Q1 2024 Roper Technologies Inc Earnings Call

Operator: Good morning. The Roper Technologies conference call will now begin. Today's call is being recorded. All participants will be in the listen-only mode. Should you need assistance, please press star zero to signal a conference specialist. I would now like to call over to Zack Moxcey, Vice President, Investor Relations. Please go ahead.

Good morning, the Roper Technologies' conference call will now begin today's call is being recorded all participants will be in a listen only mode should need should you need assistance. Please press star zero to signal a conference specialist I went.

I'd like to turn the call over to Zac, Mark <unk>, Vice President Investor Relations. Please go ahead.

Zack Moxcey: Good morning, and thank you all for joining us as we discuss the first quarter 2020 for financial results for Roper technologies. Joining me on the call. This morning are Neil Hunn, President and Chief Executive Officer, Jason <unk> Executive Vice President and Chief Financial Officer, Brandon Cross, Vice President and principal accounting Officer and Shannon.

Zack Moxcey: Good morning, and thank you all for joining us as we discuss the first quarter 2024 financial results for Roper Technologies. Joining me on the call this morning are Neil Hunn, President and Chief Executive Officer, Jason Conley, Executive Vice President and Chief Financial Officer, Brandon Cross, Vice President and Principal Accounting Officer, and Shannon O'Callaghan, 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.

Zac, Mark: Kelly <unk> Vice President of finance.

Zac, Mark: Earlier. This morning, we issued a press release announcing our financial results.

Zac, Mark: The press release also includes replay information for today's call.

Zack Moxcey: We have prepared slides to accompany today's call, which are available through the webcast and are also available on our website. Now, please turn to page 2. We will 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.

Zac, Mark: Prepared slides to accompany today's call, which are available through the webcast and are also available on our website.

Zac, Mark: Now if you please turn to page two.

Zac, Mark: 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.

Zack Moxcey: And now please turn to page three. Today, we will discuss our results primarily on an adjusted, non-GAAP, and continuing operations basis. For the first quarter, the difference between our gap results and adjusted results consists of the following items: Emeritization of Acquisition-Related Intangible Assets, Financial Impacts Associated with Minority Investments, and lastly, Transaction-Related Expenses Associated with the Completed Acquisitions

Zac, Mark: Now please turn to page three.

Zac, Mark: Today, we will discuss our results primarily on an adjusted non-GAAP continuing operations basis for the first quarter. The difference between our GAAP results and adjusted results consists of the following items amortization.

Zac, Mark: Amortization of acquisition related intangible assets financial impacts associated with minority investments and lastly transaction related expenses associated with the completed acquisition reconciliations can be found in our press release and in the appendix to this presentation on our website and now if you. Please turn to page four I'll hand, the call over to Neal after our prepared remarks, we will take <unk>.

Zack Moxcey: Reconciliations can be found in our press release and in the appendix of this presentation on our website. And now, if you'll 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.

Neal: It's from our telephone participants Neil.

Neil Hunn: Thank you, Zack, and thanks to everyone for joining our call. We're looking forward to sharing our first quarter results and our increased outlook for the year. As we turn to page four, you can see the topics we'll cover today. I'll start by highlighting our strong performance in Q1. Jason will then go through our financial results in more detail, reviewing our balance sheet, including our M&A capacity, and finally, our notable cash flow performance.

Neal: Thank you Zack and thanks to everyone for joining our call looking forward to sharing our first quarter results and our increased outlook for the year.

Neal: As we turn to page four you can see the topics we'll cover today.

Neal: I'll start by highlighting our strong performance in Q1, Jason will then go through our financial results in more detail.

Jason: Review, our balance sheet, including our M&A capacity and finally, our new it will cash flow performance.

Neil Hunn: Then, I'll walk through our segment highlights and discuss our increased guidance for the full year and introduce our Q2 guidance. After our closing remarks, we'll open the floor for your questions. So, let's go ahead and get started. Next slide, please.

Jason: I'll walk through our segment highlights and discuss our increased guidance for full year and initiate our Q2 guidance.

Speaker Change: After closing remarks, we'll open the floor for your questions. So let's go ahead and get started next slide please.

Speaker Change: As we turn to page five three key takeaways for today's call.

Neil Hunn: As we turn to page five, there are three key takeaways for today's call. First, we delivered another strong quarter results. Second, we're increasing our employer outlook. And third, we continue to be very well positioned relative to capital deployment. We grew total revenue by 14%, organic revenue by 8%, and EBITDA by 16%, with the EBITDA margin expanding by 60 basis points to 40.2%. Additionally, we grew deaths by 13% to 441, beating our guidance.

Speaker Change: We delivered another strong quarter results second we are increasing our full year outlook.

Third we continue to be very well positioned relative to capital deployment.

Speaker Change: Does that real quick.

Speaker Change: We grew total revenue by 14% organic revenue by 8% and EBITDA by 16% with EBITDA margin expanded by 60 basis points to 42%.

Speaker Change: We grew desk by 13% to $4 41, beating our guidance range.

Neil Hunn: We grew free cash flow 15% year over year, with free cash flow margins of 31%. We also completed the acquisition of ProCare Solutions, the leading provider of software and integrated payments for the early childhood education market, for $1.75 billion. ProCare is a great addition to Rupert.

Speaker Change: We grew free cash flow of 15% year over year with free cash flow margins of 31%.

Speaker Change: We also completed the acquisition of <unk> solutions, a leading provider of software and integrated payments for the early childhood education market for 175 billion.

Speaker Change: <unk> is a great addition to Rupert.

Neil Hunn: We remain very excited about the business and are especially pleased with the initial results and progress we've made during the onboarding process. We're also increasing our full year 2024 guidance for total revenue, organic revenue, and debts, reflecting our strong momentum and continued confidence in our outlook, and we continue to be very active in the M&A market, an environment that continues to improve and one where we have a very large pipeline of high quality and attractive opportunities.

Speaker Change: We remain very excited about the business and are especially pleased with the initial results and progress we made during the onboarding process.

Speaker Change: We're also increasing our full year 2024 guidance for total revenue organic revenue and deaths, reflecting our strong momentum and continued confidence in our outlook.

Speaker Change: And we continue to be very active in the M&A market environment that continues to improve and one where we have a very large pipeline of high quality and attractive opportunities.

Neil Hunn: NetNet, we're quite bullish about our ability to be active on the M&A front this year. As you can see, we had a great start to 2024, and we're well positioned to deliver yet another strong year of performance and growth. Now, let me turn the call over to Jason.

Speaker Change: Net net we're quite bullish about our ability to be active on the M&A front this year.

As you can see we had a great start to 2024 and are well positioned to deliver yet another strong year of performance and growth. So.

Speaker Change: Now, let me turn the call over to Jason Jason.

Jason Conley: Thanks, Neil. Let's dive right in on slide 6. U1 was an excellent first installment to 2024.

Jason: Thanks, Neil let's dive right in on slide six.

Jason: One was an excellent first installments to 2024.

Jason Conley: Revenue was 14% over the prior year to $1.68 billion. Organic growth of 8% was led by double-digit growth at our TEP segment and solid mid-single-digit growth across our application software and network software segments. Of note, organic recurring revenue grew 7% despite known headwinds at our freight match and foundry. Acquisitions contributed six points of growth, led by Centelis, which is a large bolt-on for a strata platform that closed in Q3 of last year, and Procur, which closed at the end of February. Regarding ProCare, integration is going really well, and we're excited to work with Joanne Kinsel and her team to drive continued growth and innovation in the attractive early childhood education market.

Jason: Revenue was 14% over prior year to 168 billion.

Jason: Organic growth of 8% was led by double digit growth at our test segment and solid mid single digit growth across our application software and network software segments.

Jason: Of note organic recurring revenue grew 7% despite known headwinds at our freight match and foundry businesses.

Jason: Acquisitions contributed six points of growth led by <unk> and tell us which is a large bolt on for Australia platform that closed in Q3 of last year and broker which closed at the end of February.

Jason: Regarding <unk> integration is going really well and we're excited to work with Joann Kintzel Entertainment to drive continued growth and innovation in the attractive early childhood education market.

Jason: EBITDA was $676 million, which was 16% over prior year.

Jason Conley: EBITDA was $676 million, which is 16% over the prior year. The EBITDA incremental margin of 44% translated into an EBITDA margin of 40.2%, which represented 60 basis points of expansion. This was fueled by a gross margin expansion of 100 basis points to 70.3%. Our market-leading businesses compete on customer intimacy and deliver demonstrable value to their customers, which we consistently realize in our high gross margin profile. Depths of 441 were above our guidance of 430 to 434.

Jason: EBITDA incremental margin of 44% translated into EBITDA margin of 42% and represented represented 60 basis points of expansion.

This was fueled by gross margin expansion of 100 basis points to 73%.

Jason: Our market, leading businesses compete on customer intimacy and deliver demonstrable value to their customers, which we consistently realize in our high gross margin profile.

Jason: That's a $4 41 was above our guidance of $4 30 to $4 34.

Jason Conley: Importantly, free cash flow was strong at $513 million, up 15% over the prior year, and our trailing 12-month free cash flow surpassed $2 billion for the first time in Roper's history. Looking over a four-year horizon, revenue in EBITDA carriers is 13% on a quarterly basis. For free cash flow, we take a broader lens and review on a trailing 12-month basis, which generated an 11% CAGR over this period. However, after accounting for cash tax payments related to Section 174, which went into effect and impacted the current period's free cash flow by $80 million.

Jason: Importantly, free cash flow was strong at $513 million up 15% over prior year and our trailing 12 month free cash flow has surpassed $2 billion for the first time in roper's history.

Jason: Looking over a four year horizon revenue in EBITDA CAGR of 13% on a quarterly basis.

Jason: For free cash flow, we take a broader lens and review on a trailing 12 months basis, which generated an 11% CAGR over this period.

Jason: Adjusting for cash tax payments related to section 174, which went into effect and impacted the periods. The current periods free cash flow by 80 million the normalized CAGR of 13% over this period for.

