarter highlights, including reviewing the platform acquisition we announced earlier today, Subsplash. Then we'll go through our segment results and our improved outlook for the full year and then get to your questions. So let's go ahead and get started. Next slide, please.

As we turn to Page 5, let me highlight the 4 key takeaways for today's call. First, we posted another solid quarter of financial results. Total revenue grew 13%. Organic revenue grew 7% and Software bookings grew in the high teens area, and we continue to deliver impressive cash flow with free cash flow margins coming in at 31% for the TTM period. Second, we announced earlier today the acquisition of another great vertical market software provider, Subsplash, which I'll get to in a bit. Then given the strong first half performance and the anticipated completion of the sub-plus acquisition, we're raising our full year total revenue guidance and our full year debt outlook. And finally, we continue to be very well positioned for capital deployment and continue to have more than $5 billion of available firepower over the course of the next 12 months.

Please turn to Page 6, where we'll discuss Subsplash. Subsplash is a cloud-native and AI-enabled software provider serving faith-based organizations. As a leading provider of digital engagement, church management and integrated giving solutions, their purpose-built platform enables customers to serve congregations while engaging with members more effectively. Subsplash partners with 20,000 faith-based organizations to help them become digitally native by deepening member engagement, reducing manual administrative burden through automation, streamlining content distribution and integrating digital giving solutions, all supporting their customers' core mission.

Simply put, Subsplash enables these organizations to allocate more time and resources to what matters most. -- ministering to and engaging with their congregation in a digitally native way, whether it be online or on an in-person basis. Importantly, this customer value proposition strengthens further as the company's AI native capabilities are further deployed across their product stack.

In terms of investment highlights, the purchase price is $800 million. We expect Subsplash to deliver $115 million of revenue and $36 million of EBITDA for the 12 months ending Q3 of 2026. This business meets all of our long-standing acquisition criteria. Leader in a niche competes on the basis of customer intimacy, has strong gross margins and converts high levels of cash flow. Subsplash reflects the maturing leader acquisition profile of being a higher organic growth business, in this case, in the high teens area and competes in a $2.5 billion U.S. TAM with about half being currently served and potential to meaningfully expand internationally.

In addition, Subsplash is well positioned to materially improve their gross and EBITDA margins over the next 3 to 5 years and we expect to deliver this by executing a handful of the available levers. As a result, we expect to see Subsplash's organic revenue growth convert to high 20% EBITDA growth over the next 3 to 5 years. We will finance this transaction with a revolver and report the results in our network software segment. Subsplash represents another powerhouse addition delivering critical solutions to a customer base with deep ongoing needs for these capabilities.

To the Subsplash team, we're so excited for you to join Roper -- thank you for all of the super important work you do for your customer community and for trusting Roper to become your permanent partner. So with that, let me turn the call over to Jason to walk through our P&L and balance sheet. Jason?

Thanks, Neil, and good morning, everyone. I'll now take you through our Q2 financial highlights on Slide 7. The second quarter was another solid installment in what we believe will be a good year for Roper. Revenue of $1.94 billion was up 13% over prior year and well balanced with 7% organic growth and a 6% increase from acquisitions, with Central reach results contributing since the April 23 close date. Organic growth was strong across the portfolio, demonstrating resilient demand for our mission-critical solutions. Importantly, and as expected, network software year-over-year growth notably improved from Q1, given more normal comps at MHA, increased freight match unit economics and recovery of foundry.

EBITDA of $775 million was up 12% and generated EBITDA margin of 39.9%. Core enterprise operating margin was flat to the prior year with core segment margin up 40 basis points. This follows a similar pattern to Q1, bringing our year-to-date core segment margin expansion to 70 basis points. For the diluted EPS, we delivered $4.87 versus our guidance range of $4.80 to [indiscernible] on strong revenue growth and excellent core operating leverage.

Finally, free cash flow of [indiscernible] million was up 10% versus prior year, which drives TTM free cash flow to over $2.3 billion. The recent passage of the big beautiful Bill Act provided a permanent repeal of Section 174 capitalization of R&D expenditures. We are, therefore, reducing our cash tax payments for 2025 by around $150 million to reflect the cumulative reversal of capitalization, of which about $60 million benefited our second quarter. We will also see a benefit of $120 million carry into next year due to deduction limitations in 2025.

Adjusting out the Section 174 impact, our 3-year TTM free cash flow CAGR would be about 14%. So overall, good news in offsetting some near-term deal dilution and feeling our growth equation. Now let's turn to Slide 8 to discuss our strong financial position. We finished the quarter with a healthy balance sheet and substantial capacity for continued capital deployment. We exited at 2.9x net debt to EBITDA and pro forma for Subsplash, this would be around 3.1x.

Additionally, our cash balance was $242 million, and our revolver had $1.4 billion drawn against our $3.5 billion credit facility. So even with Subsplash closing this month, as Neil outlined, this gives us over $5 billion in M&A firepower. This substantial capacity positions us very well to executing on our disciplined capital employment strategy. To that end, while the sponsor-to-sponsor market is still somewhat muted, we are active on a number of both platform and bolt-on transactions that reflect the characteristics of higher growth and increasing long-term value capture with Subsplash being a case in point.

