Q2 2026 Roper Technologies Inc Earnings Call

July 23, 2026

Speaker #1: Good morning. The ROPER TECHNOLOGIES conference call will now begin. Today's call is being recorded. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing *0.

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

Speaker #1: I would now like to turn the call over to Zack Moxcey, Vice President, Investor Relations. Please go ahead.

Speaker #2: Good morning, and thank you all for joining us as we discuss the second quarter financial results for Roper Technologies. Joining me on the call this morning are Neal Hunn, President and Chief Executive Officer; Jason Conley, Executive Vice President and Chief Financial Officer; Brandon Cross, Vice President and Chief Accounting Officer; and Shannon O'Callaghan, Senior Vice President of Finance.

Zack Moxcey: Good morning, thank you all for joining us as we discuss the Q2 financial results for Roper Technologies. Joining me on the call this morning are Neil Hunn, President and Chief Executive Officer, Jason Conley, Executive Vice President and Chief Financial Officer, Brandon Cross, Vice President and Chief Accounting Officer, and Shannon O'Callaghan, Senior Vice President of Finance. Earlier this morning, we issued a press release announcing our financial results. The press release also includes replay information for today's call. We prepared slides to accompany today's call, which are available through the webcast and are also available on our website. If you'll please turn to page two. 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.

Speaker #2: Earlier this morning, we issued a press release announcing our financial results. The press release also includes replay information for today's call. We prepared slides to accompany today's call, which are available through the webcast and are also available on our website.

Speaker #2: Now, if you please turn to page 2. We begin with our safe harbor statement. During the course of today's call, we will make forward-looking statements, which are subject to risks and uncertainties as described on this page, in our press release, and in our SEC filings.

Speaker #2: You should listen to today's call in the context of that information. And now, please turn to page 3. Today, we will discuss our results primarily on an adjusted, non-GAAP basis.

Zack Moxcey: You should listen to today's call in the context of that information. Now please turn to page three. Today, we will discuss our results primarily on an adjusted non-GAAP basis. For the Q2, the difference between our GAAP results and adjusted results consists of the following items: amortization of acquisition-related intangible assets, financial impacts associated with our minority investment in Indicor, and lastly, cash collected on Outgo's beneficial interest, which is the residual amount owed to Outgo after it sells receivables to a third party and is classified within cash flows from investing activities. Reconciliations can be found in our press release and in the appendix of our presentation on our website. Now, if you please turn to page four, I'll hand the call over to Neil. After our prepared remarks, we will take questions from our telephone participants. Neil?

Speaker #2: For the second quarter, the difference between our GAAP results and adjusted results consists of the following items: amortization of acquisition-related intangible assets; financial impacts associated with our minority investment in IndiCor; and, lastly, cash collected on Outgo's beneficial interest, which is the residual amount owed to Outgo after it sells receivables to a third party, and is classified within cash flows from investing activities.

Speaker #2: Reconciliations can be found in our press release and in the appendix of our presentation on our website. And now, if you would please turn to page 4.

Speaker #2: I'll hand the call over to Neal. After our prepared remarks, we will take questions from our telephone participants. Neal?

Speaker #3: Thank you, Zack, and thanks to everyone for joining us this morning. You can see our agenda on page 4, so let's get right into it.

Neil Hunn: Thank you, Zack, and thanks to everyone for joining us this morning. You can see our agenda on page four, let's get right into it. Next slide, please. As we turn to page five, I want to highlight three takeaways for today's call. First, we delivered solid results and are raising our outlook for the year. Second, AI momentum continues to build across the enterprise at an accelerating pace. Third, we continue to execute our capital allocation opportunities with our long-standing discipline. Let me double-click each point. First, Q2 results were solid and ahead of expectations. Total revenue grew 9%, organic revenue grew 5%, EBITDA grew 5%, and free cash flow grew 11%. Importantly, enterprise gross retention remains strong, consistently in the mid-90s. On that foundation, enterprise software bookings remain solid with core bookings up mid-single digit plus on a TTM basis.

Speaker #3: Next slide, please. As we turn to page 5, I want to highlight three takeaways for today's call. First, we delivered solid results and are raising our outlook for the year.

Speaker #3: Second, AI momentum continues to build across the enterprise at an accelerating pace. And third, we continue to execute our capital allocation opportunities with our long-standing discipline.

Speaker #3: Let me double-click each point. First, second quarter's results were solid and ahead of expectations. Total revenue grew 9%, organic revenue grew 5%, EBITDA grew 5%, and free cash flow grew 11%.

Speaker #3: Importantly, enterprise gross retention remained strong, consistently in the mid-90s. On that foundation, enterprise software bookings remained solid, with core bookings up mid-single digits plus on a TTM basis.

Speaker #3: At a high level and across the portfolio, Dell Tech had an encouraging second quarter, but we're not ready to call a turn in the GovCon market.

Neil Hunn: At a high level and across the portfolio, Deltek had an encouraging Q2, but we're not ready to call a turn in the GovCon market. Relative to Neptune, they had better H1 performance than originally expected. Finally, at DAT, we're seeing improving freight market conditions for the first time in many years. On the back of this quarter's performance, we're raising our full year DEPS guidance for the 2nd time this year to a range of $22.15 to $22.30. That is up $0.30 at the midpoint and up $0.80 to our original guide in January. In addition, we're raising our full year revenue growth outlook, with total revenue now expected to be north of 8% and organic growth expected to be in the 6% range. Second, we continue to build momentum around AI and the automation of tasks and workflows within our end markets.

Speaker #3: Relative to Neptune, they had better first-half performance than originally expected. And finally, at DAT, we're seeing improving freight market conditions for the first time in many years.

Speaker #3: On the back of this quarter's performance, we're raising our full-year debts guidance for the second time this year, to a range of $2,215 to $2,230.

Speaker #3: That is up 30 cents at the midpoint and up 80 cents. Our original guide in January. In addition, we're raising our full-year revenue growth outlook, with total revenue now expected to be north of 8%, and organic growth expected to be in the 6% range.

Speaker #3: Second, we continue to build momentum around AI and the automation of tasks and workflows within our end markets. During the quarter, our product release cadence accelerated, and I'd like to highlight both the breadth of what we're doing and the vertical market depth of what each of our businesses is delivering on the AI and agentic product front.

Neil Hunn: During the quarter, our product release cadence accelerated, and I'd like to highlight both the breadth of what we're doing and the vertical market depth of what each of our businesses is delivering on the AI and agentic product front. Since we last spoke, Deltek released agentic capabilities across both its GovCon and private sector solutions, including RFP development and month-end financial close. Vertafore released its Velocity AI Platform with 6 agentic SKUs, which I'll get into more depth into later. Strata released in beta its AI-enabled financial decision intelligence product. Aderant shipped its 1st generation of agents across collections, billing, appeals, talent, and time capture. Procare shipped its 1st of many agentic features, RoomRunner, which helps daycare operators optimize enrollment strategies. CentralReach deployed its next generation of AI solutions focused on clinical documentation, quality, and audit readiness.

Speaker #3: Since we last spoke, Dell Tech released agentic capabilities across both its GovCon and private sector solutions, including RFP development and month-end financial close. VERIFOR released its AI velocity platform with six agentic SKUs, which I'll get into more depth into later.

Speaker #3: STRADA released in beta its AI-enabled financial decision intelligence product. ADERANT shipped its first-generation of agents across collections, billing appeals, talent, and time capture. PROCURE shipped its first of many agentic features RoomRunner, which helps daycare operators optimize enrollment strategies.

Speaker #3: CENTRALREACH deployed its next-generation of AI solutions focused on clinical documentation quality and audit readiness. DAT continued the evolution of its ML-based freight match automation capabilities, including its first proactive AI recommendation engine, which services load opportunities to carriers who have not otherwise come across them.

Neil Hunn: DAT continued the evolution of its ML-based freight match automation capabilities, including its 1st proactive AI recommendation engine, which services load opportunities to carriers who would have not otherwise come across them. SoftWriters, iTrade, Foundry, and ConstructConnect rounded out this Q's AI and agentic product releases. I know this was a long list, but that's precisely the point. We continue to see very positive signals from our businesses and their ability to build and ship agentic features and products. Our right to win is grounded in the same advantages that have always made our vertical software businesses strong: deep domain expertise, embedded customer workflows, unique data assets, high-trust customer relationships, and scale distribution. Product velocity is also increasing within our businesses. Each company develops AI capabilities close to their customers and their workflows. While our AI accelerator team further increases velocity and scales reusable patterns across the portfolio.

Speaker #3: And SOFTWRITERS, iTrade, Foundry, and Construct Connect rounded out this quarter's AI and agentic product releases. So I know this was a long list, but that's precisely the point.