Jason Conley: The normalized CAGR is 13% over this period. For 2024, we still expect free cash flow margins of 30% or more. With that, we can turn to slide seven to talk about our balance sheet. Following our ProCare acquisition, our net debt to EBITDA ratio came in at 2.9 times a quarter end. A revolver, which provides us with three and a half billion of immediate liquidity, was utilized to fund the ProCur acquisition, bringing the drawn balance to $1.75 billion.

For 2024, we still expect free cash flow margins of 30% or more.

Jason: With that we can turn to slide seven to talk about our balance sheet.

Jason: Following our <unk> acquisition, our net debt to EBITDA ratio came in at two nine times at quarter end.

Jason: Our revolver, which provides us with $3 5 billion of immediate liquidity was utilized to fund the <unk> acquisition brings.

Jason: Bringing the drawn balance to $1 75 billion.

Jason Conley: With strong, consistent cash generation and a well-positioned balance sheet, we have the capacity to deploy $4 billion or more towards high-quality acquisitions. And I'll reiterate our commitment to remain a solid investment grade issuer as access to investment grade capital markets is fundamental to Roper's strategy. In terms of what we're seeing in deal markets, our pipeline of acquisition opportunities is growing and quite attractive. As always, we will remain patient and disciplined in allocating capital to opportunities with the highest risk-adjusted returns for our shareholders. With that, I'll turn it back over to Neil to talk through our segment details and updated guidance. Thanks.

Jason: With strong consistent cash generation and a well positioned balance sheet, we have the capacity to deploy $4 billion or more towards high quality acquisitions.

Jason: And I'll reiterate our commitment to remain a solid investment grade issuer as access to investment grade capital markets is fundamental to our strategy.

Jason: In terms of what we're seeing in deal markets. Our pipeline of acquisition opportunities is growing at quite attractive as always we were main patient and disciplined in allocating capital to opportunities with highest risk adjusted returns for our shareholders.

Jason: With that I'll turn it back over to Neil to talk through our segment detail and updated guidance.

Neil Hunn: Thanks, Jason. As we turn to page 9, let's review our application software segment results. Revenues here grew by 18% in total, and organic revenue grew by 6%. EBITDA margins were 43.3%.

Neil Hunn: Thanks, Jason as we turn to page nine let's review our application software segment results.

Neil Hunn: Revenues here grew by 18% total and organic revenue grew by 6%.

Neil Hunn: EBITDA margins were 43, 3%.

Neil Hunn: We experienced strong performance across this portfolio business. We'll start with Dell Tech, our enterprise software business serving the government contracting, architecture, engineering, and construction contractor market. Deltek continues to grow at SAS Solutions, especially within their private sector market. Importantly, in the quarter, Dell launched a new Gen AI-powered digital assistant, DELLA, which will be integrated across its core software applications.

Neil Hunn: We experienced strong performance across this portfolio of businesses.

Neil Hunn: I will start with Delta our enterprise software business, serving the government contracting architecture engineering and construction contractor markets don't have continued to grow at SaaS solutions, especially within the private sector markets.

Neil Hunn: Accordingly in the quarter Deltec launched a new Gen AI powered digital assistants, Delta, which will be integrated across <unk> core software applications.

Neil Hunn: We also welcome Bob Hughes as the new CEO of Deltec.

Neil Hunn: We also welcome Bob Hughes as the new CEO of Delta. Bob brings a wealth of software and leadership experience to the role, having most recently served as the Chief Customer and Strategy Officer at UKG. Bob, we're thrilled to be working with you. We also welcome Mike Corkery into his new role as a full-time group executive within Roper.

Neil Hunn: Rob brings a wealth of software and leadership experience to the role having most recently served as the chief customer and strategy officer at <unk>.

Neil Hunn: We're thrilled to be working with you.

Neil Hunn: We also welcome Mike Corkery into his new role as a full time group executive within Rover.

Neil Hunn: For those who do not know, Mike was Dell Tech's CEO for nearly 12 years, more than spanning our entire ownership period. Mike, thank you for building a tremendous market-leading company. Not only has Dell Tech grown multi-fold during their leadership tenure, but the underlying quality has massively improved, and the culture has never been better. Thank you for everything you've accomplished, and we're very much looking forward to working with you in your new leadership capacity at Rupert.

Neil Hunn: So those who do not know Mike was Delta CEO for nearly 12 years more than spanning our entire ownership period, Mike. Thank you for building a tremendous market leading company.

Mike Corkery: Not only is delta drone multi fold during your leadership tenure the underlying quality has massively improved and the culture has never been better.

Speaker Change: Thank you for everything you've accomplished and we're very much looking forward to working with you.

Speaker Change: ZIP capacity at Roper.

Speaker Change: However, it continues to perform incredibly well in the market and had another great quarter with continued SaaS momentum and Jen AI focused innovation.

Neil Hunn: Adderick continues to perform incredibly well in the market and had another great quarter with continued SaaS momentum and Gen AI-focused innovation. Vertifor also performed well with solid growth in their ARR base. Turning to PowerPlan, our financial planning and tax software business serving the heavy fixed asset industry, the entire plan was impressive in the quarter and grew its ARR with strong customer retention and adoption of its new SaaS solution. Great job here; we are healthcare IT businesses led by Strata and Data Innovations; we're also strong in a quarter.

Speaker Change: <unk> also performed well with solid growth in our <unk> base.

Speaker Change: Turning to power plan, our financial planning and tax software business, serving the heavy fixed asset industries.

Speaker Change: Our plan was impressive in the quarter and grew its <unk> with strong customer retention and adoption of its new SaaS solution.

Speaker Change: Great job here.

Speaker Change: Our health care businesses led by strata and data innovations were also strong in the quarter.

Neil Hunn: We're especially pleased to see the solid go-to-market execution that both businesses have put in place. Finally, as I mentioned a few minutes ago, we completed the acquisition of ProCare Solutions, which is off to a good start and complements this segment with a higher organic growth profile. For the remaining three quarters of the year, we expect to see mid-single-digit organic revenue growth for this sector. Please turn with us to page 10.

Speaker Change: We're especially pleased to see the solid go to market execution at both businesses.

Speaker Change: Finally, as I mentioned, a few minutes ago, we completed the acquisition of broker solutions, which is off to a good start and complements this segment with a higher organic growth profile.

Speaker Change: For the remaining three quarters of the year, we expect to see mid single digit organic revenue growth for this segment.

Speaker Change: Please turn with us to page 10.

Speaker Change: Revenues in our network software segment grew 5% in total and 4% on organic basis. Despite the fact, we continue to experience pressure with our freight matching businesses and the impact on foundry related to the recent accurate strike and registry.

Neil Hunn: Revenues in our network software segment grew 5% in total and 4% on an organic basis. Despite this fact, we continue to experience pressure with our freight matching businesses and the impact on Foundry related to the recent actor strike and writer strike. EBITDA margins continue to be strong at 55.9% and grew about 10% year-over-year. As we dig into the details of it, we'll start with our freight matching businesses, DAT and Loan Link, which declined slightly, as expected, due to the challenging freight market conditions that affected each of these businesses.

Speaker Change: EBITDA margins continue to be strong at 55, 9% and grew about 10% year over year.

Speaker Change: As we dig into the details of it we will start with our freight matching businesses <unk> liquids declined slightly as expected due to the challenging freight market conditions that affected each of these businesses.

Neil Hunn: As is typical for Roper, we invest in long-term, sustainable, and improving levels of organic growth. In VAT's case, we're leading the industry with Gen AI-enabled fraud detection and prevention tools. As many know, fraud across the transport ecosystem remains a cause of great concern and economic loss.

Speaker Change: As is typical for Rupert, we invest for long term sustainable and improving levels of organic growth.

Speaker Change: In either case, we're leading the industry with Gen AI enabled fraud detection and prevention tools.

Speaker Change: As many know broad across the transport ecosystem remains a cause us great concern and economic loss.

Neil Hunn: Turning to Foundry, which continues to innovate at an impressive clip, both in terms of major product enhancements and customer productivity-based AI ML innovation. That said, Foundry declined a bit in the quarter, as expected given the recent industry strike. Notwithstanding the headwinds at DAT, Loadlink, and Foundry, we grew 4% organically in this segment based on the strength across the balance of this portfolio. Specifically, iPipeline, our life insurance and annuities network software business, had strong renewals, customer expansions, and market activity, especially in the annuities market.

Turning to foundry, which continues to innovate at an impressive clip both in terms of major product enhancements and customer productivity based AI ml innovations that said foundry declined a bit in the quarter as expected given the recent industry strikes.

Speaker Change: Notwithstanding the headwinds of low Lincoln Foundry, we grew 4% organically in this segment based on the strength across the balance of this portfolio specifically.

Speaker Change: Our pipeline, our life insurance and annuities network software business had strong renewals customer expansions and market activity, especially in the annuities market.

Neil Hunn: Construct Connect continued its solid march through financial results and enhanced its network value with Gen-AI powered solutions. And MHA had a strong quarter, benefiting from increased operational focus and rigor, revenue timing related to one of MHA's data partnerships, and improvement in senior care occupancy rates. For the balance of the year, although we did a touch better than expected in the first quarter, we continue to expect low single-digit organic revenue growth for this segment, based on the continued difficult freight market conditions and our view that Foundry's recovery will be extended through this year.

Speaker Change: Construction continued its solid March improved financial results and enhance its network value with Gen AI powered solutions.

Speaker Change: And <unk> had a strong quarter benefiting from increased operational focus and rigor.

Speaker Change: Revenue timing related to one of <unk> data partnerships and improvement in senior care occupancy rates.

Speaker Change: For the balance of the year, although we did a touch better than expected in the first quarter. We continue to expect to see low single digit organic revenue growth for this segment based on the continued difficult freight market conditions and our view that foundry is recovery will be extended through this year.

Speaker Change: Now please turn to page 11, and let's review our segment results.

Neil Hunn: Now please turn to page 11 and let's review our test segment's results. Revenues here grew 17% on an organic basis, and EBITDA margins remained strong at 34.3%. Neptune continued to see notable customer demand, in particular, for its ultrasonic meters and meter data management software.

Speaker Change: Revenues here grew 17% on organic basis, and EBITDA margins remained strong at 34, 3%.