With that, I'll turn it back over to Neil for our segment highlights and the guidance update. Neil?

Thanks, Jason. As we turn to Page 10, let's review our Application Software segment. Revenue for the quarter grew by 17% in total and organic revenue grew by 6%. The EBITDA margins were 42.9%, and core margins improved 70 basis points in the quarter. As returns to the businesses, we'll start with Deltek. Deltek grew in the mid-singles range in the quarter, both recurring and total revenues. As highlighted on the slide, Deltek continues to have strong migration to their cloud offerings, while the business continues to innovate at a rapid pace and has benefited by very strong gross and net retention. .

As it relates to the federal government contracting outlook, we believe the big beautiful bill spending priorities and sheer volume will be a catalyst for market growth, which has been tepid for the last 24 months or so. The timing of market reacceleration is still to be determined, but we believe it will occur over the course of the next few quarters. Importantly, during the quarter, Deltek made substantial progress in regard to their AI-based product capability and recently announced their new flagship GovCon product cost point, fully embeds their AI assistant Della help deploy intelligent task-oriented agents to streamline repetitive processes and help users make faster, better informed decisions, exciting stuff here and lots more to come for sure.

[indiscernible] continues to be incredibly strong and posted their best bookings quarter in the company's history. The booking strength is broad-based, fueled by their AI-enabled solutions and is a combination of market share gains, cloud migration and SaaS growth. Congrats and thanks to Chris and the entire team at Aderant, Keep up the amazing work. Vertafore continues once again to be steady and solid for us. We continue to see consistent ARR growth and strong customer retention here with strength across our agency, MGA and carrier solutions. This growth is enabled by their strong go-to-market capabilities and our long-term commitment to product strength. We look forward to talking about this and their AI-enabled solutions in subsequent calls.

PowerPlan continues to be outstanding. As we mentioned last quarter, the team has done a great job at making the revenue stream more recurring in nature. In addition, they continue to get amazing feedback with our innovative cloud offerings, which are driving strong SaaS migration activity. As a result, PowerPlan just continues to win in the market. with our new SaaS solution and near 100% gross retention. ProCare and TransAct seaborne continue to perform very well in their respective markets. We also saw very good results from the health care IT portion of this segment, Strata, Data Innovations and CliniSys.

Finally, CentralReach is awesome in the early days, has exceptional momentum, record expansion activity and a 70% enterprise new client win rate all in the quarter. As it relates to the outlook for the second half of the year, we continue to expect organic revenue growth to be in the mid-single-digit plus area.

Please turn with to Page 11. Total revenue in our Network segment grew 6% and organic revenue 5% in the quarter. EBITDA margins remained strong at 54.6% and core margins improved 20 basis points. As we dig into the individual businesses, we'll start with DAT. DAT was solid in the quarter and had strong ARPU improvements. The market continues to be stable, albeit bouncing along the bottom. Also in the quarter, we integrated Loadlink our Canadian freight match business with DAT. We expect the integration to deliver over time, a more unified and efficiently deployed North American Freight Match network. DAT continues executing exceptionally well on their core strategy of driving enhanced network value for both brokers and carriers. This dual-sided approach positions us to better monetize our entire network ecosystem.

Supporting this strategy, DAT made significant progress integrating trucker tools, our Q4 bolt-on acquisition and completing the acquisition of Alco an AI-native factoring technology solution. Combined with the DAT Network Foundation, these integrated products and assets now deliver substantially more value to both carriers and brokers. Looking forward, DAT will maintain their aggressive execution of this network value enhancement strategy, positioning the business for continued growth and improved monetization across all.

Construction that was solid for us in the quarter. The growth was fueled by strong customer bookings activity and improved customer retention. Of note, this business continues to make good progress with the emerging AI-enabled takeoff and estimating solution. Foundry declined in the quarter as expected, but we continue to see market recovery signs as they grew their sequential ARR for the first time since the actors and writer strikes. Good to see recovery start here.

Also in the quarter, Foundry's new product, Nuke Stage, started gaining traction in the market, specifically with a very large studio and several smaller customers. Nuke stage enables the power of postproduction compositing to occur in the production phase of the pipeline and exciting new capability that will help drive cost savings for the industry.

Finally, our network health care businesses, MHA, SHP and SoftWriters were very good in the quarter. As we turn to the outlook for the second half of the year, we expect to see revenue growth in the mid-single-digit plus range. Now please turn to Page 12, and let's review our TEP segment's quarterly results. Revenue here grew 10% and organic revenue grew 9%. EBITDA margins came in at 36.7%. So we'll start with Neptune, which was, once again, just solid for us. Neptune continues to do a great job with our ultrasonic meter go-to-market execution and continue to see strength in their data and software offerings.

Verathon continues to execute at a high level as well. In particular, in the quarter, Verathon saw continued strength in their single-use reoccurring solutions, both BFlex and GlideScope. NDI was really good in the quarter. As discussed in prior quarters, NDI delivers proprietary and world-class precision measurement technologies to a wide variety of health care OEMs and which in turn, enables the OEMs to deliver guidance enabled solutions across many health care markets such as orthopedic surgery, interventional radiology and cardiac ablation.