Speaker #3: We continue to see very positive signals from our businesses and their ability to build and ship agentic features and products. Our right to win is grounded in the same advantages that have always made our vertical software businesses strong.

Speaker #3: Deep domain expertise, embedded customer workflows, unique data assets, high-trust customer relationships, and scaled distribution. Product velocity is also increasing within our businesses. Each company develops AI capabilities close to their customers and their workflows, while our AI accelerator team further increases velocity and scales resonant patterns across the portfolio.

Speaker #3: This model is working very well. Demand is strong, but these products are interactive, and in many cases, they change how customers do their work, so the pace of adoption is still developing.

Neil Hunn: This model is working very well. Demand is strong, but these products are interactive, and in many cases, they change how customers do their work, so the pace of adoption is still developing. What is powerful, though, is that these products will improve with use. As adoption expands, the products get better, knowledge graphs compound, and the value to customers increase. That creates a flywheel. More value drives more adoption, more adoption improves the product, and the cycle accelerates. While we're still early in the commercialization curve, we like the progress we're seeing. Third, we continue to execute with the same consistent, disciplined capital allocation approach that has defined Roper for years. During the Q, we repurchased another 3.6 million shares, and we expect to soon receive proceeds from Indicor divestment of its instrumentation businesses to AMETEK.

Speaker #3: What is powerful, though, is that these products will improve with use. As adoption expands, the products get better, knowledge graphs compound, and the value to customers increases.

Speaker #3: That creates a flywheel. More value drives more adoption, more adoption improves the product, and the cycle accelerates. So, while we're still early in the commercialization curve, we like the progress we're seeing.

Speaker #3: And third, we continue to execute with the same consistent disciplined capital allocation approach that has defined Roper for years. During the quarter, we repurchased another 3.6 million shares, and we expect to soon receive proceeds from the end-of-quarter divestment of its instrumentation businesses to AMETEK.

Speaker #3: So let me turn the call over to Jason so he can walk you through the details of both of these, as well as our financials and balance sheet position.

Neil Hunn: Let me turn the call over to Jason, so we can walk you through the details of both of these and our financials and balance sheet position. Jason?

Speaker #3: Jason?

Speaker #2: Thanks, Neal, and good morning, everyone. I'll first take you through our second quarter financial performance, beginning on slide 6. At a high level, this was a solid second quarter.

Jason Conley: Thanks, Neil, and good morning, everyone. I'll first take you through our Q2 financial performance beginning on slide 6. At a high level, this was a solid Q2. We finished above the high end of our DEPS guidance range and organic growth was slightly above expectations. Revenue of $2.1 billion was up 9%, with organic growth of 5% and acquisitions contributing 3 points. Organic recurring revenue across our software segments grew 7% in the quarter, consistent with our Q1 performance. Further, we expect organic recurring revenue growth to inflect higher as we move into the H2. EBITDA of $815 million, with EBITDA margin of 38.6%. Core EBITDA margin was down 70 basis points.

Speaker #2: We finished above the high end of our debts guidance range, and organic growth was slightly above expectations. Revenue of $2.1 billion was up 9%, with organic growth of 5% and acquisitions contributing 3 points.

Speaker #2: Organic recurring revenue across our software segments grew 7% in the quarter, consistent with our Q1 performance. Further, we expect organic recurring revenue growth to inflect higher as we move into the second half.

Speaker #2: EBITDA of $815 million was 815 million, with EBITDA margin of 38.6%. Core EBITDA margin was down 70 was mainly driven by lower margins in our TEP segment, given similar dynamics to Q1, which are we had higher input costs at Neptune, and a mix of more reoccurring consumables at NDI and Verithon.

Jason Conley: The reduction was mainly driven by lower margins in our TEP segment, given similar dynamics to Q1, which are: we had higher input costs at Neptune and a mix of more recurring consumables at NDI and Verathon. As we move into the H2, we expect margin improvement at Neptune and easy comparisons in the segment. Importantly, in the quarter, core margins across our software segments were down a modest 10 basis points, which includes investment in our AI team. Diluted earnings per share of $5.38 was above our guided range of $5.25 to $5.30 and up 10% over prior year. This outperformance was driven by the combination of solid organic growth and additional buyback activity, which generated $0.03 of accretion in the quarter relative to our guidance. Free cash flow was $447 million, up 11% over prior year.

Speaker #2: As we move into the second half, we expect margin improvement at Neptune and easier comparisons in the segment. Importantly, in the quarter, core margins across our software segments were down a modest 10 basis points.

Speaker #2: This includes investment in our AI team. Diluted earnings per share of $5.38 was above our guided range of $5.25 to $5.30, and up 10% over the prior year.

Speaker #2: This outperformance was driven by the combination of solid organic growth and additional buyback activity. Which generated 3 cents of accretion in the quarter, relative to our guidance.

Speaker #2: Free cash flow was $447 million, up 11% over prior year. On a trailing 12-month basis, free cash flow is now at $2.6 billion, and has compounded at 18% over the past three years, or 15% adjusted for Section 174.

Jason Conley: On a trailing 12-month basis, free cash flow is now at $2.6 billion and has compounded at 18% over the past 3 years, or 15% adjusted for Section 174. Growth in free cash flow coupled with share repurchase activity resulted in free cash flow per share growth of 19% in the quarter. If we turn with me to slide 7, I'll walk you through our financial position and capital deployment. We exited the Q2 at 3.4x net debt to EBITDA, up from 3.1x at the end of Q1, reflecting the capital deployed towards share repurchases in the quarter. We finished with $365 million of cash and $2.9 billion drawn on our $3.5 billion revolver. As Neil mentioned, during the quarter, we repurchased 3.6 million of shares for $1.2 billion at an average price of approximately $341 per share.

Speaker #2: So growth in free cash flow, coupled with share repurchase activity, resulted in free cash flow per share growth of 19% in the quarter. Now, if we turn to me with me to slide 7, I'll walk you through our financial position and capital employment.

Speaker #2: We exited the second quarter at 3.4 times net debt to EBITDA, up from 3.1 times at the end of Q1, reflecting the capital deployed toward share repurchases in the quarter.

Speaker #2: We finished with $365 million of cash and $2.9 billion drawn on our $3.5 billion revolver. As Neal mentioned, during the quarter we repurchased 3.6 million shares for $1.2 billion, at an average price of approximately $341 per share.

Speaker #2: That brings our cumulative repurchases to 9 million shares, spending $3.2 billion since this program began. Said differently, we have repurchased over 8% of our shares in eight months, which gets us back to our 2013 share count position.

Jason Conley: That brings our cumulative repurchases to 9 million shares, spending $3.2 billion since this program began. Said differently, we have repurchased over 8% of our shares in 8 months, which gets us back to our 2013 share count position. Also, Indicor announced an agreement to sell its instrumentation businesses to AMETEK, which is expected to close in H2 of this year. As a minority holder in Indicor, we expect gross proceeds of approximately $1.4 billion or an estimated $1.2 billion after tax, which further strengthens our balance sheet and deployment capacity. Of note, the flow control businesses remain in the Indicor portfolio and will provide additional liquidity following a competitive sale process, which is not yet factored into our capacity framework. With good visibility into forward free cash flow and the expected Indicor instrumentation proceeds, we retain more than $5 billion of annualized capacity for capital deployment.

Speaker #2: Also, End-of-Course announced an agreement to sell its instrumentation businesses to AMITEC, which is expected to close in the second half of this year. As a minority holder in End-of-Course, we expect gross proceeds of approximately $1.4 billion, or an estimated $1.2 billion after tax, which further strengthens our balance sheet and deployment capacity.

Speaker #2: Of note, the flow control businesses remain in the end-of-course portfolio, and will provide additional liquidity following a competitive sale process. Which is not yet factored into our capacity framework.

Speaker #2: With good visibility into forward free cash flow and the expected end-of-course instrumentation proceeds, we retain more than $5 billion of annualized capacity for capital deployment.

Speaker #2: We expect M&A activity to break loose later this year, and into 2027, and plans to prepare our balance sheet to take advantage of these opportunities.

Jason Conley: We expect M&A activity to break loose later this year and into 2027, and plan to prepare our balance sheet to take advantage of these opportunities. That said, we will remain patient and disciplined and deploy capital to the highest risk-adjusted return investments. With that, I'll turn it back over to Neil to discuss segment performance and our outlook. Neil?

Speaker #2: That said, we will remain patient and disciplined and deploy capital to the highest risk-adjusted return investments. With that, I'll turn it back over to Neal to discuss segment performance and our outlook.

Speaker #2: Neal?

Speaker #3: Thanks, Jason. As we turn to page 9, let's review our application software segment. Revenue grew 8% in total, with organic revenue growth of 5%, slightly better than our expectations.