Speaker Change: Neptune continued to see notable customer demand in particular for their ultrasonic meters and meter data management software and shorts Neptune delivered another great quarter of growth.

Neil Hunn: In short, Neptune delivered another great quarter of growth. Verithon had very strong growth across all three of its product families and executed at an exceptional level in the quarter. Unknown Attendee.

Speaker Change: Verathon had very strong growth across all three of those product families and executed at an exceptional level in the quarter.

Speaker Change: Notes.

Neil Hunn: Veritathon had a record number of large account wins, further demonstrating their market momentum. A great job by team Verify. We also had strong execution and growth led by healthcare and markets from Civco, Antibonics, IPA, and RFIDs. As we turn to the outlook for the balance of the year, let us remind you that we expected to have a stronger first quarter, which we delivered. That said, for the balance of the year, we expect to see organic revenue for this segment to be in the high single digits area. Now, please turn with us to page 13.

Speaker Change: Verathon had a record number of large account wins further demonstrating their market momentum.

Speaker Change: Eight job I've seen marathon.

Speaker Change: We also had strong execution and growth led by health care end market from Cisco antibiotics, IPA and RFID.

Speaker Change: As we turn to the outlook for the balance of the year, let us remind you that we expected to have a stronger first quarter, which we deliver.

Speaker Change: That said for the balance of the year, we expect to see organic revenue for this segment to be in the high single digits area.

Speaker Change: Now please turn to page 13.

Speaker Change: Now, let's review our increased full year of 2020 for guidance and discuss our Q2 outlook.

Neil Hunn: Now, let's review our increased full year 2024 guidance and discuss our Q2 outlook. Based on our strong Q1 results, enterprise momentum, and our confidence in our outlook, we are raising our guidance for 2024. For the full year, we now expect total revenue to grow in the 12% area, up from our initial guide of 11 to 12%, organic revenue to grow about 6%, up from 5% to 6% originally, and adjusted debts to be in the range of $18.05 and $18.25, up from $17.85 to $18.15 previously. Our guidance continues to assume a full-year effective tax rate in the 21-22% range. For Q2, we expect adjusted depths to be in the range of 442 and 446.

Speaker Change: Based on our strong Q1 results enterprise momentum and our confidence in our outlook, we're raising our guidance for 2024.

Speaker Change: For the full year, we now expect total revenue to grow in the 12% area up from our initial guidance of 11% to 12%.

Speaker Change: Organic revenue to grow about 6% up from 5% to 6% originally and adjusted debt to be in the range of $18 five and <unk> 25 up from 70% to 85% to $18 15 previously.

Speaker Change: Our guidance continues to assume a full year effective tax rate and a 21% to 22% range.

Speaker Change: For Q2, we expect adjusted <unk> to be in the range of $4 40 to $4 46.

Speaker Change: Now please turn.

Neil Hunn: Now please turn this to page 14, and we'll open it up for your questions. As per custom, we'll conclude with the same key takeaways with which we started. First, we delivered another strong quarter of results. Second, we're increasing our outlook for the full year. And third, we're very well positioned relative to capital deployment. For the quarter, we delivered double-digit growth in revenue, EBITDA, adjusted debts, and free cash flow with margin expansion and very strong cash flow conversion. Also in the quarter, we completed the acquisition of ProCare Solutions, which is a great addition to our enterprise and our application software segments.

Speaker Change: To page 14, and we'll open it up for your questions.

Speaker Change: As per our custom we will conclude with the same key takeaways with which we started first we delivered another strong quarter results second we are increasing our outlook for the full year and third we're very well positioned relative to capital is one of them.

Speaker Change: For the quarter, we delivered double digit growth in revenue EBITDA, adjusted EPS and free cash flow margin expansion and very strong cash flow conversion.

Speaker Change: Also in the quarter, we completed the acquisition of <unk> solutions, which is a great addition to our enterprise and our application software segment.

Neil Hunn: And we're increasing our full year 2024 guidance for total revenue, organic revenue, and debts, reflecting our confidence and our outlook and continued momentum. Finally, we continue to maintain a strong financial position with $4 billion plus of capacity for capital employment. The M&A markets are very active. We have a very robust pipeline of attractive acquisition opportunities that we're excited to pursue with our unbiased and disciplined approach. We're quite bullish about our ability to execute this part of our strategy over the course of 2024. Now, as we turn to your questions, and if you could flip to the final slide, our strategic flywheel. We'd like to remind everyone that what we do at Rupert is simple.

Speaker Change: And we're increasing our full year 2024 guidance for total revenue organic revenue of index, reflecting our confidence in our outlook and continued momentum.

Speaker Change: Finally, we continue to maintain a strong financial position with $4 billion plus of capacity for capital deployment.

Speaker Change: The M&A markets are very active we have a very robust pipeline of attractive acquisition opportunities.

Speaker Change: <unk> pursued with our unbiased and disciplined approach.

Speaker Change: We're quite bullish about our ability to execute this part of our strategy over the course of 2024.

Speaker Change: Now as we turn to your questions and if you could flip to the final slide our strategic flywheel, we'd like to remind everyone that what we do at Roper simple.

Neil Hunn: We compound cash flow over a long arc of time by operating a portfolio of market-leading, application-specific, and vertically-oriented businesses. Once a company is part of Roper, we operate a decentralized environment so our businesses can compete and win based on customer intimacy. We coach our businesses on how to structurally improve their organic growth rates and underlying business quality. Finally, we run a centralized process-driven capital deployment strategy that focuses on finding the next great business to add to our cash flow compounding flywheel. Taken together, we compound our cash flow over a long arc of time in the mid-Teens area. With that, we'd like to thank you for your continued interest and support and open the floor to your questions.

Speaker Change: We compound cash flow over a long arc of time by operating a portfolio of market, leading application specific and vertically oriented businesses.

Speaker Change: Once the company is part of Rover, we operate a decentralized environment. So our businesses can compete and win based on customer intimacy.

Speaker Change: We chose our businesses on how to structurally improve the organic growth rates and underlying business quality.

Speaker Change: Finally, we run a centralized process driven capital deployment strategy that focuses on finding the next great business to add to our cash flow compounding flywheel.

Taken together, we compound our cash flow over a long arc of time is the mid teens area.

Speaker Change: With that we'd like to thank you for your continued interest and support and open the floor to your questions.

Operator: We will now go to our question and answer portion of the call. We request that our callers limit their questions to one main question and one follow-up. If you would like to ask a question, you may do so by pressing the star key followed by the digit 1 on your touch-tone phone. If you are using a speaker phone, please pick up your handset before pressing any key. To withdraw your question, please press star, then the digit 1. Again, we request that callers limit their questions to one main question and one follow-up. Your first question comes from Julian Mitchells from Barclays. Please go ahead.

Speaker Change: We will now go to our question and answer portion of the call. We request that our callers limit their questions to one main question and one follow up if you would like to ask a question you may do so by pressing the star key followed by the digit why don't you.

Speaker Change: Telephone if youre using a speakerphone please pick up your handset before pressing any keys.

Speaker Change: Your question. Please press Star then the digit too again, we request that callers limit their questions to one main question and one follow up your first question comes from Julian Mitchell from Barclays. Please go ahead.

Julian C.H. Mitchell: Hi, good morning. Good morning.

Julian C.H. Mitchell: Hi, good morning.

Julian C.H. Mitchell: Good morning, maybe just a first question on the networks.

Neil Hunn: Maybe just the first question on the network software division. So the freight markets, I think there was a fairly sort of downbeat outlook from some of the US trucking companies in the past couple of weeks. Sounds like that business for you on freight matching is playing out as expected. Are we expecting sort of a low single-digit decline for the balance of the year in the freight match business? Is that what you're kind of dialing in on? And any comments on where we are on the sort of carrier consolidation?

Julian C.H. Mitchell: Network software Division.

Julian C.H. Mitchell: So the freight markets.

Julian C.H. Mitchell: I think there was a fairly sort of gallon be outlook from some of the the U S. Trucking companies in the past couple of weeks it sounds like that business for you on freight matching is playing out as expected.

Julian C.H. Mitchell: Are we expecting sort of down low single digit for the balance of the year.

Julian C.H. Mitchell: In the freight match.

Julian C.H. Mitchell: Is that what you're kind of dialing in and any comments on where we are on the sort of carrier.

Jason Conley: Why don't you take the first one? I'll take the second one. Yeah, so Julian, it's like you said, it's about playing out as we expected, down low singles for the year, not much change from our perspective last quarter. So, yeah, that's kind of the current guiding assumption. And for us on the carrier side, it's actually been pretty stable for the last several months. It hasn't improved, it's just been stable, and when you really take that stability and you put it against the priority of your comp, that's what drives the outlook for the year.

Julian C.H. Mitchell: Consolidation.

Speaker Change: Once you take that first of all I'll say the second yeah. So Julien. It's like you said, it's about playing out as we expected down low singles for the year.

Speaker Change: Not much change from our perspective last quarter. So, yes, that's kind of the current.

Speaker Change: Guiding assumptions.

Speaker Change: On the carrier side, it's actually been pretty stable for the last several months.

Speaker Change: It Hasnt improved this has been stable.

Speaker Change: And when you take that stability and you put it against the prior year comps, that's what drives to the to the outlook for the year.

Jason Conley: That's helpful, thank you. And then just dialing in on the second quarter EPS guide, I think normally you'd have, you know, maybe a sort of a 3-4% type sequential increase in earnings in the second quarter. Looks like it's basically flat at the guide midpoint for this Q2. Is there anything going on sort of sequentially with any of the segment sales or margins that's abnormal or something below the line that's weighing on that? Uh, you know, not really. I mean, we still...

Speaker Change: That's helpful. Thank you and then just.

Speaker Change: Dialing in on the second quarter.

Speaker Change: Scott I think normally you would have maybe.

Speaker Change: Sort of a three 4% type sequential increase in earnings in the second quarter.

Speaker Change: It looks like it's basically flat.

Speaker Change: Midpoint for this Q2.

Scott: Is there anything going on sort of sequentially with any of the segment sales or margins that that's abnormal or something below the line that's weighing on that.