Finally, there was strong execution, which led to growth across SIFCO, FMI, anionic IPA and RF ideas. Turning to the outlook for this segment. We expect to see high single-digit organic growth for the second half of the year with a stronger third quarter and a more difficult fourth quarter comp. Before turning to our guidance outlook, I'd like to reflect on our AI perspective, its transformational potential for customers and our enterprise and the steps we're taking to build lasting advantage.

Our strategy is focused and practical, applying AI to address high-impact customer-specific challenges. We're confident that AI-based innovation substantially expands our business's TAMs where we have a high right to win, and will be a core catalyst for our next chapter of growth. The true unlock, the magic, if you will, of AI emerges at the intersection of the specialized mission-critical workflows as our customers rely on daily and our deep vertical market expertise. Our AI initiatives span all our businesses, and we're seeing early traction from compliance solutions to AI-enhanced products to AI assistance and intelligent agents that streamline tasks. We're building solutions that deliver tangible high-value outcomes.

Today, we have approximately 25 AI-enabled products either in market or in development. Importantly, our AI innovations create a positive halo effect across many of our businesses, driving booking activity for our broader product stacks. This is an exceptionally fun moment to be at the forefront of innovation, redefining and automating workflows across our vertical markets while unlocking new growth and building durable competitive advantages. Exciting stuff for sure.

So with that, please turn to Page 14. Let's turn to our Q3 and increased full year 2025 guidance. Given our strong Q2 performance and anticipated closing of the Subsplash acquisition, we're increasing our total revenue growth guide to be in the 13% range. Our organic growth rate of 6% to 7% for the full year remains unchanged. Finally, we're increasing our full year depths outlook to be 1990 to 2005 which includes about [indiscernible] of Subsplash solution. Our guide continues to assume a full year effective tax rate in the 21% to 22% area.

For the third quarter, we expect adjusted debt to be between $5.08 and $5.12, absorbing $0.03 of Subsplash dilution in the quarter. Now please turn over 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, our second quarter financial results were quite good. Second, we announced the acquisition of another market-leading vertical market software business Subsplash. Third, given our solid start to the year, we're raising our full year guidance. And finally, we remain well positioned for further capital deployment. Relative to our financial results, we grew total revenue 13% and organic revenue 7% in the quarter and delivered 31% free cash flow margins in the TTM period. We're delighted with our acquisition of South Flash. As discussed, this vertical market leader is mission critical to the delivery of digital engagement, church management and payments to 20,000 faith-based organizations and has several embedded growth drivers that will support high teens revenue growth and expanding margin profile.

Next, we're raising our full year outlook. And finally, we continue to be very well positioned with more than $5 billion of available M&A firepower to deploy capital towards leading vertical market software businesses. Our M&A pipeline continues to be very active, and our teams are engaged on several opportunities. As usual, we're excited to pursue these opportunities with our unbiased and disciplined approach.

Prior to turning to your questions and if you could flip to the final slide, our strategic compounding flywheel, we'd like to remind everyone that what we do with Roper is simple. We compound cash flow over a long arc of time by executing a low-risk strategy and running our dual threat offense. First, we have a proven powerful business model that begins with operating a portfolio of market-leading application-specific and vertically oriented businesses.

Once the company is part of Roper, we operate 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. Second, we are on a centralized process-driven capital deployment strategy that focuses on a deliberate and disciplined manner on cultivating, curating and acquiring the next great vertical market leading 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, meaning we double our cash flow every 5 years or so. With that, we'd like to thank you for your continued interest and support and open the floor to your questions.

[Operator Instructions] With that, our first question comes from the line of Dylan Becker with William Blair.

I want to appreciate the question here. Maybe, Neil, starting for you, kind of the resiliency and strength across the software segments of the business. Can you kind of just give us a general breakdown of again, the emphasis that your customers are kind of focusing on around productivity kind of in the current context. How that's layering in momentum around AI and maybe this prolonged period of uncertainty, if there's any easing that you're seeing there as they can't necessarily sit on their hands from a decisioning standpoint forever?

Yes. So I appreciate the question. So first, it was nice to see the high teens bookings in the second quarter gives you a sense that in the nooks and crannies of the market that our businesses serve, things are okay. Also, I'd remind you and everybody that the end market exposure we have generally, not exclusively, but generally are less tied to macro think education, legal, insurance, I mean these are areas that health care for sure, that are generally less macro sensitive but they don't -- they don't ignore the macro sensitivity, but that -- the other thing, as you say, and this is not unique to us, there's just an unprecedented generational opportunity in front of us, all of our businesses to really drive so much productivity gains inside of our customers with the use of these AI tools [indiscernible] sure others will have questions on this, but lots of momentum in terms of the knowledge that's being built up inside the company and that translating the products into the market and then many more products are in development. So that's very exciting.

For instance, in Aderant, it was one of our faster-growing businesses in the quarter. There -- we're one of the -- probably our first company to get actual AI-based products, automation-based products into the market, and you see that translating into their bookings activity, not just for the AI-specific product, but for the drag along of existing tech stack with it as well.