Neil Hunn: Thanks, Jason. As we turn to page nine, let's review our Application Software segment. Revenue grew 8% in total, with organic revenue growth of 5%, slightly better than our expectations. EBITDA margins were 42.8%, and core margins declined 20 basis points year-over-year. Organic recurring and reoccurring revenue, which represents about 85% of the segment, continued to grow in the mid-single-digit plus range, while non-recurring revenue was down low single digits. Looking across the segment, a couple themes spike out. First, our SaaS transitions continue to advance meaningfully. Several of our larger businesses made real progress on ground to cloud conversions and on bringing new cloud-native products to the market. Over time, this should continue to be a positive trend for the segment. Second, as discussed earlier, AI momentum continues to build across the portfolio. Turning to the business highlights.

Speaker #3: EBITDA margins were 42.8%, and core margins declined 20 basis points year over year. Organic recurring and reoccurring revenue represented about 85% of the segment and continued to grow in the mid-single-digit plus range, while non-recurring revenue was down low single digits.

Speaker #3: Looking across the segment, a couple of themes spike out. First, our SaaS transitions continue to advance meaningfully. Several of our larger businesses made real progress on ground-to-cloud conversions, and I'm bringing new cloud-native products to the market.

Speaker #3: Over time, this should continue to be a positive trend for the segment. And second, as discussed earlier, AI momentum continues to build across the portfolio.

Speaker #3: Turning to the business highlights. Adirant was once again excellent in the quarter. The business continues to win in the market, drive accelerating adoption of its cloud offerings, and build momentum with its agentic AI solutions.

Neil Hunn: Aderant was once again excellent in the quarter. The business continues to win in the market, drive accelerating adoption of its cloud offerings, and build momentum with its agentic AI solutions. Deltek was solid in the quarter, driven by strength in its private sector solutions. GovCon was decent and we saw some encouraging signs. That said, it is still too early to call it a trend. Before upgrading our GovCon outlook, we'd like to see the sales pipeline convert consistently over the next few quarters. We do expect improvement over time, supported by the market tailwinds from the OBBB, but are not ready to call that inflection just yet. Vertafore delivered another solid quarter with continued ARR growth. More importantly, faster product delivery is turning its AI strategy into tangible customer solutions.

Speaker #3: Dell Tech was solid in the quarter, driven by strength in its private sector solutions. GovCon was decent, and we saw some encouraging signs. That said, it is still too early to call it a trend.

Speaker #3: Before upgrading our GovCon outlook, we'd like to see the sales pipeline convert consistently over the next few quarters. We do expect improvement over time, supported by the market tailwinds from the OBBB, but are not ready to call that inflection just yet.

Speaker #3: Vertifort delivered another solid quarter with continued ARR growth, more importantly, faster product delivery is turning its AI strategy into tangible customer solutions. Its agentic AI strategy targets five areas of insurance distribution: digital servicing, smart submissions, accounting automation, producer workflows, and business intelligence.

Neil Hunn: Its agentic AI strategy targets five areas of insurance distribution: digital servicing, smart submissions, accounting automation, producer workflows, and business intelligence. It starts with high volume, labor-intensive work where customer value is immediate, then expands into more complex, higher value workflows. VeloCity, Vertafore's purpose-built AI platform, enables rapid agent development directly within systems customers already use. Recently launched with six initial agentic SKUs, it establishes the foundation for continued innovation. Vertafore's high right to win comes from applications that define and run their customers' core workflows. Thousands of customer environments are configured around specific data, products, rules, permissions, and processes. This allows agents to operate inside live environments with unique customer-by-customer context to perform real work accurately and securely. Three products demonstrate the strategy's breadth and value. The reconciliation agent ingests carrier statements, matches transactions, and directs employees only to exceptions, reducing up to an hour of work to minutes.

Speaker #3: It starts with high-volume labor-intensive work where customer value is immediate, then expands into more complex, higher-value workflows. Velocity, Vertifort's purpose-built AI platform enables rapid agent development directly within systems, customers already use.

Speaker #3: Recently launched with six initial agentic SKUs, it establishes the foundation for continued innovation. Vertifort's high-rate-to-win comes from applications that define and run their customers' core workflows.

Speaker #3: Thousands of customer environments are configured around specific data, products, rules, permissions, and processes. This allows agents to operate inside live environments with unique customer-by-customer context to perform real work accurately and securely.

Speaker #3: Three products demonstrate the strategy's breadth and value. The reconciliation agent ingests carrier statements, matches transactions, and directs employees only to exceptions, reducing up to an hour of work to minutes.

Speaker #3: The submission processing agent converts unstructured emails and documents into underwriting-ready data, reducing processing time from roughly an hour to about two minutes. The portal launcher agent converts static PDF applications into digital submission experiences, enabling MGAs to launch new programs dramatically faster, and compete more effectively.

Neil Hunn: The submission processing agent converts unstructured emails and documents into underwriting-ready data, reducing processing time from roughly an hour to about two minutes. The portal launcher agent converts static PDF applications into digital submission experiences, enabling MGAs to launch new programs dramatically faster and compete more effectively. These are not features that merely make work faster. They automate meaningful portions of the workflow, improving speed and accuracy, increasing capacity, enabling growth without proportional headcount. That deepens Vertafore's customer value and expands its opportunity beyond software spend into the much larger pool of labor spend. Alumia delivered a strong Q2 with revenue ahead of expectations as it wins share and cross-sells into the combined Seaboard and Transact customer base. Strata also performed well with its AI strategy accelerating faster than anticipated. Procare remains a work in progress.

Speaker #3: These are not features that merely make work faster. They automate meaningful portions of the workflow, improving speed and accuracy, increasing capacity, and enabling growth without proportional headcount.

Speaker #3: That deepens Vertifort's customer value and expands its opportunity beyond software spend into the much larger pool of labor spend. Illumia delivered a strong second quarter, with revenue ahead of expectations, as it wins share and cross-sells into the combined Seaboard and Transact customer base.

Speaker #3: Strata also performed well, with its AI strategy accelerating faster than anticipated. Procare remains a work in progress. The team is advancing a broader product strategy, with Room Runner released, strong early usage, and more innovation in the pipeline.

Neil Hunn: The team is advancing a broader product strategy with RoomRunner released, strong early usage, and more innovation in the pipeline. At the same time, Joe and the team are shoring up the core product, go-to-market execution, and implementation capability. Finally, Sensoreach continues to execute at a high level, delivering very strong growth and meaningful margin improvement. As a reminder, Sensoreach turns organic next quarter, and after one year, the business is ahead of our deal model. As we turn to our outlook for Application Software, we expect organic growth for H2 of the year to be the mid-single digit plus range. Please turn us to page 10. Total revenue in our Network Software segment grew 12%, and organic revenue grew 4% in the quarter. Organic recurring growth was strong, growing high singles, but it's offset by weaker reoccurring and non-recurring revenue at MHA and iPipeline's.

Speaker #3: At the same time, Joe and the team are shoring up the core product, go-to-market execution, and implementation capability. And finally, Centries continues to execute at a high level, delivering very strong growth and meaningful margin improvement.

Speaker #3: As a reminder, Century turns organic next quarter, and after one year, the business is ahead of our deal model. As we return to our outlook for application software, we expect organic growth for the second half of the year to meet the mid-single-digit plus range.

Speaker #3: Please turn to page 10. Total revenue at our Network Software segment grew 12%, and organic revenue grew 4% in the quarter. Organic recurring growth was strong, growing in the high single digits, but this was offset by weaker reoccurring and non-recurring revenue at MHA and iPipeline.

Speaker #3: EBITDA margins were 50.9%, down 370 basis points year over year, while core margins improved slightly, up 30 basis points. The gap reflects two dynamics.

Neil Hunn: EBITDA margins were 50.9%, down 370 basis points year-over-year, while core margins improved slightly, up 30 basis points. The gap reflects two dynamics, the acquisition of Subsplash, a faster growth business with a lower but steadily improving margin profile, and our ongoing investment at DAT, particularly Convoy. Turning to the business level highlights. DAT grew nicely in the quarter and continues to execute at high fidelity. We're also seeing encouraging growth in our digital freight marketplace solutions with increasing adoption and engagement. Broader market indicators are improving as well. Carrier additions have increased steadily throughout the year, spot pricing is strengthening relative to contract rates, and carrier rejection rates are rising. We still need to see load volumes improve before becoming fully bullish on the recovery. The 2026 benefit is tracking modestly ahead of our prior expectations, and the indicators remain encouraging as we look towards 2027.

Speaker #3: The acquisition of Subsplash, a faster-growth business with a lower but steadily improving margin profile, and our ongoing investment at DAT, particularly Convoy. Turning to the business-level highlights.

Speaker #3: DAT grew nicely in the quarter and continues to execute at high fidelity. We're also seeing encouraging growth in our digital freight marketplace solutions, with increasing adoption and engagement.