Jason Conley: No, not really. We feel good about, you know, our guidance being raised for the full year. And, you know, if you look back a quarter ago, our, you know, our Q2 guide is consistent with what we thought, you know, 90 days ago. So I think if you go back to like 21 and 22, we were actually flat in Q1 and Q2 on a segment EBITDA basis. And that's usually the normal motion for us.

Speaker Change: No not really I mean, we feel good about our guidance being raised for the full year and if you look we look back a quarter ago, our Q2 guidance consistent with what we thought 90 days ago. So.

Speaker Change: If you go back to like 'twenty, one and 'twenty two we were actually flat Q on Q2 on a like a segment EBITDA basis, and Thats, usually the normal motion for US last year, we did move up sequentially, but that was driven by some.

Jason Conley: Then last year, we did move up sequentially, but that was driven by some a surge at TEP. You know, there were some strong deliveries that led by Verithon. And then this year, you know, Verithon's coming out strong out of the gate. So we don't have that dynamic this year.

Speaker Change: A surge at tap you know there was some strong deliveries led by Verathon and then this year marathons coming out strong out of the gates. So we don't have that dynamic this year.

Jason Conley: And then usually AS steps down a little bit in earnings due to some VertiFOR timing, but we didn't have that dynamic last year. So, you know, I think we feel good about sort of the progression from Q1 to Q2, you know, on an operating basis. And, you know, in terms of the second half, we'll, you know, we'll start to see the accretion of ProCare with this, you know, it's got sequential growth throughout the year. And then we'll have, of course, reduced interest expenses as we pay down the revolver. So, you know, feel pretty good about the progression going on throughout 2024.

Speaker Change: And then usually steps down a little bit of an earnings due to <unk>.

Speaker Change: Virtu for timing, but we didn't have that dynamic last year. So I think we feel good about sort of the progression from Q1 to Q2 on an operating basis.

Speaker Change: In terms of the second hospital will start to see any accretion approach there with us.

Speaker Change: It's got sequential growth throughout the year and then we'll have of course reduced interest expense as we pay down the revolver. So.

Speaker Change: Pretty good about the progression going throughout 2024.

Speaker Change: Great. Thank you.

Yes.

Speaker Change: Your next question comes from Deane Dray with RBC capital markets. Your line is now open.

Deane Michael Dray: Your next question comes from Deane Dray with RBC Capital Markets. The line is now open.

Deane Michael Dray: Thank you and good morning, everyone Happy Friday.

Deane Michael Dray: Thank you. Good morning, everyone. Happy Friday. Be proud of yourself. Mind it. Great.

Deane Michael Dray: Good morning.

Deane Michael Dray: Great.

Neil Hunn: Hey, since it's the newest addition to the team on ProCare, just some data points. So what was the contribution in the quarter? And remind us about any kind of seasonality on the cash flow because it is tied to education. So we know that it tends to be seasonal and any sort of like first hundred day plans for the business.

Deane Michael Dray: It's the newest addition to the team on pro care, just some data points. So what was the contribution in the quarter and remind us about any kind of seasonality on the cash flow because it is tied to education. So we know that it tends to be seasonal in any sort of like.

Deane Michael Dray: First 100 day plans for the business.

Jason Conley: Yeah, so if I can, I can hit that, Dean. It was about what we expected. We had a couple more days, but it was, you know, a little over 20 million in revenue came in, sort of about as we expected in terms of EBITDA margin in the mid-30s or so. And then, from a cash flow perspective, you know, it's, it's, it's more of a monthly sort of payments stream.

Yes, so if I can I can hit that Dean. So there was about where we expect to be at a couple of more days and but it was a little over $20 million of revenue came in sort of.

Dean: As we expected in terms of EBITDA margin.

Dean: In the mid 30% or so.

Dean: And then.

Dean: I think what we from a cash flow perspective.

Dean: It's more of a monthly payment stream. So we don't get it sounds like frontline, where they've got big renewals in the schools are paying them. This is.

Jason Conley: So we don't get, you know, it's not like Frontline where they've got big renewals and schools are paying them. This is, you know, childhood education centers that are just sort of paying on a monthly basis. Of course, there's a payment stream there, too, that we get that comes on a monthly basis. So it's more consistent throughout the year.

Dean: Childhood education centers that are just sort of paying on a monthly basis of course, there is a payment stream there too that we get.

Dean: That comes on a monthly basis. So it's more consistent throughout the year and I think we're just off to a really good start in terms of.

Jason Conley: And I think, you know, we're just off to a really good start in terms of the integration work, of course, the teams are quickly up and running from a financial standpoint, you know. We're working through all the normal integration points around insurance and cyber and things like that, you know. And then, beyond that, we've been engaged in weekly conversations on progress against, you know, some defined value creation levers that we have around growth. And those are going really well. And, you know, the super collaborative teams are digging in, and we're really on track for the milestones we agreed upon right after close. So I'm just feeling really good about the momentum there.

Dean: The integration work of course it teams.

Dean: Teams are quickly up and running from a financial standpoint, we're working through all the normal integration points around insurance and cyber and things like that.

Dean: And then beyond that we've been engaged in weekly conversations on progress against some defined value creation levers that we had around growth.

Dean: And those are going really well and.

Dean: Super collaborative teams digging in and we're really on track for the milestones we agreed upon rate up to close so just feeling really good about the momentum there.

And the normal cadence.

Jason Conley: And the normal cadence for the monthly is, revenue cadence is approximately what?

Dean: For the monthly is a revenue cadence is approximately what.

Jason Conley: It's consistent, right? So if you think about software is obviously, you know, consistent month to month, and then the payments, they might get a little bit more at the beginning of the year, but it's modest, it's pretty, it's, it's pretty consistent throughout the year, of course, they're growing, right? So it's gonna, you know, it'll, it'll go ramp up sequentially throughout the year. But just overall, in terms of a business model, it's pretty consistent throughout the year, not a lot of seasonality.

Dean: It's consistent right. So it's just you can think about software is obviously.

Dean: Consistent month to month, and then the payments they might get a little bit more.

Dean: At the beginning of the year, but it's modest it's pretty it's pretty consistent throughout the year of course, they are growing right. So it's going to it'll it'll go ramp up sequentially throughout the year.

Dean: But just overall in terms of our business model, it's pretty consistent throughout the year not a lot of seasonality Dean if youre comparing this frontline where most of the cash flow comes in Q3. This is not that this is much more linear throughout the course of the year.

Neil Hunn: Deane, if you're comparing this to Frontline, where most of the cash flow comes in Q3, this is not that. This is much more linear throughout the course of the year.

Speaker Change: Great and then.

Neil Hunn: That's great. And then just a follow up on the fastest growth platform right now is, surprisingly, on the tech-enabled products, you know, Neptune. It's just how what are the expectations for this growth rate? How much of this, because we see similar numbers at like the badger meter, so it looks in line, but how much of this is market growth versus any short sort of share gains that you might be realizing? Yeah, so for a long time.

Dean: Just a follow up on the fastest growth platform right now is surprisingly.

Dean: The tech enabled products.

Dean: Neptune is just how what's the expectations for this growth rate.

Dean: How much of this because we see it similar numbers that like Badger meter. So it looks in line, but how much of this is market growth versus any sort of share gains that you might be realizing.

Neil Hunn: Yeah, so, for a long time, Deane, as you know, Neptune, over a long arc of time, is a slow and steady share gainer, for sure. That's, I think that proves out in all the market data we see and continue to research and get. Relative to short-term performance, we think it's a combination of a couple things. First is, there has been, there is, we're working through an unprecedented amount of backlog. So, that certainly happened, but then, when COVID happened in the Northeast, in particular, where a lot of the meter sets are inside people's homes versus outside, there was basically a stall in that activity.

Speaker Change: Yes, so for a long Deane as you know Neptune over a long arc of time is a slow and steady share gainer for sure.

Speaker Change: So I think it proves out in all the market data, we see and continue to researching it.

Speaker Change: All of these short term performance, we think it is.

Speaker Change: Combination of a couple of things.

Speaker Change: First is there has been.

Speaker Change: They're working through unprecedented amounts of backlog backlog. So that is certainly happen, but then when COVID-19 happened in the northeast in particular, where a lot of the meter sensor inside people's homes versus outside there was basically a stall of that activity yet the customers our customers still have obligations to stay.

Neil Hunn: Yet, customers, our customers still have obligations to stay on their maintenance schedules. So, if there was a year, a year and a half of slower maintenance. Schedule sort of execution that's being deployed now, we think that's happening over a 3 or 4 year period. So, if you will, maybe 5 or 5 and a half years of demand squeezed into 4. So, that's the market dynamic that's driving some of the growth that we're very much in the midst of. I expect that to continue well in the next year.

Speaker Change: On their maintenance schedule. So if there was a year year and a half of slower maintenance schedule sort of execution. That's that's being deployed now we think thats happening over a three or four year period. So if you will maybe five or five it appears demand squeezed into four so that's a market dynamic that's driving some of the growth that we're very much in the midst of.

Speaker Change: We expect that to continue well into next year.

Neil Hunn: The final thing I'd say is there's just nice momentum on the new technologies that Neptune has in the field, both in terms of solid-state ultrasonic meters, both on the residential side and large commercial side, as well as just the cellular and the meter data management software that we have that really helps our customers have better network connectivity.

Speaker Change: Final thing I'd say is there is just a nice momentum on the new technologies that Neptune.

Speaker Change: As in the field in terms of solid state ultrasonic meters, both on the resi side and large commercial side as well as just the cellular.

And the meter data management software that we have that really helps our customers better network connectivity.

Speaker Change: Thank you.

Speaker Change: Thank you.

Speaker Change: Your next question comes from Joe <unk> with Baird. Your line is now open.

Joseph D. Vruwink: Your next question comes from Joe Vruwink with Baird. Your line is now open.

Joseph D. Vruwink: Great. Hi everyone.

Joe: Hi, great. Thank you everyone.

Neil Hunn: When you consider the businesses that serve clients in the public sector, how are they planning for the balance of the year, just particularly around the election and then the end of stimulus in certain cases? And I ask about stimulus not because a business like Frontline has benefited from that, but does just the shifting of revenue sources for a school district perhaps cause a pause in their decision making? Yeah, so, um, we got it depends on which, you know.