All right. Very helpful. And then maybe on -- within some of the recent acquisitions as well to more of a kind of a payments orientation ACO, obviously, within DAT as well. I guess can you just kind of give us a broader overview. You have a lot of value across the network and platform. You're driving incremental adoption kind of how you're thinking about the positioning of embedded and layering in kind of more payments functionality across the suite and how that can kind of tie into broader team expansion.

Yes. So certainly, with ProCare, certainly with sub slash a little bit with transacted Seaboard there is a payments element. The thing that's essential to all 3 of those is that the payments -- the right to the payments opportunities earned through the software, and that's very much the case across all 3. So we view it as a software-led, heavy R&D led to earn their rights. It's a very natural control point to have the payments. I'd say it's not a thematic, I would not read too much into the last 2 or 3 or [indiscernible] transactions, 4 if you count [indiscernible] have a payments angle, we have a strategic strategic decision has been made that we want to layer more payments. I think it's more coincidental than anything else. .

The other thing about payments is it does create payments and software and other network effect as well just creates a ton of stickiness -- these businesses tend to have very high both gross and net retention. [indiscernible] a little bit different. [indiscernible] is really the first tech-only tech forward, tech native, I should say, factoring software that's used in the transportation space for the carriers that it's really a slick user interface, a slick back in to enable just an ease of factoring. And so it certainly is enabled commerce and payments, but it's a slightly different payments set up.

And your next question comes from the line of Brent Thill with Jefferies.

Neil, throughout the quarter, I'm just curious, did you see any signs of the tariff headlines your government spending flow on impact anything or perhaps throughout the quarter, maybe things got better as you went through in the back of the quarter. Can you just give us a sense of what you saw in terms of the business trends through the quarter and how how that's trending so far in July?

Yes. So just the broader macro, the tariffs obviously, on our test business is relatively small. I think we said last quarter, it's in the $10 million to $15 million range. I think it's still in that. The team is working very hard to mitigate -- mitigated some of that. in supply chain mitigated some of that in pricing. So I won't -- I think it's too early to call it not effect, but for -- relative to others, it's quite small.

Relative to the broader other uncertainty, [indiscernible] in pockets, there's uncertainty in K-12 education. So it just sort of had a muted effect on bookings activity across the industry and frontline had a slower bookings quarter, but that's in the backdrop of high teens across the whole enterprise for enterprise bookings. Otherwise, I mean, governor contracting inside of Deltek remains muted as we expected it to occur with the BBB coming through and sort of not knowing what that was going to look like as well as the sort of hangover or lasting effects of [indiscernible]. But I said in the comments relative to Deltek, we think the big beautiful bill is what the industry has been looking for, for the last 24 months or so to unlock and sort of get things moving in given -- one, there's just a lot of spending in the bill relative to the government contracting. But more importantly or maybe equal as importantly, is the category of spend from civilian to defense. DoD, DHS goes from a relatively low spend where it's contractor spend to a higher contractor spend, so definitely civilian spending is a low contract percentage and defense spending is a high contract percentage. So it should be the unlocked.

The timing is to be determined because there's still got to get contract and spending into the market, but it should be measured in a small number of quarters, hopefully.

Yes. The timing is definitely the question because you've got agencies that don't have employees that we normally interact with. So you've got just a tactical problem at this point. But the demand is there, the pipeline is very strong at Deltek.

I would say as you -- as we switch questions, I should conclude with, I mean, we're talking about this weren't getting ready for the call. We -- the call down to our businesses on the macro topic was our business units were cautiously optimistic coming out of the calls and and we are going into the call is not exactly sure we're going to hear, and we left equally a cautiously optimistic about the go-forward period.

And your next question comes from the line of Joe [indiscernible] with Baird.

I wanted to drill down on the high teens bookings that seems like a very impressive number, just given the year ago period was an inflection higher in its own rate. And it seems like maybe GovCon or frontline were not contributors to this quarter. So maybe the question is what did contribute to the positive trends and at this point given bookings have been better now for 5 quarters, I suppose. -- do you kind of have the backlog you need to inflect your organic recurring revenue growth closer to the double-digit level. .

Thanks, Joe. It's Jason. Yes. No, I think it was a very strong quarter. I think you were correct in highlighting the 2 areas of weakness that Neil alluded to was the Deltek and frontline. Otherwise, very strong. And we mentioned that Aderant had their biggest bookings quarter in history. They landed one of the largest ground to cloud conversions ever. So that was good. And then just strength across some of their AI solutions, cross-selling there. Health care was solid, I'd say, not spectacular or not above the range, but solid. So I think as we look into -- it really supports our second half guide. I think we -- as you know, a lot of the bookings activity tends to Q4, so that's playing more for '26. But this -- I guess after kind of a more -- a little bit more of a muted first quarter, having the high teens kind of supports where we thought where we'd be year-to-date. And so I think that's positive to get back on plan.

And then on AI, it strikes me even relative to last quarter. There's just a lot more happening, a lot more references to what the individual business units are working on -- do you maybe have a better sense of how that starts to impacts the P&L? How is it impacting like R&D spend? Are you getting engineering productivity through your own use of tools -- and then when might the revenue implications start to show up?