Speaker #3: Broader market indicators are improving as well. Carrier additions have increased steadily throughout the year, spot pricing is strengthening relative to contract rates, and carrier rejection rates are rising.

Speaker #3: We still need to see load volumes improve before becoming fully bullish on the recovery. The 2026 benefit is tracking modestly ahead of our prior expectations, and the indicators remain encouraging as we look towards 2027.

Speaker #3: ConstructionNet had another solid quarter, with continued growth of its AI-based takeoff solution. The business is expanding AI deeper into the pre-construction workflow, helping customers reduce manual effort, move faster through project documents, and improve decision speed.

Neil Hunn: ConstructConnect had another solid quarter with continued growth of its AI-based AI Takeoffs solution. The business is expanding AI deeper into pre-construction workflow, helping customers reduce manual effort, move faster through project documents, and improve decision speed. Foundry continued to deliver year-over-year ARR growth with meaningful AI innovation across SmartRoto and GripTape. SmartRoto automates a historically manual part of the visual effects workflow, while GripTape extends Foundry's position in AI orchestration across production and post-production environments. Subsplash delivered another strong quarter with double-digit software growth, even faster payments growth, and meaningful margin expansion. The business also continued to extend AI across its church engagement and giving platform, taking its AI assistant live to all customers. Finally, I joined our SoftWriters team, which provides the core operating system for long-term care pharmacies for a site visit at LI Script Pharmacy.

Speaker #3: Boundary continued to deliver year-over-year ARR growth, with meaningful AI innovation across Smart Roto and Grip Tape. Smart Roto automates a historically manual part of the visual effects workflow, while Grip Tape extends Foundry's position in AI orchestration across production and post-production environments.

Speaker #3: Subsplash delivered another strong quarter with double-digit software growth, even faster payments growth, and meaningful margin expansion. The business also continued to extend AI across its church engagement and giving platform, taking its AI assistant live to all customers.

Speaker #3: Finally, I joined our SoftWriters team, which provides the core operating system for long-term care pharmacies, for a site visit at Ally Script Pharmacy.

Speaker #3: I spent time understanding Ally Script's strategic and operational priorities, and where soft writers can help accelerate the business. Ally Script serves more than 32,000 beds across 150 facilities, so small workflow improvements create significant value.

Neil Hunn: I spent time understanding LI Script's strategic and operational priorities and where SoftWriters can help accelerate the business. LI Script serves more than 32,000 beds across 150 facilities, so small workflow improvements create significant value. I sat alongside pharmacists processing prescription orders with and without SoftWriters' AI-powered order entry and review solution. Without automation, a new order can require up to 90 seconds of manual entry and review. Our solution reads the prescription, populates information in the existing workflow, and lets the pharmacist focus on validation rather than transcription. Processing time falls to about 18 seconds per order, an 80% reduction. The benefit extends beyond lower labor costs. It gives pharmacists and technicians more capacity for quality assurance, clinical review, answering nurses' questions, supporting customers, and absorbing volume without proportional headcount. That means better patient care, better customer service, and a more scalable path to growth.

Speaker #3: I sat alongside pharmacists, processing prescription orders with and without SoftWriters' AI-powered order entry and review solution. Without automation, a new order can require up to 90 seconds of manual entry and review.

Speaker #3: Our solution reads the prescription, populates information in the existing workflow, and lets the pharmacist focus on validation rather than transcription. Processing time falls to about 18 seconds per order, and there's an 80% reduction.

Speaker #3: The benefit extends beyond lower labor costs. It gives pharmacists and technicians more capacity for quality assurance, clinical review, answering nurses' questions, supporting customers, and absorbing volume without proportional headcount.

Speaker #3: That means better patient care, better customer service, and a more scalable path to growth. Equally important, the automation is delivered in context at the precise point of work, with extremely low latency.

Neil Hunn: Equally important, the automation is delivered in context at the precise point of work with extremely low latency. SoftWriters derive proprietary data, domain-specific models, dense workflow integration, customer trust, and distribution were evident. It showed how our vertical market moats enable differentiated AI that automates meaningful customer work. Order entry is just the beginning of SoftWriters' workflow automation opportunity. Finally, the monetization model is also attractive and in addition to the existing software spend. SoftWriters prices the solution transactionally, directly aligning revenue with orders automated and labor savings delivered. Customers achieve a clear return while SoftWriters participates in the value created with revenue scaling as adoption and transaction volumes grow. Thank you to the LI Script team for hosting me and for the partnership. Now let me turn to our outlook for network software.

Speaker #3: Soft writers derive proprietary data, domain-specific models, dense workflow integration, customer trust, and distribution where evident. It showed how our vertical market modes enable differentiated AI that automates meaningful customer work.

Speaker #3: Order entry is just the beginning of soft writers' workflow automation opportunity. Finally, the monetization model is also attractive and an addition to the existing software spend.

Speaker #3: Soft writers prices the solution transactionally, directly aligning revenue with orders automated and labor savings delivered. Customers achieve a clear return while soft writers participate in the value created with revenue scaling as adoption and transaction volumes grow.

Speaker #3: Thank you to the Ally Script team for hosting me and for the partnership. Now let me turn to our outlook for network software. We expect organic growth for the second half of the year to increase versus the first half, and be in the mid-single digit plus range.

Neil Hunn: We expect organic growth for the H2 of the year to increase versus the H1 and be in the mid-single digit plus range. Now, please turn to page 11, and let's review our TEP segment. Revenue and organic revenues grew 7%. Results were better than anticipated at Neptune, NDI, and Verathon. EBITDA margins were 34.5%, down 220 basis points year-over-year, reflecting the same dynamics discussed last quarter. Input cost pressure at Neptune, principally bronze ingot inflation, and a mix shift at both NDI and Verathon towards faster-growing consumables, which carry lower gross margins, though notably more durable and reoccurring revenue profiles. Starting with NDI, the business had another very strong quarter, driven by sustained demand for its electromagnetic tracking solutions across cardiac, neurological, and orthopedic applications.

Speaker #3: Now please turn to page 11, and let's review our depth segment. Total revenue and organic revenues grew 7%. Results were better than anticipated at Neptune, NDI, and Verithon.

Speaker #3: EBITDA margins were 34.5%, down 220 basis points year over year, reflecting the same dynamics discussed last quarter. Input cost pressure at Neptune, principally bronze ingot inflation, and a mix shift at both NDI and Verithon towards faster-growing consumables, which carry lower gross margins, though notably more durable and recurring revenue profiles.

Speaker #3: Starting with NDI, the business had another very strong quarter, driven by sustained demand for its electromagnetic tracking solutions across cardiac, neurological, and orthopedic applications.

Speaker #3: EP remains a compelling multi-year growth opportunity, with procedure volumes increasing, leading OEMs launching new tracking-enabled catheter platforms, and NDI uniquely positioned at the sensor layer.

Neil Hunn: EP remains a compelling multiyear growth opportunity, with procedure volumes increasing, leading OEMs launching new tracking-enabled catheter platforms, and NDI uniquely positioned at the sensor layer. Neptune had an encouraging quarter. Revenue declined modestly year-over-year, came in ahead of our expectations as strong mechanical meter volumes and continued growth at Muni-Link helped offset the anticipated decline in market unit volumes. Muni-Link also continues to strengthen Neptune's position across the broader meter-to-cash workflow through its cloud-based utility billing and customer communication capabilities. Finally, the metering business remains on track to return to growth in the H2. Verathon delivered solid growth driven by strong demand for BFlex and GlideScope single-use offerings. We're also encouraged by the launch of the CFlex single-use cystoscope and BFlex specimen collection system, which further expands Verathon's single-use portfolio.

Speaker #3: Neptune had an encouraging quarter. Revenue declined modestly year over year, but came in ahead of our expectations, as strong mechanical meter volumes and continued growth at Munilink helped offset the anticipated decline in market unit volumes.

Speaker #3: Munilink also continues to strengthen Neptune's position across the broader meter-to-cash workflow through its cloud-based utility billing and customer communication capabilities. Finally, the metering business remains on track to return to growth in the second half.

Speaker #3: Verithon delivered solid growth given driven by strong demand for B-Flex and GlideScope single-use offerings. We're also encouraged by the launch of the C-Flex single-use cystoscope and B-Flex specimen collection system, which further expands Verithon's single-use portfolio.

Speaker #3: Finally, I want to recognize the teams at SIVCO, FMI, and IPA for their excellent work in the second quarter. Each team executed well, and contributed to the segment's performance.