Joe: When you consider the businesses that serve clients in the public sector. How are they planning for the balance of the year, just particularly around.

Joe: The election, and then the endo stimulus in certain cases, and I ask you about stimulus not because our business like frontline has benefited from that but this is just the shifting of revenue sources for our school district, perhaps caused a pause in their decision making.

Yeah. So.

Joe: Got it depends on which.

Neil Hunn: Yeah, so it depends on which part of the market you're talking about education. Our frontline business was not and has not been a meaningful beneficiary of ESSER funding. And so that is. That is coming to an end.

Joe: As far as the market Youre talking about education, our frontline business.

Joe: This was not and has not been a meaningful beneficiary of MSR funding and so is that is there.

Coming to it and it's not been a direct beneficiary of that there might be some some secondhand or third hand benefit, but just having the school districts, having a lot of money over the last years and feeling good about life, but we've not none of what we don't believe anything that we sell has been directly funded by us or funding so the pipeline.

Neil Hunn: We've not been a direct beneficiary of that. There might be some second-hand or third-hand benefit from that, just having the school districts having a lot of money over the last years and feeling good about life, but we don't believe anything that we sell has been directly funded by ESSER funding. First of all, Frontline had a very solid first quarter of bookings. Their pipeline coverage for the second quarter is very good, and so we're cautiously optimistic there.

Joe: Coverage of pipe frontline first of all probably had a very solid first quarter bookings or pipeline over the second quarter is very good and so were cautiously optimistic there.

Neil Hunn: The other part of the market that we talked about is U.S. federal government contractors. At the enterprise class, the largest customers, the largest government contractors, just with the uncertainty of government spending, that has been a more tepid macro environment and slower on the bookings front. On the largest of the customers, the SMB portion of that market actually has been quite strong for Dell Tech. So if you want to talk about other parts, we're probably happy to do it, but Jason, anything you want to add to that?

Joe: The other part of the market.

Joe: Talking about as a government U S. Federal government contractors at the enterprise class the largest customer was a largest government contractors.

Joe: With the uncertainty of government spending.

That has been a more tepid macro environment and slower on the bookings front on the largest of the customers. The SMB portion of that market actually has been quite strong for delta. So if you want to talk about other parts of the portfolio is happy to do it but Jason anything you want to add to that.

Jason: So are you still there.

Jason: Yes, yes, no no.

Neil Hunn: Yeah, yeah. No, those are the two that I had in mind. And then, if I can ask, I guess this is a pretty targeted segment level question, but the reoccurring revenue sources for application software really look like they jumped this period, maybe about two points more in growth contribution than you typically see there. What drives that particular part of the business?

Speaker Change: The two that I had in mind.

Speaker Change: And then if I can ask I guess this is a pretty targeted segment level question, but the re occurring revenue sources for application software really looked like they jumped this period, maybe about two points more in gross contribution then typically you see there just.

Speaker Change: What drives that particular part of the business.

Speaker Change: Yes, Joe that's the.

Neil Hunn: Yeah, Joe, that's the pro care business coming online, right? So we talked about 75% or so of their revenue is payments, and so that's showing up in the recurring line.

Speaker Change: Broker business coming online right. So we talked about 75% or so of their revenue is payments and so that's shown up in the rate of current line.

Okay that makes sense. Thank you.

Joseph D. Vruwink: Okay, that makes sense. Thank you.

Speaker Change: Your next question comes from Scott Davis with Melissa Research. Please your line is now open.

Scott Reed Davis: Your next question comes from Scott Davis with Millissue Research. Please. Your line is now open.

Scott Reed Davis: Hey, good morning, guys.

Scott Reed Davis: I think this was more positive in tone on the M&A side commentary-wise, and I think we usually get from you guys; you're never really that bearish. But talk to us about a couple of things. A little bit more color there.

Scott Reed Davis: Good morning, Scott.

Scott Reed Davis: I think this was.

Scott Reed Davis: More <unk>.

Positive in tone on the M&A side commentary wise I think we usually get from you guys that youre never really that bearish.

Scott Reed Davis: But.

Scott Reed Davis: Talk to us about a couple of things a little bit more color there is it.

Neil Hunn: Is it the number of deals? Is it that valuations have gotten more interesting? Is it because the competition on the buy side has gotten a little bit better? I mean, Just drill down a little bit into that, it'd be helpful, and kind of a natural secondary is, you know, you say four billion for fire practice. Is that enough? And would you consider tapping equity markets if the deal flow was going to be even more robust?

Scott Reed Davis: Is it the number of deals is that the valuations have gotten more interesting is it is it.

Scott Reed Davis: The competition on.

Scott Reed Davis: And the buy side has gotten a little bit better I mean.

Scott Reed Davis: Just drill down a little bit into that'd be that'd be helpful. In kind of a natural secondaries, you say $4 billion of Fireeye is that enough.

Scott Reed Davis: And would you consider tapping equity markets. It's the deal flow was going to be even more robust.

Scott Reed Davis: So a lot of there are adjacent I will do our best to cover all points. If we we don't cover one policy count all break back right back to it. So we're very optimistic at the moment I think it's for really all the reasons. We talk about so there are a very large number of deals in the market and coming to the market.

Neil Hunn: There is a lot in there. Jason, I'll do our best to cover all the points. If we don't cover one, pull out a candle. I'll bring it back, bring us back to it.

Neil Hunn: So, we're very optimistic at the moment. I think it's for really all the reasons you talk about. So, there are a very large number of deals in the market and coming to the market. We have very good instrumentation relationships with both the sponsors and all the investment banker intermediaries.

We have very good.

Instrumentation relationships with both the sponsors and all the investment banker intermediaries the bankers pipelines are full.

Neil Hunn: The bankers' pipelines are full, and so there is just a lot of stuff coming. So why is that? There was essentially not a lot of stuff for 18 or so months prior. In the private equity world, it's all about DPI and getting money back to the LPs. The LP pressure is at the point where they want the capital returned, and so we're just going to compress. 2.5 years worth of deals in a year, a year and a half, and so there's going to be a lot of activity.

Scott Reed Davis: And so there is just a lot of stuff coming so why is that there was essentially not a lot of stuff for 18 or so months prior so.

Scott Reed Davis: And the private equity World, It's all about DPI and getting money back to the Lps LP pressure is mounted to the point, where they want the capital returned and so.

Scott Reed Davis: We're just going to compress you know too.

Scott Reed Davis: Two and a half year's worth of deals in a year or year and a half since theres going to be a lot of activity.

Neil Hunn: Relative to the competition points, because of this, it is our belief, and my belief, for a window of time here, that the asset class of private equity that we compete with is going to be a net seller of assets versus a net buyer here for a period of time. So, if ProCare is an indication for what's to come, then the competition is less. It's not without competition, but it is less than we've seen in prior periods, which leads to valuation.

Scott Reed Davis: Relative to the competition points because of this this is our belief my belief for a window of time here that the asset class of private equity that we compete with is going to be a net seller of assets versus a net buyer here for a period of time so.

Scott Reed Davis: Pro care is an indication of what's to come then the competition is less it's not without competition, but it is less than we've seen in prior periods, which leads evaluation I mean, when you look at the broker valuations I mean that was very.

Neil Hunn: I mean, you look at the ProCare valuation. It was a very high-growth, very high-quality business at a very reasonable price. I think it's really a combination of the volume of deals and maybe our view of the competition. Also, I mean, any of this, the number of deals is almost for sure going to happen. This concept of competition could change at any moment, but that's what's fueling sort of our optimism.

Scott Reed Davis: Very high growth very high quality business at a very reasonable price.

I think it's really a combination of the volume of deals that may be our view on competition also mean any of this the number of deals is almost for sure going to happen. This concept of competition could change at any moment.

Scott Reed Davis: But but that's.

That's our that's what's fueling our optimism.

Neil Hunn: To your point about whether $4 billion is enough, we're just always about the cash flow compounding of the enterprise, being investment-grade, using leverage, and being unbiased and disciplined in our approach. And so, we're going to stay true to that and look at every deal on a deal-by-deal basis.

Scott Reed Davis: To your point about is 4 billion enough. We're just we're just always about the cash flow compounding of the enterprise being investment grade using the leverage and being unbiased and disciplined in our approach and so we're going to stay true to that and look at every deal on a deal by deal basis.

Scott Reed Davis: Very encouraging. A good answer.

Speaker Change: Very encouraging good answer thank you I'm going to pass it on I. Appreciate it guys best of luck this year.

Scott Reed Davis: Thank you. I'm going to pass it on. Appreciate it, guys. Best of luck this year.

Brent John Thill: Your next question comes from Brent Thill with Jeffreys. Your line is now open.

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

David: Hey, thanks so much. This is David on Brent.

Speaker Change: Hey, Thanks, so much this is David <unk> on for Brent.

Neil Hunn: I wanted to ask around, you know; there was increased commentary, I think, in the first prior quarters around some of the companies and what they're doing around AI. Just if you could just give us an update on the barter AI strategy. And, you know, if you guys are charging for any of these AI products, any color there would be helpful, and any way AI could possibly help with the organic growth of some of your assets in the long term. That'd be helpful. Thanks. Yes, we'll certainly give you an update on that.

Speaker Change: I wanted to ask around the it was increased commentary I think versus prior quarter. It was around some of the companies and what they're doing around AI. Just if you could just give us a update on the BARDA AI strategy.

David: If you guys are charging for any REIT AI products any color there would be helpful and how AI could possibly help with the organic growth of some of your assets in the long term that'd be helpful. Thanks.

David: Yep.

Speaker Change: Certainly give you an update on that so are we.

Neil Hunn: Yeah, well, certainly give you an update on that. So we continue to grind away at this. So we have done a lot of work engaging with all 28 of our businesses, both on the internal productivity-based applications around R&D, customer-for-the-life, customer support, go-to-market, admin, HR, finance, regulatory, et cetera. We're starting to see some early wins on productivity, like most are in code assistance, marketing content generation, things like that. We're cautiously optimistic about productivity enhancements.

Speaker Change: We continue to grind away at this so.

Speaker Change: We have done a lot of work on it.

Speaker Change: Gauging with all 28 of our businesses both on the internal productivity based.