Yes. So -- this is the question. So we are definitively getting the internal productivity gains that you'd expect any company to get. 30% in one of our larger software businesses, 30% productivity gains in R&D, for instance, there's productivity gains across customer support, go-to-market, obviously, content generation. There's a long -- there's still way more to go get in that regard. And in fact, we have to do for our businesses where they're sort of re-underwriting or reimagining their entire business to be AI native. The first part of that is for the customer value chain sort of first, second, third derivative. The second part that's a fast follow is leaning in very aggressively on the productivity gains.

In terms of when all this goodness hits the P&L -- there's -- it's small today. It's tens of millions in terms of ARR today, that's direct. AI native products that didn't exist a year or two ago. It's a multiple of that or -- it's hard to track but a multiple or 2 of that in terms of the pull along on the rest of the other tech stack, but we are fundamental believers that this is a compounding effect. There's a compounding effect in terms of the knowledge inside the business, the skill, the curiosity -- it's a compounding effect of availing the resources and the dollars, both from freeing up legacy road map work to this work and also just having the dollars gain that we talked about at the beginning of this answer, and then that begets compounding in terms of releases and revenue recognition. So it's going to be small for this year, and it will gain momentum and we get it next year.

Like I said, '25 products, either in market or in development, that number is going to be much larger in 3 months. It will be much larger in 6 months, so much so that will stop giving you the number because it's everything is just going to flow together in terms of everything is just going to be a data, but we're super, super bullish and management fund to be innovating in this market right now.

And your next question comes from the line of Brad Reback with Stifel.

Great. Neil, following up on that 30% productivity gain comment. How do you decide what falls to the bottom line and what gets invested back into faster organic growth?

Yes. So the the strong push to the businesses at the moment. We've been very consistent with this answer is we want to do more than for the next period of time to try to get it to the bottom line. There's so much to do, so much opportunity to drive product road map to drive go to market expansion, whatever it is at the individual business level. So that is the mantra for the time being is do more and drive competitive advantage and top line growth.

That's great. On the AI monetization side of the equation, there's a lot of debate going on inside of software, especially as it relates to seat-based models. Do you have a good sense yet of early successes and the best way to price these products? Or is that still very much a work in progress?

I think it's a work in process, and I definitely don't believe that -- or we don't believe there's going to be a one size fits all. So we have products today that again, in these early days, you have AI products, particularly at Deltek that are part of the subscription that's driving an upgrade to the cloud, which is monetizing that way. That is certainly not going to be the long-term method for all. But that is clear and obvious for the customer base and that customer base right now.

You have others that have sort of a subscription with sort of a consumption overage and then you have some better straight consumption. And so it's going to be bespoke to the business to the customer. But if I had to say we're -- there's one that there's a general, some gravitation too, it's going to be sort of a subscription with a consumption over the top of it, but it's hard -- it we're early days in this, but that's -- those are our initial thoughts.

And your next question comes from the line of Joshua Tilton with Wolfe Research.

Just 2 quick ones for me. My first one, I just want to follow up on the Deltek subject. And I guess what I'm trying to understand is -- if I look last quarter, it feels that you guys pretty much called out similar growth. So no change in the growth of the business from 2Q to 1Q. But you also talked to embedding some more conservatism in your outlook for Deltek last quarter because of all the uncertainties. So I guess what I'm trying to understand is, is Deltek just performing ahead of what you initially expected when you kind of set our expectations 90 days ago?

No, I wouldn't say that. I think we're just -- the beautiful bill is giving us -- I mean we had strong pipelines coming into that, but now you're seeing just more activity, especially in defense, which plays strongly to Deltek. I think the area that -- so we're more bullish, but I don't think it's a bullish for '25 comment. It's more about when we can actually get those orders secured from the customer. So we may -- there may be some upside in the fourth quarter depending on timing, but we haven't yet sort of contemplated that because it's just been a -- it's just been a very uncertain dynamic in that market.

Yes. And the upside would come in for Perpetual, which is in Q4. So that's obviously hard to predict at this stage. The other part is Deltek is only 60% GovCon, 40% is in professional services markets, and they have been -- that part of the business has been very strong throughout.

Makes sense. Maybe just to put a finer point on that, I guess, does the outlook still embed that conservatism that you spoke to last quarter?

Yes.

Okay. And then maybe just a quick follow-up. Congrats on the acquisition. I feel like it is definitely the ultimate network software. The one question I have is you guys spoke to confidence in improving the growth profile of the business. We're already at high teens. Can you just talk to what you saw during the diligence that maybe gives you confidence that you can improve that profile going forward?

Yes. No. So I think it's -- we feel confident in the ability to sustain the growth rates but improve the margin profile. And so I'm happy to get into that. But if that answers your question, I'll stop there. .

I'd love to hear that as well, please.

Feared as much. So just to give you a sense on the growth rate of the business. So face-based organizations churches are super early in their modernization or digitization, if you will. I mean, it's -- the TAM is only 50% served from a tech point of view. And really just now the technology is -- and the competitors and vendors in the space can sort of have a modern church management that manages the church manages the engagement with the guests as well as the closed loop donation donor sort of economics and sort of how that ties together in a single platform. So there is just a general wave that we get to ride there.