Neil Hunn: Finally, I want to recognize the teams at CIVCO, FMI, and IPA for their excellent work in the Q2. Each team executed well and contributed to the segment's performance. Turning to our TEP outlook, we expect organic growth for the H2 of the year to be in the high singles range and be a bit stronger in Q3. With that, please turn us to page 13. On this page, let's walk through our increased full-year revenue and DEPS guidance, as well as our Q3 outlook. For the full year, we're raising adjusted DEPS guidance to a range of $22.15 to $22.30. That represents a $0.30 increase in the midpoint from our prior guide and an $0.80 increase from our original guide. We're also increasing our full-year total revenue growth guidance to north of 8%, with organic revenue growth expected to be in the 6% area.

Speaker #3: Turning to our depth outlook, we expect organic growth for the second half of the year to be in the high singles range, and to be a bit stronger in Q3.

Speaker #3: With that, please turn to page 13. On this page, let's walk through our increased full-year revenue and debt guidance, as well as our Q3 outlook.

Speaker #3: For the full year, we're raising adjusted depth guidance to a range of $2,215 to $2,230. That represents a 30-cent increase in the midpoint from our prior guide, and an 80-cent increase from our original guide.

Speaker #3: We're also increasing our full-year total revenue growth guidance to north of 8%, with organic revenue growth expected to be in the 6% area. Please note this guidance outlook excludes any proceeds from end-of-course to vessature of its instrumentation businesses.

Neil Hunn: Please note, this guidance outlook excludes any proceeds from Indicor's divestiture of its instrumentation businesses. For the H2 of the year, we expect a tax rate in the 21% area. To reiterate a few key assumptions from our segment commentary, there are some encouraging signs of stabilization at Deltek, not enough yet to change our outlook. DAT's freight market is improving, we now expect a modest benefit in 2026, with the setup becoming increasingly encouraging for 2027, Neptune's H1 performance was stronger than we modeled, contributing to our H1 beat. For Q3, we're establishing adjusted DEPS guidance of $5.75 to $5.80. Now, please turn with us to page 14, we'll open it up for your questions. We'll conclude with the same three points with which we started. First, we delivered solid Q2 results and are raising our outlook for the year.

Speaker #3: For the back half of the year, we expect a tax rate in the 21% area. To reiterate, a few key assumptions from our segment commentary: there is some encouraging signs of stabilization at Dell Tech, but not enough yet to change our outlook.

Speaker #3: DAT's freight market is improving, and we now expect a modest benefit in '26, with the setup becoming increasingly encouraging for '27. And Neptune's first-half performance was stronger than we modeled, contributing to our first-half beat.

Speaker #3: For Q3, we're establishing adjusted depth guidance of 575 to 580. Now please turn us to page 14, and we'll open it up for your questions.

Speaker #3: We'll conclude with the same three points with which we started. First, we delivered solid second quarter results and are raising our outlook for the year.

Speaker #3: Retention remains strong, and based on our year-to-date performance, we're raising full-year depth guidance for the second time this year. We're also raising our full-year revenue growth outlook, both for total and organic revenue.

Neil Hunn: Retention remains strong, based on our year-to-date performance, we're raising full-year DEPS guidance for the second time this year. We're also raising our full-year revenue growth outlook, both for total and organic revenue. Second, AI momentum continues to accelerate across the enterprise. Our product release cadence accelerated meaningfully in the quarter, our businesses are shipping agentic and AI-enabled capabilities into high-value vertical workflows. Though it's still early, we will continue learning through the H2 of the year, the signals are very positive. We have the vertical market knowledge, deeply embedded workflows, unique data advantages, high-trust customer relationships, and scale distribution to win in the AI era. Finally, our capital allocation framework remains unchanged. We'll deploy capital wherever we see the greatest opportunity for durable, long-term cash flow per share compounding, whether through acquisitions or opportunistic share repurchases.

Speaker #3: Second, AI momentum continues to accelerate across the enterprise. Our product release cadence accelerated meaningfully in the quarter, and our businesses are shipping agentic and AI-enabled capabilities into high-value vertical workflows.

Speaker #3: Though it's still early, and we will continue learning through the back half of the year, the signals are very positive. We have the vertical market knowledge, deeply embedded workflows, unique data advantages, high-trust customer relationships, and scaled distribution to win in the AI era.

Speaker #3: Finally, our capital allocation framework remains unchanged, with deployed capital wherever we see the greatest opportunity for durable, long-term cash-flow per share compounding, whether through acquisitions, or opportunistic share repurchases.

Speaker #3: Over the last eight months, that discipline led us to repurchase approximately $3.2 billion of equity, roughly 9 million shares, or a bit more than 8% of shares outstanding, returning our share count to 2013 levels.

Neil Hunn: Over the last 8 months, that discipline led us to repurchase approximately $3.2 billion of equity, roughly 9 million shares, or a bit more than 8% of shares outstanding, returning our share count to 2013 levels. We are very pleased by that outcome. Looking ahead, we believe M&A is likely to offer the more attractive long-term compounding opportunity, provided assets meet our strategic and our risk-adjusted financial criteria. We expect the M&A market to improve over the coming quarters and are cautiously optimistic about deploying $5 billion or more towards acquisitions over the next 12 to 18 months. Given this expected improvement, with leverage currently around 3.4x, near-term capital deployment will favor de-leveraging over opportunistic buybacks. We expect to de-lever quickly through strong H2 cash flow and the Endocore proceeds, rebuilding capacity to pursue high-quality acquisition candidates.

Speaker #3: And we're very pleased with that outcome. Looking ahead, we believe M&A is likely to offer a more attractive long-term compounding opportunity, provided assets meet our strategic and risk-adjusted financial criteria.

Speaker #3: We expect the M&A market to improve over the coming quarters, and are cautiously optimistic about deploying $5 billion or more toward acquisitions over the next 12 to 18 months.

Speaker #3: Given this expected improvement, and with leverage currently around 3.4 times, near-term capital deployment will favor deleveraging over opportunistic buybacks. We expect to delever quickly through strong second-half cash flow and the end-of-course proceeds, rebuilding capacity to pursue high-quality acquisition candidates.

Speaker #3: So in closing, the ingredients for accelerating cash flow per share compounding are most important financial metric continue to strengthen. Our portfolio is the strongest it has ever been, organizational velocity is increasing, AI is expanding our addressable markets, and we expect our product innovation to translate into higher growth over time.

Neil Hunn: In closing, the ingredients for accelerating cash flow per share compounding, our most important financial metric, continue to strengthen. Our portfolio is the strongest it has ever been. Organizational velocity is increasing. AI is expanding our addressable markets, we expect our product innovation to translate into higher growth over time. Our capital deployment capacity and flexibility remain significant differentiators, most importantly, our discipline is unchanged. With that, we will open up to your questions.

Speaker #3: Our capital deployment capacity and flexibility remain significant differentiators, and, most importantly, our discipline is unchanged. So with that, we'll open it up to your questions.

Speaker #1: We will now move to our question-and-answer session. 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 star, followed by the digit 1, on your touch-tone telephone.

Operator: We will now go to our question and answer session. 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 star, followed by the digit one on your touchtone telephone. If you are using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star, then the digit two. Again, we request that callers limit their question to one main question and one follow-up. Your first question comes from Deane Dray with RBC. Your line is now open.

Speaker #1: If you are using a speakerphone, please pick up your handset before pressing any keys. To address your question, please press star, then the digit 2.

Speaker #1: Again, we request that callers limit their questions to one main question and one follow-up. Your first question comes from Dean Dray with RBC. Your line is now open.

Speaker #2: Thank you. Good morning, everyone, and congrats on all the AI SKU launches.

Deane Dray: Thank you. Good morning, everyone, congrats on all the AI SKU launches.

Speaker #3: Thank you, Dean. Hey, before you answer your question, I just want to jump in and say a couple of things, if that's okay with you personally.

Neil Hunn: Thank you, Deane. Hey, before you answer your question, I just want to jump in and just say a couple things, if it is okay, to you personally. Congrats on just a great career, and also congrats on stepping away from the day-to-day. I have come to know you, we have come to know you for the better part of the last 15 years, lots of conversations, several road shows. I think the thing that I take away the most from that, and respect the most is the way you have done your job. You are always fair, objective, principled, including the moments when we did not see things the same way. That is pretty amazing. Congrats on that. Also appreciate you introducing me to a few leaders who become friends that I can call friends now.

Speaker #3: Congrats on just a great career and also congrats on stepping away from the day-to-day I've come to know you. We've come to know you for the better part of the last 15 years, lots of conversations, several roadshows, and I think the thing that I take away the most from that, in respect the most, is the way you've done your job.

Speaker #3: You're always fair, objective, and principled, even in the moments when we didn't see things the same way. So it's pretty amazing—congrats on that. I also appreciate you introducing me to a few leaders who have become friends, that I can now call friends.

Speaker #3: Great congrats on a great career and especially congrats on retirement, and I hope you get plenty of time with that family, especially those grandkids.