Speaker Change: Applications around R&D customer for life customer support go to market admit HR finance regulatory et cetera, Cabo Cabo call at lunch with a large group of our leaders today on just that topic.

Speaker Change: We're starting to see some early wins on productivity like most of them most of our <unk> code assistance.

Speaker Change: Getting market marketing content generation and things like that so cautiously optimistic about productivity enhancements as it relates more directly to your question around.

Neil Hunn: As it relates more directly to your question around products and market monetization, this is going to be a slow and steady race about how you use these tools to create incremental value for our customers. Again, we compete on intimacy. That intimacy leads us to know very specific problems and very specific questions that need to be addressed.

Speaker Change: Our products in the market and monetization.

Speaker Change: So this is going to be.

The slow and steady rates, but how do you use these tools to create incremental value for our customers again, you know we compete on intimacy that intimacy.

Speaker Change: Leads us to know very specific problems in very specific questions that need to be addressed and we have new technology set to be able to do that.

Neil Hunn: We have a new technology set to be able to do that. Companies that have products in the market today using Generative AI are Adderant, Deltek, DAT, ConstructConnect, and Foundry, by our count, or maybe a few others. Two quarters ago, I think that the count was zero, and so we like the momentum in that regard. But in terms of monetization, it's still early days. Our belief, at least for the moment, is that we're monetizing the Generative AI investments by adding that tool set and capability to our existing products in unique ways, and then that is creating more value in the products, which is driving, in almost all cases, booking acceleration with those products, and in some cases, higher price points because of the value that's achieved through the tools. So, that's where I'd leave it. I'm happy to answer any follow-ups, or anything you want to add, Jason.

Speaker Change: Companies that have products in the market today using generally in our address Deltec DHT construct conducted foundry by our count there maybe a few others.

Speaker Change: Two quarters ago, I think that an account with zero and so we like the momentum.

Speaker Change: In that regard in terms of monetization.

Speaker Change: It's still early days, our belief at least for the moment at least we're monetizing the general investment.

Speaker Change: Investments by having by adding that did that tool set and capability to our existing products and unique ways.

Speaker Change: And then that is creating more value in the products, which is driving in almost all cases, the bookings acceleration with those products and in some cases higher price points because of the value.

Speaker Change: It's achieved through the tools, so that's where I believe it happy to answer any follow ups anything you want to add Jason.

Your next question comes from Terry Tillman with tourists Securities. Your line is now open.

Neil Hunn: Your next question comes from Terry Tillman with Truist Securities. Your line is now open.

Terrell Frederick Tillman: Yeah, hey Neil, Jason, and Zack, thanks for taking my question and then following up as well. Maybe just the first question, because it is the most recent addition to the portfolio, and I think you all highlighted the opportunity here maybe to, you know, continue buying high-quality assets but maybe even some better growth profiles, and good valuations. I'm curious, just an update on where you see kind of on a go-forward basis the ProCare Solutions revenue compounding growth rate, where you see that, and then, as you've had a little bit of time here, where do you see one of the most untapped growth engines for that? And then I had a quick follow-up for Jason. Thank you.

Terrell Frederick Tillman: Yeah, Hey, Neil Jason and Zach Thanks for taking my question and then follow up as well maybe just the first question because it is the most recent addition to the portfolio and I think you all called it the opportunity here maybe to.

Terrell Frederick Tillman: Continue buying high quality assets, but maybe even some better growth profiles at good valuations I'm curious just an update on where you see kind of on a go forward basis, the pro care solutions revenue.

Terrell Frederick Tillman: Compounded growth rate, where you see that and then as you've had a little bit of time here.

Terrell Frederick Tillman: Where do you see one of the most untapped growth engines for that and then I had a quick follow up for Jason. Thank you.

Neil Hunn: Yeah, so on ProCare when we announced the deal, we talked about how we believe this was going to be a mid-teens organic growth business. The market's growing 10% or a little north of that.

Speaker Change: Yes, so a broker when we announced the deal we talked about how we believe this is going to be at mid teens organic growth business. The market is growing 10% a little north of that.

Neil Hunn: ProPair is about one and a half times the relative market share, and so with that leadership position and market growth, ProCare has the right to win that, to gain, share, and grow above the market. In terms of, if your question, Terry, is, you know, bolt-on activity inside of ProCare, there's a couple areas that Janet and her team with the leadership team of ProCare are exploring where you tuck in a couple bolt-on type products to sell into the network. But I think at ProCare, the bolt-ons are going to be modest on a go-forward basis.

Speaker Change: Brokers about one five times relative market share.

Speaker Change: And so with that leadership position in the market growth.

Speaker Change: Great broker has the right to win that.

Speaker Change: Gain share and grow above market.

Speaker Change: Terms of your question Terry is bolt on activity inside approach here, there's a couple areas that Janet and her team with the leadership team of protests are exploring where he tuck in a couple of bolt on type products to sell into the network, but I think it broker the bolt ons are going to be modest.

Speaker Change: On a go forward basis.

Jason Conley: Got it. Okay. And then just a quick follow-up. I think it was five to 6% organic growth, and now you've just firmly set 6%. So that's good to see. Jason, if you had to think about like, what is the biggest driver, or maybe it's just a bunch of little things? What is the biggest swing factor in just tightening that and effectively raising the organic growth?

Speaker Change: Got it Okay, and then just a quick follow up.

Speaker Change: I think it was 5% to 6% organic growth and now you've just firmly set 6%. So that's good to see Jason If you had to think about like what is the biggest driver or maybe it's just a bunch of little things what is the biggest swing factor and just tightening that in.

Jason Conley: Yeah, I mean, obviously, we had a really great time.

Speaker Change: Effectively raising the organic.

Jason Conley: Yeah, I mean, obviously, we had a really strong Q1, so part of that's just carrying that through, and a lot of that was at TEP, and then we had, you know, some various, you know, small beads across software. So, I think it's mainly what we saw in Q1 and then just the confidence that, you know, we're going to be able to sort of maintain our prior guidance for the next couple Okay, thank you.

Jason: Yes, I mean, obviously, we had a really strong Q1. So part of that is just carrying that through in a lot of that was a tap and then we had.

Jason: Yes.

Jason: Some various small beats across software. So I think it's mainly what we signed in Q1 and then just the confidence that we're going to be able to sort of maintain our prior guidance for the for the out quarters.

Speaker Change: Okay. Thank you.

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

Speaker Change: Your next question comes from Joe G. R. Dino with kidney Cowen Your line is now open.

Speaker Change: Hey, guys good morning.

Joseph Craig Giordano: I'm just curious about jobs in the country, like you look at the job data, and they're pretty good, but there's generally been a erosion of white-collar type jobs replaced by like part-time blue-collar jobs. And I'm just curious, like, on a longer term, what are the implications on some of your, you know, software businesses that are more headcount driven?

Speaker Change: Hey, good morning.

Speaker Change: Just curious.

Speaker Change: <unk>.

Speaker Change: On the jobs in the country like you look at the jobs data in there pretty good but it has generally been like a erosion of white collar type jobs replaced by like part time Blue collar jobs and I'm just curious like on a longer term what are the implications on some of your software.

Speaker Change: Software businesses that are more head count driven is that trend I know you won't see it like immediately but is that.

Neil Hunn: Is that trend? I know you won't see it like immediately, but is that are you starting to see the implications of that on a like an outlook basis?

Speaker Change: Are you starting to see the implications of that on a on a like an outlook basis.

Neil Hunn: So, I would say no, but perhaps the reason is that very, there's some, but very little of our revenue is fee-based pricing. There's some, like I said, and where that exists, we're transitioning to a different metric. So, if you get more disruption within AI or the knowledge workers sort of get more productive, we certainly want to benefit from that and not be penalized by that. But it's not been something that's been brought up by any of our companies in any of our operating or strategies.

Speaker Change: So I would say no.

Speaker Change: But perhaps the reason is.

Speaker Change: Barry there is some but very little of our revenue is seat based pricing. There's some like I said and where that exists we're transitioning to a different metric. So as you get more.

Speaker Change: Disruption, which nai or the knowledge workers sort of getting more productive more productive we certainly want to benefit by that not be not be penalized by that but it has not been something that.

Speaker Change: It brought up by any of our companies in any of our operating or strategy reviews.

Neil Hunn: Interesting, okay. And then just to follow up on the AI discussion in terms of deployments and the products you're launching here, has that been like table stakes now, or is your competition doing the same, or do you feel like deploying these tools has been a differentiation for your businesses?

Speaker Change: Interesting, Okay, and then just to follow up on the AI discussion in terms of deployment.

Speaker Change: Deployments in the products you are launching here has that been like table Stakes now or is your competition doing the same or do you feel like deploying is these tools.

Speaker Change: Tools has been a differentiation for your businesses.

Neil Hunn: So far, it's been very differential. I think the expectation is that the competitors will have their response for sure. I would just double-click on that a bit, though, which is, you know, we tend to all across all 20 of our businesses, we operate these very small markets, and we are the largest player in the small market. So we have that advantage around scale in these small markets to be able to do more product development, do more research and development, do more, invest more, and go to market to get these tools there.

Speaker Change: So far it's been very differential.

Speaker Change: The expectation is the competitors will have will have their response for sure.

Speaker Change: I'll just.

Speaker Change: Double click on that a bit, though which is you know we tend we are ultra across all 20 of our businesses. We operate these very small markets.

Speaker Change: The largest player in the small market. So we have.

Speaker Change: That.

Speaker Change: <unk> advantage around scale in these small markets to be able to do more product development do more research and development do more invest more in go to market to get these tools there and so that is a long term advantage that we have and why we split the businesses, we do to be part of the portfolio.

Neil Hunn: And so that is a long-term advantage that we have and why we selected businesses we did to be part of the portfolio. The other thing is that when you compete on intimacy and with generative AI, you know, all these verticals that we have, we obviously have the knowledge, the content, and the data, and that's only half the question, half the problem. The other half of the problem, though, is we compete on intimacy, so we actually know what questions to ask. So we have the content, the data, and the questions, and now with generative AI, it's just another tool, a toolkit about how to solve those problems. So we like our long-term competitive position.

Speaker Change: The other thing is.