Second is Subsplash, I would call it, really the second-generation technology platform that's in the market, so very similar to, gosh, decade ago with our strata business, where we bought the new tech stack, it has -- it's demonstrated its ability to gain market share in this growing market, which is why this business will continue to grow above the market at the top line.

Now on the margin structure, there is -- the prior owner K1 did a great job from growing this business from a small business to a a slightly larger business but left lots of opportunity to sort of, if you would just generically call it, professionalize the business. Tim has done a great job running the business for sure, but there's opportunities in almost every part of the cost bar you look at cost of sales, go-to-market, R&D, the way you can improve the payments sort of what's underneath the hood relative to the payments infrastructure. So there's a dozen plus more levers available. We've underwrite to about half of those in the margin improvement where over the course of the next 3 to 5 years, it will look like not quite as high as the network margin, but meaningfully improve -- substantially improve from where it is.

Final thing I'd say on that is, just to remind everybody, our strategy for the last couple of 3 years is to buy these maturing leader profiles, which this is just that. And so you get a business that is earlier in its life cycle relative to the [indiscernible] conversion and then they get the scale and other cost structure, which unlocks more value for our shareholders over time.

And your next question comes from the line of Ken Wong with Oppenheimer.

First question on the big beautiful bill, clearly, some impact on Deltek timing unknown. As we think about some of your other segments, are you guys -- have you guys thought through what tailwinds, headwinds might potentially impact some of the other sectors that you guys cater to?

Yes. So quite a bit, as you'd expect. So I think we've drained the Deltek, so I'll leave that unless you have follow-up questions there. Obviously, we have a lot of exposure to health care, but whether it's all indirect to the payer to Medicaid, it's all -- everything is indirect, obviously, we serve providers of health care either through health care IT or with medical products.

As you dig into sort of what the 10-year Medicaid sort of impact is going to be roughly 12 -- the estimate is roughly 12 million people who roll off of Medicaid, but somewhere between $5 million and $7 million of those will go on to some other commercial or ACA coverage. So the net effect of total dollars is going to be -- our estimate is flat to up over this period of time. So we would expect there to be minimal, if any, impact, call it, just neutral for our franchise. Final thing I'd say I've been around health care IT for my entire career, 25 years or so. And the 1 constant is there's always reimbursement pressure on the providers, whether it's commercial, Medicaid, Medicare or whatever it is, and it's just a way of life. And when you serve that community, if you do 1 or 2 things, you generally are going to be in a good spot, which is if you deliver a tangible hard dollar ROI, which essentially all of our health care IT assets do or if you deliver a clinical benefit that is unique and compelling to which every one of our medical product businesses do. And so it's sort of a neutral.

And then on K-12 and higher ed, we would call that neutral-ish as well. Certainly, K-12, there's very -- there's small dollars that are tilting towards private, but for the larger K-12 public enterprise, it's largely a nonevent. And on higher ed, it puts more pressure on -- on performance, if you will, for the higher ed institutions, which into the theme of our Transact investment, which is better engagement of the students so they can attract the students and retain the students, which is exactly what our software and capability does there.

And I would just add on health care. Our Central reach business, the Medicaid impact is more to adults than children and most of end consumers and children. So fairly muted impact there. And then a lot of our alternate site health care businesses are more indexed Medicare versus Medicaid. So again, not a huge impact.

Got it. Fantastic. And then just a quick follow-up on the record Aderant quarter. Any unique legal tailwinds that are driving that? Or is this more specific to idiosyncratic dynamics that you're seeing within your business, I think you guys called out maybe starting to see some AI flow through. Would just love to hear what you guys are seeing drive that outsized performance.

Yes. So just to frame Aderant and so everybody understands it doesn't paint too broad of a brush with legal tech. Aderant is in the business of law, not the practice of law. So think about in their principal go-to-market AI-based products right now are on the concept of how you automate and streamline time entry to cash collection and substantial gains still gains to happen on the technology and product side. So we just [indiscernible] over 8 or 9 years has been the clear market share winner, I mean, going from 30% to 55% market share, plus or minus, the largest law firms in the world and there's a large move to cloud that is still happening there, which is driving the bookings. But let's make no mistake about it. Aderant has the technology halo in the market right now on the business of law period full stop. Final thing is the largest law firms are winning in the market, right? They're gaining share, and so we're riding along with that as well.

And your next question comes from the line of Terrell Tillman with Truist Securities.

Neil, Jason and Zack. A lot of my questions have been answered, but you have a bunch of platform businesses, so I still have a few. One thing I was going to ask about ProCare is it's starting to move into the organic calculation. I think you all had some some leadership changes, go-to-market investments? And also, I think you were working on improving attach rate of payments. Just how is ProCare performing, particularly as it's becoming more of an organic calculation? And then I had a Neptune follow-up.