Neil Hunn: Congrats on a great career. Especially congrats on retirement, and I hope you get plenty of time with that family, especially those grandkids.

Speaker #2: Oh my gosh. Thank you so much for all those kind words. It's really been my privilege to follow ROPER over the years, and yes, going back to the hallowed days of Brian Jellison.

Deane Dray: Oh my gosh. Thank you so much for all those kind words. It is really been my privilege to follow Roper over the years, and yes, going back to the hallowed days of Brian Jellison. I really appreciate all the help, Neil, you and the team have given me, all the insight. I have got a ton of respect for you all, I wish you continued success.

Speaker #2: So I really appreciate all the help Neil, you, and the team have given me, and all the insight. I've got a ton of respect for you all, and I wish you continued success.

Speaker #3: Thank you so much. All right. Let's get to your question. So congrats.

Neil Hunn: Thank you so much. All right. Let us get to your question. Congrats.

Speaker #2: Geez. I don't know how I pivot to buybacks, but I'm going to. Hey, just the idea here, this is now the second quarter of some sizable buybacks, and I'd really be interested in hearing how you look at buybacks on a capital allocation versus a CRI, a creative deal equivalent.

Deane Dray: Geez, I don't know how I pivot to buybacks, I'm going to. Just the idea here, this is now the Q2 of some sizable buybacks, I'd really be interested in hearing how you look at buybacks on a capital allocation versus a CRI, accretive deal equivalent, what that would need to look like. I think the key here is on a risk-adjusted basis. If you could just share that insight, that'd be great.

Speaker #2: What that would need to look like. And I think the key here is on a risk-adjusted basis. But if you could just share that insight, that'd be great.

Speaker #3: That's right. Happy to do it. So, we always, first of all, look at what we believe will be the best way to compound our cash flow per share over a longer arc.

Neil Hunn: That's right. Happy to do it. We always, first of all, look at what we believe will be the best way to compound our cash flow per share over a longer arc, think a five- to seven-year period of time. We've always looked at it this way. Until the last eight months, the capital allocation mathematically always favored M&A. When you look at the returns, both a time zero return, a time five return, whether it's a year five EBITDA or a year five ROIC, to M&A. Obviously with the last 12 months or so, 12 to 18 months with the current share price level of Roper in the broader software sector, all of a sudden buybacks became significantly more attractive. Now, looking forward, we expect the private values to mirror those or come down to the public values.

Speaker #3: Think of a 5- to 7-year period of time. We've always looked at it this way. Until the last eight months, the capital allocation mathematically always favored M&A.

Speaker #3: When you look at the returns, both the time-zero return and time-five return, whether it's a year-five EBITDA or year-five ROIC, to M&A, but obviously with the last 12 months or so, 12 to 18 months with the current share price level of ROPER and the broader software sector, all of a sudden buybacks became significantly more attractive.

Speaker #3: Now, looking forward, we expect the private values to mirror those or come down to the public values. We're starting to see some very early signs of that. As we all know, public values are ultimately the gravitational force for all private companies.

Neil Hunn: We're starting to see some very early signs of that. As we all know, public values are ultimately the gravitational force for all private companies. When that happens, then the math turns quite interesting, quite accretive, quite more attractive towards M&A versus buyback. We'll always sort of judge those two between what's best for the long-term cash flow per share compounding.

Speaker #3: And when that happens, then the math turns quite interesting, quite a creative quite more attractive towards M&A versus buyback. And so we'll always sort of judge those two between what's best for the long-term cash flow per share compounding.

Speaker #2: That's really helpful. And could you just expand on the comment about the pipeline? I think the term was "breaking loose"—just the expectation on deal flow over the near term.

Deane Dray: That's really helpful. Could you just expand on the comment about the pipeline? I think the term was breaking loose. Just the expectation on deal flow over the near term.

Speaker #3: Yeah. I should also say, just on the last question, we always look at the buyback of our own stock versus an acquisition with a risk premium.

Neil Hunn: Yeah. I should also say, on the last question, we always look at the buyback of our own stock versus an acquisition with a risk premium. We obviously know ourselves better than anything we could know externally, so we have to sort of be compensated through returns on that. We obviously look at that, we just round out that answer. I forgot your second question already.

Speaker #3: We always, obviously, know ourselves better than anything we could know externally. So we have to be compensated through returns on that, and so we look at it that way.

Speaker #3: We just sort of round out that answer. On the and now I forgot your second question already, so. Oh, the pipeline. Sorry. Yeah. So the what I would say there is, Janet and her team are having they always have they always have a lot of dialog.

Jason Conley: Pipeline.

Neil Hunn: Oh, the pipeline. Sorry. Yeah. What I would say there is Janet and her team, they always have a lot of dialogue. The dialogue's turned decidedly more constructive over the last couple months-ish in terms of the sponsors sort of understanding the valuation landscape. They've had three or four years of DPI pressure. Private credit pressure doesn't help their situation with the public values have been here for, like I said, the better part of 9 to 12 months, sort of a bounce back. Their hope of a bounce back, a near-term bounce back is likely not going to happen. Sponsors just coming to grips, The new 15 is yesterday's 25, or whatever the quote is from a couple of sponsors that we've talked to privately. A lot of proprietary opportunities right now.

Speaker #3: The dialog's turned decidedly more constructive over the last couple months or so, in terms of the sponsors sort of understanding the valuation landscape. They've had three or four years of DPI pressure—private credit sort of pressure doesn't help their situation.

Speaker #3: We've the public values have been here for, like I said, the better part of 9 to 12 months, sort of a bounce-back. So their hope of a bounce-back is near-term bounce-back is likely not going to happen.

Speaker #3: And sponsors are just coming to grips. Quote-unquote, the new 15 is yesterday's 25 or whatever the quote is from a couple of sponsors that we've talked to privately.

Speaker #3: A lot proprietary opportunities right now. Sponsors saying, "Hey, if we can get a deal done, we'll just do something with you on a one-off basis." I think that's a sign of where we are, both from as a preferred buyer, but also from a macro perspective.

Neil Hunn: Sponsors saying, Hey, if we can get a deal done, we'll just do something with you on a one-off basis. I think that's a sign of where we are, both as a preferred buyer, but also from a macro perspective. That sort of informs our view of the pipeline. We'll always be disciplined, we'll always be patient. I wouldn't anticipate there's a massive breakthrough of the pipeline in the next small number of months, but we want to prepare the balance sheet to be completely ready when that time comes.

Speaker #3: And so that's sort of informs our view of the pipeline. We'll always be disciplined. We'll always be patient. I wouldn't anticipate there's like a massive breakthrough of the pipeline in the next small number of months, but we want to prepare the balance sheet to be completely ready when that time comes.

Speaker #4: I'd also just say, in the channel from the investment banking community, we're getting a lot of signals there. And then also, those that do market diligence—consultants—their books are filled up right now, quite a bit.

Jason Conley: I'd also just say in the channel, from the investment banking community, we're getting a lot of signals there. Also, those that do market diligence, the consultants, their books are filled up right now quite a bit. That's another signal.

Speaker #4: So that's another signal.

Speaker #2: Great. Thank you all very much. Appreciate it.

Deane Dray: Great. Thank you all very much. Appreciate it.

Speaker #3: Thanks, Dean. Congrats.

Speaker #4: Thank you.

Speaker #3: Congrats.

Speaker #1: Your next question comes from Terry Tillman with Truist. Your line is now open.

Operator: Your next question comes from Terry Tillman with Truist. Your line is now open.

Speaker #2: Yeah. Hey, Neil, Jason, and Zach—can you all hear me okay? I've had a bad connection. Can you hear me?

Terry Tillman: Yeah. Hey, Neil, Jason, and Zack. Can you all hear me okay? I've had a bad connection. Can you hear me?

Speaker #3: Okay. We hear you great.

Jason Conley: Okay.

Neil Hunn: We hear you great.

Speaker #2: Wonderful. Yeah. On VERTIFOR, seems like it is very high value. We do a lot of work in insurtech. And I'd love to kind of double-click on it.

Terry Tillman: Wonderful. Yeah, on Vertafore, seems like it is very high value. We do a lot of work in insurtech, and I'd love to kind of double-click on it. I think you all said continued ARR growth. How is the growth compared to the overall software organic, which I think was 5% in the quarter? On top of that, with these six agents, have you started to size the potential uplift you could see? I had a follow-up.

Speaker #2: I think you all said continued ARR growth. I mean, how is the growth compared to the overall software organic, which I think was 5% for the quarter? And then on top of that, I mean, with these six agents, have you started to size the potential uplift you could see?

Speaker #2: And then I had a follow-up.

Speaker #4: Yeah, so the ARR growth is a little bit higher than the segment, so trending well there.