Speaker Change: When you compete on the intimacy with generative AI you know, we don't only verticals that we have we obviously have the knowledge and the content of the data and Thats only half the question. The other half the problem. The other half of the problem. Though is we are so we can feel this makes it makes so we actually know what questions to answer so we have the content.

Speaker Change: The data and the question and now with generative AI. It's just another tool the tool kit about how to solve those problems. So we like our our long term competitive positions.

Neil Hunn: Just on that, if I could just sneak in a follow-up on that, like, is this an area where, I know, generally, once you acquire a business, it kind of runs on its own, but is this an area where, like, the corporate can flex a little bit because these solutions tend to be expensive to deploy? So is this an area where, like, Roper Corporate could be like, all right, we are making a decision to kind of allocate capital to businesses that need this specifically outside of, you know, the natural free cash flow dynamics of that specific firm?

Speaker Change: Just on that if I could if I could just sneak in a follow up on that like is this an area I know generally once you acquire a business that kind of runs on its own but is this an area where like the corporate can flex a little bit because these solutions tend to be expensive to deploy so is this an area where like Roper corporate can go like all right. We are making a decision to kind of.

Speaker Change: Allocate capital to the businesses that need this specifically outside of the natural free cash flow dynamics of that specific firm.

Neil Hunn: So, the, um... These tools are not free, but they are substantially less expensive than these large language models that have to be developed, right? And so there's the research and development part of the application of the LLMs and what we're doing, and then there's the operational costs. You know, Jason did a teach-in a couple months ago about the ROI case studies and all of this stuff. So far, we've not seen an ROI case study that has been challenged in any meaningful way on this front.

Speaker Change: So the.

Speaker Change: So these tools are not free but they are substantially less expensive than these large language models that have to be developed and so there is the research and development part of the application of the alloy Enzo what we're doing and then theres the operational cost Jason did a teach in a couple of months ago about the ROI case studies on all of this stuff.

Speaker Change: So far we've not seen a ROI case study that's been challenged.

Neil Hunn: I'm sure that'll happen as you start to work down the curve of opportunities, but we're not, at the moment, we're not going to try to do a one-size-fits-all Roper generative AI solution because it would just not work because of the 28 different applications. Jason, anything you want to add? Yeah, no, that's right. I mean, though, you know, we do have benefits of scale.

Speaker Change: Any meaningful way on this round sure that'll happen as you start work down the curve of opportunities but.

Speaker Change: But we're not at the moment, we're not going to try to do a one size fits all brokerage iterative AI solution because it would just not work because of the 20 different applications. Jason anything you want to add yeah. No. That's right I mean, we do have benefits of scale with some of the agreements with our large cloud service providers. So that's that's been beneficial for companies to do.

Neil Hunn: Right. I mean, though, you know, we do have benefits of scale with some of the agreements with our large cloud service providers. So that's been beneficial for companies to do some experimentation at a very low cost. And then we're just allocating a lot of mind share towards that so we can collectively get better. But in terms of like, you know, allocating capital, that just hasn't been front and center. Now, if a company has a really compelling value proposition, we're always going to entertain that. But that's not what we're seeing today.

Some experimentation at a very low cost. So and then we're just allocating a lot of mind share towards that so we can collectively get better but in terms of like.

Jason: Allocating capital that just hasnt been a front and center now the company has a really compelling value proposition, we're always going to entertain that but that's.

Jason: That's not what we're seeing today.

Speaker Change: Alright, Thank you guys.

Speaker Change: Thank you.

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

Speaker Change: Your next question comes from Joe Ritchie with Goldman Sachs. Your line is now.

Joseph Alfred Ritchie: Morning. Morning. Hey.

Hey, guys good morning.

Joseph Alfred Ritchie: Good morning, Hey.

Joseph Alfred Ritchie: So, in your prepared comments, Neil, you referenced how some of your new SaaS-based offerings are helping certain businesses. I'm just curious, as you kind of take a look at the portfolio as a whole, like how far along are you in terms of rolling out additional new platforms and how much room is there to go from here? And if there are any examples that you want to highlight, that would be great throughout the portfolio. Yeah.

Joseph Alfred Ritchie: So in your prepared comments, Neil you reference to house some of your new SaaS based offerings, we're helping certain businesses I'm. Just curious as you kind of take a look at the portfolio as a whole like how far along are you in terms of rolling out.

Joseph Alfred Ritchie: There's no new platforms and how much how much room is there to go from here and if there are any examples that you want to highlight that that would be great across the portfolio.

Joseph Alfred Ritchie: Joe, I just want to make sure we understand and are answering the question you're asking, which is essentially how far along are we on our SAS journey and what that looks like.

Neil Hunn: Yes, I just wanted to make sure we understand and are answering the question. You're asking is is essentially how far along are we on our SaaS journey and what's that look like.

Speaker Change: Yeah, that's that's exactly right and then if there are examples across the portfolio, where you think you have it.

Joseph Alfred Ritchie: Yeah, that's exactly right. And if there are examples across the portfolio where you think you have, like, additional opportunity, I'd love to just hear about some of those examples.

Speaker Change: Additional opportunity I'd love to just hear about some of those examples.

Jason Conley: So Jason, why don't you take the first part; I'll take the second part.

So why don't you take the first part I'll take the second part, yes at the macro level or a little over $900 million of maintenance today maintenance revenue.

Jason Conley: Yeah, at the macro level, we're a little over 900 million dollars in maintenance today, maintenance revenue. And if you go back maybe the last five years, we've converted the base of maintenance, probably in the mid to high single digit area. So we still have a lot of room left, and we convert that maintenance revenue two to two and a half times when we go to SaaS. And so that's kind of where we're at today.

Speaker Change: If you go back maybe in the last five years, we've converted the base of maintenance probably like in the mid to high single digit area. So we still have a lot a lot of room left and we convert that maintenance revenue.

Speaker Change: Two to two five times when we go to SaaS and so that's kind of where we're at today and Theres a.

Jason Conley: And Neil can talk about the specific businesses. There are a handful of businesses that are transitioning. I'd say Adorant is one that's probably had the biggest migration over the last three or four years, which happened right at COVID. That was an industry that was reluctant to move to the cloud. And then all of a sudden, once a few firms went, they all went. So they're right in the thick of things in terms of that cloud migration. But Neil, do you want to talk about some other things?

Speaker Change: Neil can talk about the specific businesses theres a handful of businesses that are transitioning I'd say add renters one that's.

Neil Hunn: I, probably had the biggest migration over the last three or four years, which happened right at co. But you know that was an industry that.

Neil Hunn: Was reluctant to move to the cloud and then all of a sudden wants a few firms went they always though so they're right in the thick of things in terms of that cloud migration, but Neil you want to talk about some other should we do it so as Jason said I mean is this $900 million of on premise maintenance is concentrated.

Neil Hunn: So, as Jason said, this $900 million in on-premise maintenance is concentrated in a handful of businesses. The examples we give would start with Dell Tech. It's both on their cost point, which is their government contracting core product, and vantage point, which is their private sector, their engineering architecture product. You might have seen, for instance, on cost point this quarter, Dell Tech achieved FedRAMP moderate ready status. So, there is a requirement the government puts on for security.

Full of businesses. The examples we gave would start with Deltec.

Neil Hunn: It's both on the cost point, which is our government contracting core product and vantage point, which is their private sector their engineering.

Neil Hunn: Market texture.

Neil Hunn: Our products.

Neil Hunn: You might have seen for instance on cost point this quarter Deltec achieved fed ramp moderate ready status. So there is a requirement the government puts on for security its a meaningful.

Neil Hunn: It's a meaningful checkpoint for cost point in the cloud. Almost all the net new for the private sector part of Dell Tech's book is sole and vantage point, which is in the cloud. It's fast and able. Jason talked about Adderitt.

Neil Hunn: Checkpoint for the cost point and the cloud almost all net new for the private sector.

Neil Hunn: Part of Dell textbook as solar vantage point, which is in the cloud SaaS enabled Jason talked about 80% of all about our bookings today are in the cloud talked about power plan power plan.

Neil Hunn: Eighty-plus percent of all of Adderitt's bookings today are in the cloud. I talked about PowerPlan. PowerPlan has one of their – a handful of core applications. I would say their number two application is cloud-enabled and being deployed today. So, we're definitively rolling through that book and that product set and building it into this long-term SaaS business.

Neil Hunn: Has one of the handful of core applications I would say there are a number two application is cloud enabled and being deployed today. So we're definitively rolling through the book and that product set and building it into the slow long term SaaS.

Joseph Alfred Ritchie: Got it. That's super helpful. I'll just leave it there. Thank you.

Neil Hunn: Business.

Speaker Change: Got it.

Speaker Change: Helpful. I'll just leave it there thank you.

Speaker Change: Thanks.

Bradley Thomas Hewitt: Your next question comes from Brad Hewitt with Wolf Research. Your line is now open.

Speaker Change: Your next question comes from Brad Hewitt with Wolfe Research. Your line is now open.

Bradley Thomas Hewitt: Hi, good morning. Thanks for taking my question. Good morning, Brad.

Bradley Thomas Hewitt: Hi, good morning, Thanks for taking my questions.

Bradley Thomas Hewitt: Morning, Brett.

Bradley Thomas Hewitt: So you talked about the strength that pipeline in the quarter I saw you announced a new CFO for that business with a focus on driving the long term growth strategy. Just wondering if you could update us on kind of the normalized growth profile of that business and what you see as kind of the biggest opportunities to perhaps accelerating correct.

Neil Hunn: So you talked about the strength that I saw in the pipeline in the quarter. I saw you announce a new CFO for that business with a focus on kind of driving the long-term growth strategy. Just wondering if you could update us on kind of the normalized growth profile of that business, and what you see are kind of the biggest opportunities to perhaps accelerate growth in that business going forward.

Bradley Thomas Hewitt: That business going forward.

Neil Hunn: Yeah, I'll take the first part. I'll let Jason talk about the growth outlook. So, hey, it's not – I mean, we have a new president there, Pat O'Donnell. He just hired his new CFO, as you referenced. I really like the leadership mindset, the competitive orientation, the learning orientation, the building capability to be able to think long term and act short term that the new leader brings to iPipeline. His predecessor, Dean Price, who's been a long-term Roper leader, did a great job for a couple years setting that business up. Retention is super strong.