Yes, sure. So ProCare, the first year was mixed. In the first year, it underdelivered on our expectation on growth, there's more like a 10-ish percent grower with our expectation of 15 -- the root causes of that are known and already countermeasure, and you alluded to some of them. So it's been a complete change of the leadership team to be more growth oriented, to be more process-oriented. So there's a new CEO, CFO, CRO, CTO, right? So that's -- those are the leadership changes. So what's happened as with all the leadership changes is the go-to-market is massively improved where we are winning in the market and the principal competitor is not. So that's a great outcome. .

The product -- the customer support, there's a great lean Kaizen event on to solve customer support tickets more quickly about 6 or 8 weeks ago, already having an impact. And so you're seeing a rotation there. We expect that by the way, that for the second half of the year to be back on slope of 15% mid-teens organic growth for the reasons they cited. So I feel very good on a go-forward trajectory. ProCare -- it was just a little worse than we thought early on. In terms of attach of payments, it's been solid. Help me -- keep me honest, Jason, and it's 75% plus or minus range, right? So that's been a consistent tax rate and also, I'd say payments, another thing I would say -- the whole payments apparatus has improved from a functional -- operational point of view in a period that we've owned them as well.

[indiscernible] a lot of great color. I got asked about ProCare. And I guess just a follow-up on Neptune, and it relates to kind of steps more broadly. But with the meter data management solutions, the billing acquisition, and then on top of just ultrasonic meter reading, like do these just create opportunities for solid for longer? Or potentially some reacceleration of growth from some of these newer dynamics.

Yes. So there's a long answer, which we can all spare everybody with. The short answer is we think these are -- the connecting the meter to cash is a unique, compelling and really -- Neptune is only one playing running that strategy. We think it's highly, highly compelling, especially in the segment of the market where Neptune competes in wind, which is a long tail of smaller municipalities, where they want to have a single vendor that stitches all this together in that compelling way. And then when you put in -- once you have that, then you can do leak detection and you can help them engage with the municipalities engage with their end customers with more automation and more perhaps AI-based communications, we'll see what that looks like. It's very early days. And so we're competing and winning today based on the strength of the go-to-market channel and the product that we have, which we would make -- we would claim very aggressively that we have the best static meter from from a readability point of view. And in the future, we expect that to pick up, but it's going to -- the growth to pick up, but it's going to take some time for this to fully get into the market.

And your next question comes from the line of Joe Giordano with TD Cowen. .

When -- just based on your comments on ProCare that you just gave, like when you reflect on that, like how do you kind of prevent similar things from happening. I know they're totally different markets. But like when you look at Central REIT Subsplash now that you're going to bring on board, like how do you kind of prevent those things before they start.

Yes. So I'd like to ask Jason to add some comments to this when I'm done. So we learned a lot in the ProCare maturing leader. I think at the end of the day, this is -- we had Jason, we had Janet who leads our capital deployment. We had Shannon, who is here with us on FP&A and our group executive sort of in weekly and every other weekly meetings and we saw some of these challenges occurring and some of which we move very quickly and some of which we weighted. And I think the #1 learning is you just don't wait. -- right? It's the #1 learning is simple. And it's so fundamental the learning is that is. It is true, and we've observed it. And so and transact or Subsplash or sensor reach to the extent we see something we're just not going to wait in the early ones. .

The other -- but I'll let you take it from there. Anything you want to add, Jason.

Yes. No. I think it starts in diligence, and we have now, I think, staffed up appropriately in certain areas where if we don't see the proper telemetry on the business or just some of the infrastructure we can help the business sort of illuminate that so that we can have conversations that will drive actions quicker. And so that was another key learning at ProCare. And so we've got a pretty rigorous schedule and execution plan on every deal. We have -- we thought we had one with ProCare, but now as you learn, you fine-tune that a little bit more. And since then, via Transact or central reach, we've had a much smoother integration. Both of those are tracking really well on our value creation plan. And so good lesson learning for us.

One thing I'd say on that is when we did our post-[indiscernible] Procare the Board the last board meeting, we summarized it in that we got the slope right -- so the market, the market growth, the competitive intensity, the competitive positioning, the number of jump balls, the the right to win in payments. All of that is the slope of the forward growth rate, we got exactly right, if you will, slope. The INTERCEPT, we got wrong, right? And so the good news is the INTERCEPT of things that are 99% in our control about the way you operate the business. And so I just want to give you the context, let's stride into what we did, but it would be harder and be a bigger issue if the slope is wrong. If we got something wrong about the market growth rate or the competitive intensity, but that is all fully intact.

Fair. On subset specifically, can you talk about the market landscape there a little bit in the competitive landscape? I mean, I guess it doesn't feel like a structural growing market in terms of like the total TAM, I guess. But it's interesting to hear like only 50% served. So just curious to hear like what the competitive landscape is.

Yes. So just to give you some sense of the market size or the market that's about a $2.5 billion market for software, like I said, about half served. In terms of church attendance, call it flattish over a 20-year period of time. The last 2 or 3 years is up low single digits, but all we've sort of assumed just flattish church attendance. And this is all U.S., I should say. We -- the number of faith-based organizations, the number of buildings is actually up a couple of percent. And then giving is actually up about 4% or 5% over the last 10 or 20 years. And then on top of that, then you have the digitization going from essentially no technology to manage, operate, engage with the congregates to now starting to do that. And so that's why you have a sort of, call it, 9-ish percent growth rate in the market and then and then the ability for this company to compete and win on top of that, which they've been -- what they've done for the last 5, 6, 7 years. So there's a lot of penetration to still happen there.