Jason Conley: Yeah. The ARR growth is a little bit higher than the segment. Trending well there.

Speaker #3: Yeah, I could take the agentic opportunity. So, we've worked with our partners at Bain. Amy and her team have done their own internal work about what the TAM expansion potential is at Vertafore for the agentic work in the five areas that we talked about in the prepared remarks.

Neil Hunn: Yeah, I can take the agentic opportunity. We've worked with our partners at Bain. Amy and her team have done their own internal work about what the TAM expansion potential is at Vertafore for the agentic work in the five areas that we talked about in the prepared remarks. It's a doubling-ish of the market size. Now, specific to these six agents, it's a distinct minority or smaller portion of that doubling. This is just the beginning. Think of the scaffolding and the architecture of the agentic platform is probably the biggest part of the release here, then the 6 SKUs on top, which means the acceleration of SKUs coming from this point forward should accelerate, and we'll sort of develop product and launch product to sort of fully cover that 2x market opportunity. By the way, these are informed guesses.

Speaker #3: It's a doubling-ish of the market size. Now, specific to these six agents, it's a distinct minority. Our small portion of that doubling. But this is just the beginning.

Speaker #3: I mean, this is the thing with the scaffolding. And the architecture of the agentic platform is probably the biggest part of the release here.

Speaker #3: And then the six SKUs on top, which means the acceleration of SKUs coming from this point forward should accelerate. And we'll sort of develop product and launch product to fully cover that 2x market opportunity.

Speaker #3: And by the way, these are informed guesses. I don't think anybody really knows the complete TAM expansion, but going in and sort of automating some of these tasks and giving our customers an efficiency is certainly lets us sort of monetize some of the labor spend.

Neil Hunn: I don't think anybody really knows the complete TAM expansion, going in and sort of automating some of these tasks and giving our customers that efficiency certainly lets us sort of monetize some of the labor spend.

Speaker #2: Yep. And then the follow-up is kind of a hard question, unfortunately, but it is kind of a you said guesses because I agree it is all guesses for all of us, but this kind of clearing event and the timing of it really to take hold.

Terry Tillman: Yeah. The follow-up is kind of a hard question, unfortunately. It is kind of a, you said guesses, because I agree, it is all guesses for all of us, but this kind of clearing event and the timing of it really to take hold. I know we talked last quarter, Neil, and I'd even mentioned maybe is there some sort of FDE layer that you have to add? You said scaffolding, then the agents. When do you see the light bulb, the switch flipping where, hey, we're going to really run big, large production workloads? Do you think it's the H2 this year or just anything on that? Thanks.

Speaker #2: I know we talked last quarter, Neil, and I'd even mentioned maybe is there some sort of FDE layer that you have to add? I mean, you said scaffolding, then the agents.

Speaker #2: When do you see the light bulb, the switch flipping where, "Hey, we're going to really run big, large production workloads"? Do you think it's the second half this year, or just anything on that?

Speaker #2: Thanks.

Speaker #3: Yeah. I think we said last quarter, and we'll repeat this quarter. As an organization, we've just had an amazing set of learnings on how to build these commercial-grade agentic products over the last 12 to 18 months.

Neil Hunn: Yeah. I think we said last quarter and we'll repeat this quarter. As an organization, we've just had an amazing set of learnings on how to build these commercial-grade agentic products over the last 12 to 18 months, and that's just compounding. We had just an amazing CTO, CPO event. This quarter is the largest in-person Roper event we've ever had, a couple hundred people. Our AI center team, Shane and his team, did just an expert job of having a dialogue and discourse and training session on how to build production-grade agentic capabilities, not agent toys, but truly production-grade. That was incredible. We've climbed that learning curve, and we'll continue sort of springboarding that knowledge compounding. Now we're also on a commercialization learning curve. How do we price, how do we deploy, how do we drive utilization?

Speaker #3: And that's just compounding. We had just an amazing CTO, CPO event this quarter. It was the largest in-person ROPER event we've ever had, a couple hundred people.

Speaker #3: And our AI center team, Shane and his team, did just an expert job of having a dialog and discourse and training session on how to build production-grade agentic capabilities, not agent toys, but truly production-grade and that was incredible.

Speaker #3: So we've come up with that learning curve, and we'll continue sort of springboarding sort of that knowledge compounding. Now, we're also on a we're also on a commercialization learning curve.

Speaker #3: And so how do we price? How do we deploy? How do we drive utilization? And we're getting we'll certainly get our teams together across ROPER to sort of share those learnings.

Neil Hunn: We'll certainly get our teams together across Roper to sort of share those learnings. Ultimately, whether or not we call them forward deployed engineers or not, I don't know, but definitely the customer service implementation resources will spend more time with our customers driving utilization, teaching them, going through change management, their workflows. It's just the rate of adoption across each of our businesses is the large unknown. Will it be material revenue in the H2? It will not be for us this year. There's momentum building unmistakably inside the organization, and we're excited about that.

Speaker #3: Ultimately, whether or not we call them forward-deployed engineers or not, I don't know, but definitely the customer service implementation resources will spend more time with our customers driving utilization, teaching them, going through change management, their workflows.

Speaker #3: And it's just the rate of adoption across each of our businesses is the large unknown. So will it be material revenue in the second half?

Speaker #3: It will not be. For us this year, but there's momentum building unmistakably inside the organization. And we're excited about that.

Speaker #2: Thank you.

Terry Tillman: Thank you.

Speaker #3: You bet.

Neil Hunn: You bet.

Speaker #4: Thanks.

Speaker #1: Your next question comes from Brent Phil with Jefferies. Your line is now open.

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

Speaker #4: Good morning. Just on M&A, I think you had mentioned you're hoping to see the thaw in the cold, but I guess what is what's underpinning the confidence in that?

Brent Thill: Good morning. Just on M&A, I think you had mentioned you're hoping to see the thaw in the cold, but I guess what's underpinning the confidence in that? Is that just, hey, it hasn't thawed forever, or you're now seeing signs underneath that we can't see that you're just giving the signal that things are in the mix? What's different than, hey, we hope it thaws?

Speaker #4: Is that just, "Hey, it hasn't thawed forever," or you're now seeing signs underneath that we can't see that you're just giving the signal that things are in the mix?

Speaker #4: What's different than "Hey, we hope it thaws"?

Speaker #3: Yeah. I think it's similar to what we attempted to say a little bit ago, which is the conversations we're having with sponsors are now real conversations they understand the valuation world that we live in.

Neil Hunn: Yeah. I think it's similar what we attempted to say a little bit ago, which is the conversations we're having with sponsors are now real conversations. They understand the valuation world that we live in. They've come to grips with that reality. I would say the sponsors that are multi-industry sponsors come to grips with that a little bit quicker than ones that are specialized in sectors, in software sector. As Jason said, the consultants who do a lot of the diligence work are quite busy. The conversation we have with the intermediaries, the bankers, their pipelines are quite busy and quite full. It's that that informs us. The signal is there. It's positive, but it's distant. It takes more than a couple of minutes to prepare the balance sheet to play offense, so that's what we're doing at the moment.

Speaker #3: They've come to grips with that reality. I would say the sponsors that are multi-industry sponsors come to grips with that a little bit quicker than ones that are specialized in sectors and the software sector.

Speaker #3: As Jason said, the consultants who do a lot of the diligence work are quite busy. The conversation we have with the intermediaries, the bankers, their pipelines are quite busy.

Speaker #3: And quite full. And it's that—that informs us. The signal is there. It's positive, but it's distant. But it takes more than a couple of minutes to prepare the balance sheet to play offense.

Speaker #3: And so, that's what we're doing at the moment.

Speaker #4: Okay. And sorry for the first half of the year. What has been the capital you've deployed?

Brent Thill: Okay. Sorry, for the H1, what has been the capital you've deployed?

Speaker #3: Well, outside the buyback, there are two small bolt-ons so as an aggregate sub-50, about $50 million.

Neil Hunn: Well, outside the buyback, there are two small bolt-ons. It's an aggregate about $50 million.

Brent Thill: 50. Okay. Okay, great. Just real quick, Jason, for Deltek, can you just give us a sense of how things are going, what you're seeing into the H2?

Speaker #4: $50. Okay. Okay. Great. And then just real quick, Jason, for Dell Tech, can you just give us a sense of how things are going?

Speaker #4: What you're seeing in the second half of the year?

Speaker #3: Yeah, so actually, we had a good second quarter. We had mentioned a large license deal that we had not put in our guidance that they actually executed on, so it drove a little bit of outperformance in the segment.