Yeah, I'll take the first part and I'll, let Jason talk about the growth outlook.

Jason: It's not too I mean, we have a new president there Pat O'donnell, you just hired a new CFO as you as you referenced.

Jason: Really like the leadership mindset, the competitive orientation, the learning orientation to building capability to be able to take long term in that short term debt.

Jason: New leader brings to our pipeline.

Jason: His predecessor, Dean price, you've been a long term Roper leader did a great job for a couple of years setting that setting that business up retention a super strong love sort of the market or is this company is really poised for market share gains its goods market focus the competitive environment. One is tilting our direction for sure the business has.

Jason Conley: Love sort of the market. This company is really poised for market share gains. It's good market focus. The competitive environment is tilting in our direction for sure. The business has network effects. So, really like the momentum and what we're poised to do in that business. And then, Jason, I'll let you take the growth question. Yeah, I mean, I think it's playing out as we thought it would when we acquired it back in the 2018, 2019 area. It's in the high single-digit plus range.

Jason: <unk> network effect, so really like the momentum.

Speaker Change: And then what we're poised to do in that business and then Jason I'll, let you take the great question, Yes, I mean, I think it's it's playing out as we as we thought it would when we acquired it back in.

Jason: 2018, 2019 area its in the high single digit plus range and maybe it will tell us a little higher down the road, but.

Jason Conley: And maybe it'll tilt a little higher down the road, but that's sort of where it's tracking. And Adam Boone was added to the team a month ago, and we're excited about him joining along with Pat. So, yeah, we're excited about the profits for iPipeline.

Jason: That's sort of where it's tracking just Adam Adam Boone was added to the team a month ago and we're excited about him joining along with Pat So.

Jason: We're excited about the prospects for our pipeline.

Jason: Okay.

Jason Conley: Okay, great. And then it looks like growth and network in Q1 were maybe a few points better than expected. Your guidance for the rest of the year kind of implies revenue flattish sequentially on an absolute basis. I would assume most of the businesses in that segment would see kind of modest sequential growth throughout the year. So just kind of trying to understand, you know, if there are any potential offsets that, you know, maybe if that's DAT. Any thoughts on, you know, kind of sequentials relative to Q1 levels and networks? Yeah, sure. So we talked a little bit about what I mean.

Speaker Change: Okay, Great and then it looks like Griffin network in Q1, with maybe a few points better than expected.

Speaker Change: <unk> for the rest of the year kind of implies revenue flattish sequentially on an absolute basis.

Speaker Change: I would assume most of the businesses in that segment would see kind of modest sequential growth throughout the year. So just kind of trying to understand.

Speaker Change: If there are any potential offsets that.

Speaker Change: Maybe if that's the key.

Speaker Change: Just any thoughts on kind of sequentially relative to Q1 levels and network.

Jason Conley: Yeah, sure. So we talked a little bit about MHA having a really strong quarter, and we think they're still, they're going to continue to grow this year, but Q1 was especially strong as they had a contract renegotiation. So we got a little bit of a bump in organic growth in the first quarter, and then, you know, EET and Link, they'll continue to be down, you know, this year. And so, you know, maybe a touch lower than Q1. So that's what's driving the sort of low single digits throughout the rest of the year.

Speaker Change: Yes, sure. So we talked a little bit about EMEA had a really strong quarter and we think theres still they're going to continue to grow this year, but Q1 was especially strong as they had a contract renegotiations, we got a little bit of a bump in organic growth in the first quarter and then.

Speaker Change: E T and link they'll continue to be down this year and so.

Speaker Change: Maybe.

Touch lower than Q1, so that's what's driving the sort of low single digits throughout the rest of the year.

Patrick Michael Baumann: Your next question comes from Patrick Bowman with J.P. Morgan. Your line is now.

Speaker Change: Great. Thanks, guys.

Speaker Change: Your next question comes from Patrick Baumann with Jpmorgan. Your line is now.

Patrick Michael Baumann: All right, good morning. Thanks for taking my questions. Excuse me.

Patrick Baumann: Alright, good morning.

Patrick Baumann: Thanks for taking my questions.

Patrick Baumann: Excuse me.

Patrick Michael Baumann: A lot of ground being covered, just a couple cleanups here. Sticking with the network software segment, it's seen really good margin expansion for a couple quarters now. Could you remind us what's driving that and if this 56, 57% is sustainable and could potentially move up further in coming quarters?

Patrick Baumann: A lot of ground and cover just a couple of cleanups here.

Patrick Baumann: Sticking with the network software segment.

Patrick Baumann: Really good margin expansion for a couple of quarters now just could you remind us what's driving that and if this.

Patrick Baumann: 50, 657% of sustainable and could potentially move up further in coming quarters.

Jason Conley: Yeah, so yeah, we touched on this last year, just, you know, DT getting ahead of where they saw the market was going and taking, you know, some of the fixed costs out of the business. And so we're just realizing that, you know, through the first three quarters of this year, we think, you know, the margins and that I don't think they're going to get any wider, you know, we're sort of in the 55-56 range, and we'll expect that to continue throughout the year.

Speaker Change: Yeah. So you know we touched on this.

Speaker Change: Last year, just D. D T getting ahead of where they saw the mark was going and taking some some of the fixed costs out of the business and so we're just realizing that.

Speaker Change: Through the first three quarters of this year, we think.

Speaker Change: The margins in that I don't think it's going to get is going to expand further.

Speaker Change: And the $55 56 range or should we expect that to continue throughout the year.

Patrick Michael Baumann: Okay, I got it. Thanks.

Speaker Change: Okay got it thanks and then.

Patrick Michael Baumann: And then, lastly, just the second quarter, any color you can give us on organic growth expectations? I know you gave it for 2Q to 4Q. Any difference between the second quarter and that 2Q to 4Q guide? And then also on free cash flow, typically lumpy, you know, from quarter to quarter. So wondering if you can give any kind of color on that relative to the first quarter.

Speaker Change: Lastly, just the second quarter any color you could give us on organic growth expectations.

Speaker Change: I know you gave it for <unk> any difference between second quarter and that <unk> Guide and then also on free cash flow are typically lumpy from quarter to quarter. So wondering if you give any kind of color on that relative to the first quarter.

Yes, I mean, I think the organic growth expectations are the same in the second quarter as they are for the year.

Jason Conley: Yeah, I mean, I think the organic growth expectations are the same in the second quarter as they are for the year. So, no real big swings there.

Speaker Change: So no real big swings there and then.

Jason Conley: And then, you know, cash flow in the second quarter, it's always the quarter that we make our federal tax payments. So it's always the lowest of the year. So that's the really the only dynamic I would point out there; if you look over prior years, that's always our low point, but we still expect it to grow, of course.

Speaker Change: Slow on the second quarter, it's always the quarter that we make two federal tax payments. So it's always the lowest of the year.

Speaker Change: So that's really the only dynamic that I would point out there if he lives over prior years, that's always our our low point, but still expect to grow of course.

Speaker Change: Okay, great. Thanks best of luck.

Patrick Michael Baumann: Okay, great. Thanks. Best of luck. Your next question comes from Alexander Blanton with Clear Harbor Asset Management.

Speaker Change: Thanks.

Speaker Change: Your next question comes from Alexander Blanton with clear Harbor asset management. Your line is now.

Alexander M. Blanton: Your line is now open. Hi, good morning. Morning. Morning.

Alexander M. Blanton: Hi, good morning.

Alexander M. Blanton: Good morning.

Alexander M. Blanton: I noticed that you're forecasting.

Alexander M. Blanton: Your next question comes from Alexander Blanton with Clear Harbor Asset Management. Your line is now open.

Alexander M. Blanton: Guiding to organic growth of 6% for the year correct.

Alexander M. Blanton: No, I mean, I think it all plays out, Alex, in our products, you know, segment, our tech segment over the first quarter, we just had a better compare and, and just the ramp that we had in Neptune last year, the comps sort of normalize out in the balance of the year. So it's, it's really just that it's no more complicated than that. And so that's why Q1 was and that's, you know, when we came into the year, that's what we had indicated that Q1 was going to be the kind of high mark in terms of organic unless unless things change in that, you know, in our assumptions.

Alexander M. Blanton: But had eight 8% in the first quarter.

Alexander M. Blanton: So are you factoring in some economic weakness.

Alexander M. Blanton: In the U S in that in that forecast.

Speaker Change: No I mean, I think it all plays out Alex in our in our products.

Speaker Change: Segment in our test segment over the first quarter, we just had a better compare in and.

Speaker Change: Just the ramp that we had in Neptune last year, it's sort of the comps sort of normalize out in the in the balance of the year. So it's Pete its really just that it's no more complicated than that.

And so that's why in Q1 and that's when we came into the year. That's what we had indicated that Q1 was going to be the kind of the high mark in terms of organic unless the unless things change in that.

Jason Conley: And I would just add, like Jason said, we... We assume that there is, you know, the freight conditions and whatnot, that that is muted. And we've assumed that all the way through; it's not a new assumption, but there is definitely back half macroeconomic weak impacts in that part of our business. That did not change, but it's embedded from our original, in which part of the business the transportation part, the DHC and load length inside a network, the freight matching list.

Speaker Change: Assumptions.

Speaker Change: And Alex It was they said we.

Speaker Change: We assume that there is the freight conditions and whatnot that is muted and we but we've assumed that all the way through the new assumption, but there is definitely back half macroeconomic week impact in that part of our business that that has not changed but its embedded from our original guidance.

Speaker Change: In which part of the business I missed that.

Speaker Change: Certainly.

Speaker Change: Transportation part D T and locally inside a network the freight matching business.

Neil Hunn: This concludes our question and answer session. We will now return to Zack Moxcey for any closing remarks. Thank you, everyone.

Speaker Change: Alright, thank you.

Speaker Change: Thanks.

Speaker Change: This concludes our question and answer session I will now return back to Zack Oxy for any closing remarks.

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

Unknown Attendee: Thank you everyone for joining us today, we look forward to speaking with you during our next earnings call.

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

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

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