The import also relative to the competitive intensity, there is engagement technology, which Subsplash really created, invented is a clear market leader. When you engage, when you use modern day engagement technologies, and this is more than just websites and live streaming, for churches, then you find there's a 15% increase in donations when you engage the [indiscernible] that way, which then loops in the ability to drag along the church management software and other elements into the single stack. So lots of good flywheel effects here that the company has demonstrated in their most recent history, and we've underwritten to going forward.

Final thing is something like 50% of donations and churches are still cash and check. So there's still a large dentition of payments as well.

And your next question comes from the line of Deane Dray with RBC Capital Markets.

Just want to circle back on the DAT and Loadlink combination. It makes intuitive sense here, but could you flesh out like what the synergies are expected to be both on kind of go-to-market, but might there be any cost synergies.

Yes. I think it's the first big opportunity for us is there's a managerial synergy, if you will. We've got an amazing leadership team [indiscernible] and the businesses are essentially the same 1 in the Canadian market, 1 in the U.S. market. So we just get a network-oriented leadership team thinking about the network is one.

Two, is a cross-border U.S. to Canada and maybe in the future U.S. to Mexico subtlety in the freight matching business, which we'll be able to better manage in -- when we sort of have the businesses together. In terms of the actual network, the underlying technology itself, that's -- we're sort of taking a wait-and-see approach on that. I mean the 2 markets, the 2 networks fundamentally operate -- they very, very well today. DAT in the U.S. is extraordinarily busy and an exciting way integrating the trucker tools transaction, the [indiscernible] transaction and executing the monetization strategy. So as you know, essentially every broker and every carrier in the U.S., North America is on the DAT network, and we monetize both sites to a subscription and now we're going down looking at the value stack of a carrier, in this case, factoring. We have that captive now in the DAT and we have partnerships, for instance, with legal services and fuel cards.

On the broker side, you look at what their -- what we can do to help them, it starts with tracking trucker tools, and there's other things that DAT is working on. And so you have that sort of U.S.-centric oriented that port a market over time as well. So it's really per playing the longer the medium to long game here, Deane, versus some short-term synergy play.

Great. That was really helpful. And just a follow-up, Neil, I'm not sure how much you can comment. But has there been any change in the Board's thinking about potentially exiting some of the non-software businesses, there was a media article suggesting Neptune might be exited. Can you comment on this? Anything about potential timing?

Yes, Deane, I'll say what we've said publicly for the better part of 2.5 years, which is it was really just November of 2022 when this -- the current portfolio came into existence when -- and as you know, the driving force behind divesting TransCore and Zetec and the industrial businesses to CD&R and Veresen Singapore telecom engineering, et cetera, was to beat the cyclicality out of our business. And so that was the decision that we made, and we like that decision with the product businesses we have today are great businesses. They meet all of our criteria, leaders in its markets that compete on intimacy that have greater economics and margin profile, they're consistent or slightly better than organic growth aspirations. And so they have -- they are doing particularly well in the portfolio, not proving to be noncyclical. So that's our strategy, and we're going to play this going through. .

Your next question comes from the line of Scott Davis with Melius Research.

I just want to follow-on on kind of Deane's question but in a different way. What -- when you think about the structural change that has occurred at Roper, which has been pretty meaningful in the last few years, -- what do you -- what would -- and now you include sub Splash, which seems like it's a pretty interesting deal. But -- what do you think your core growth rate or kind of entitlement growth rate has changed kind of, I don't know, just say, 2022 to 2026.

Yes. So our -- the portfolio that in the Thanksgiving of 2022 time when we snap the top line with the divestitures, we talked about the the historical growth rate of that portfolio was somewhere in the 6%, 6.5% range. We believe that we have improved the sort of through cycle, if you will, sort of the minimal cycle that we have, puts or takes in a given year to be in the 7%, 7.5% range. We said that for the last couple of years. This isn't any guidance to this year, next year, this is sort of through year-over-year, so people aren't confused. .

And the art the possible is in the mid 8s with this portfolio. Then as we buy businesses that are growth accretive, Subsplash is something like 15 basis points growth accretive organic. I think [indiscernible] each was 30 or 40 basis points, something like that. Then it either, a, provides a hedge, so I just said or b, provides an opportunity to stack on top of that. So that's -- I hope that answers your question, but happy to clarify anything I just said.

No, that does answer it. And then look, there's been a lot of questions on Subsplash. But just to be clear, with I'm not asked for an exact number, but within your deal model, are you assuming the Subsplash should be somewhere around segment average EBITDA margin year 5-ish, -- does that sound about right?

It's going to be a little bit below, Scott, because networks in sort of the mid- to high 50s EBITDA. And so we'd say it'd be in the low 40s.

And this concludes our question-and-answer session. I would like to turn it 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.

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