Jason Conley: Yeah. We actually had a good Q2. We had mentioned a large license deal that we had not put in our guidance that they actually executed on, drove a little bit of outperformance in the segment. Pipelines look really strong. I think what Neil mentioned in his prepared remarks is that we're really waiting for some of those conversions to be more of a trend before we call it. Certainly, the contractors, the appropriations are starting to move into the contractor world. I think you'll see some of the public company earnings releases have been good. We have really good signal that things are going to move in our direction, but we haven't called it yet.

Speaker #3: Pipelines look really strong. I think what Neil mentioned in his prepared remarks is that we're really waiting for some of those conversions to be more of a trend before we call it.

Speaker #3: Certainly, the contractors, the appropriations are starting to move into the contractor world. I think you'll see some of the public company earnings releases have been good.

Speaker #3: So we have really good signal that things are going to move in our direction, but we haven't called it yet.

Speaker #4: Great. Thanks.

Brent Thill: Great. Thanks.

Speaker #3: You bet.

Jason Conley: You bet.

Speaker #1: Your next question comes from Joe Giordano with Cowen. Your line is now open.

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

Speaker #5: Hey, guys. Good morning.

Joseph Giordano: Hey, guys. Good morning.

Joe Giordano: Hey, guys. Good morning.

Speaker #3: Good morning, Joe.

Neil Hunn: Morning, Joe.

Speaker #5: Hey, can you I know it probably varies a lot these AI solutions that you're deploying, can you help us think about what the hit rate internally is?

Joseph Giordano: Hey, can you I know it probably varies a lot business to business, but when we talk about these AI solutions that you're deploying, can you help us think about what the hit rate internally is? When you're drawing these things up on the whiteboard, how many ideas is it taking to generate something that's actually getting into production versus how these businesses operated in a pre-AI world when you're thinking about improvements?

Joe Giordano: Hey, can you I know it probably varies a lot business to business, but when we talk about these AI solutions that you're deploying, can you help us think about what the hit rate internally is? When you're drawing these things up on the whiteboard, how many ideas is it taking to generate something that's actually getting into production versus how these businesses operated in a pre-AI world when you're thinking about improvements?

Speaker #5: When you're drawing these things up on the whiteboard, how many ideas is it taking to generate something that's actually getting into production versus how these businesses operated in a pre-AI world when you're thinking about improvements?

Speaker #3: Yeah. I mean, it's really appreciate that question. The hit rate right now is quite high. Now, you think about if I step back about really what the, if you will, the transformation we're going through on the product side is our historical approach to software development being the market leader in each one of our 21 software verticals is sort of methodical and lower risk.

Neil Hunn: Yeah. Really appreciate that question. The hit rate right now is quite high. If I step back about really what the, if you will, the transformation we're going through on the product side is our historical approach to software development being the market leader in each one of our 21 software verticals is sort of methodical and lower risk. In the AI world, you want to go at frenetic pace and actually work at a little bit higher risk because the cost to develop is much lower, so the risk of a mistake is much lower. That's been, if you really sort of condense the learning over the last two years, that is the learning of the organization. We're moving at just great pace, and the development here has been great. Also the learnings have been, you start with putting AI chat in your products.

Speaker #3: In the AI world, you want to move at a frenetic pace and actually work with a little bit higher risk because the cost to develop is much lower.

Speaker #3: So the risk of a mistake is much lower. So that's been the if you really sort of condense the learning over the last two years, that is the learning of the organization.

Speaker #3: And so we're moving at pace, and the development here has been great. Now, also, the learnings have been: you start with putting AI chat in your products—there's not a lot of value there.

Neil Hunn: Not a lot of value there you can monetize. You sort of do lighter weight agents that have lower entropy. You get into real commercial-grade, differentiated, high-value agentic workflows, which is what now is being released to the market. The customer signal that we get is incredible. I think I put on social, on LinkedIn, when Procare released their first agentic feature. Mind you, it's not monetized in this particular case, the first one. Within four hours of release, I think 20% of the customer base engaged with the feature. Unheard-of engagement in the software landscape that quickly. Strata, with their financial decision intelligence tool, they hosted a call, and they had more people on the call seeing the demo of this product than when they merged with Syntellis, to give you a sense of the energy in the market.

Speaker #3: You can monetize. Then you sort of do lighter weight agents that have lower entropy. And then you get into real, commercial-grade, differentiated, high-value agentic workflows, which is what now is being released to the market.

Speaker #3: But the customer signal that we get is incredible. I think I put on social and LinkedIn that Procare released their first agentic feature, and mind you, it's not monetized.

Speaker #3: In this particular case, the first one, within four hours of release, I think 20% of the customer base engaged with the feature. Unheard-of engagement.

Speaker #3: In the software landscape that quickly. Strata, with their financial decision intelligence tool, they hosted a call and they had more people on the call seeing the demo of this product than when they merged with Centellus.

Speaker #3: To give you a sense of the energy and the market. The number of customers in the beta in the early adopter for some of the Vertifor agents normally they're capped at a dozen or two.

Neil Hunn: The number of customers in the beta and the early adopter for some of the Vertafore agents, normally they're capped at a dozen or two, and Amy left it uncapped, and there were more than a couple hundred. The early signal is quite high. I'm just trying to give you a couple data points on this. If the hit rate is, if we miss on a few, that's okay because we've added a little bit of that, if you will, risk, given the speed in which we're developing.

Speaker #3: And Amy left it uncapped, and there were more than a couple hundred. So the early signal is quite high, and I'll just try to give you a couple of data points on this.

Speaker #3: Now, but if the hit rate is if we miss on a few, that's okay because we want it we've added a little bit of that, if you will, risk given the speed in which we're developing.

Speaker #5: And then on the M&A side, as you evaluate these companies, I know the multiples are weird and we're maybe talking about what multiples should you pay on a trough type result.

Joseph Giordano: On the M&A side, as you evaluate these companies, I know the multiples are weird and we're maybe talking about what multiple should you pay on a trough type result. How willing are you to underwrite inflections in these businesses? Maybe you're willing to pay a headline sticker price that's way higher multiple than we'll normally see from you because you're willing to underwrite something in the business. How confident are you in ability to kind of pick that here in this world?

Joe Giordano: On the M&A side, as you evaluate these companies, I know the multiples are weird and we're maybe talking about what multiple should you pay on a trough type result. How willing are you to underwrite inflections in these businesses? Maybe you're willing to pay a headline sticker price that's way higher multiple than we'll normally see from you because you're willing to underwrite something in the business. How confident are you in ability to kind of pick that here in this world?

Speaker #5: How willing are you to underwrite inflections in these businesses? So maybe you're willing to pay a headline sticker price that's way higher multiple than we're normally see from you because you're willing to underwrite something in the business.

Speaker #5: How confident are you in ability to kind of pick that here in this world?

Speaker #3: We've never really we've never been the buyer and fixer of an asset ever. At least intentionally, right? We think that we're buying winners that have good momentum behind them.

Neil Hunn: We've never been the buyer and fixer of an asset ever.

Joseph Giordano: Correct. Yeah.

Joe Giordano: Correct. Yeah.

Neil Hunn: At least intentionally, right? We think that we're buying winners that have good momentum behind them, and that's what we're focused on. Increasingly, that'll become easier to discern in the AI era because the targets will have AI growth and earnings, AI related product growth and earnings. The concept of a business that has some headwind attached to it, then somehow we can own it and magically improve it, not really what we do, and I don't see us doing that in the future.

Speaker #3: And that's what we're focused on. And increasingly, that'll become easier to discern in the AI era because the targets will have AI growth and earnings, AI-related growth, product growth and earnings.

Speaker #3: And so but the concept of core a business that has some headwind attached to it and then somehow we can own it and magically improve it, not really what we do.

Speaker #3: And I don't see us doing that in the future.

Speaker #5: Thanks, guys.

Joseph Giordano: Thanks, guys.

Joe Giordano: Thanks, guys.

Speaker #3: Yep. We're going to buy the winners and make them better.

Neil Hunn: Yeah. We're going to buy the winners and make them better.

Speaker #1: Your next question comes from Clark. Jeffries with Piper Sandler. Your line is now open.

Operator: Your next question comes from Clarke Jeffries with Piper Sandler. Your line is now open.

Speaker #6: Hello. Thank you for taking the question. I wanted to ask kind of two interrelated questions around the core margin momentum in the business. Just where do we stand on the quarter-to-quarter movement of the input costs or the mix and tap?

Clarke Jeffries: Hello. Thank you for taking the question. I wanted to ask kind of two interrelated questions around the core margin momentum in the business. Just where do we stand on the quarter-to-quarter movement of the input costs or the mix in TEP? I think core margins were down 70%, but with less contribution from software. I think that implies that TEP improved from a core margin perspective, but love to get sort of background on what you're seeing and what you expect for H2.

Speaker #6: I think core margins were down 70%, but with less contribution from software. So I think that implies that tap improved from a core margin perspective, but love to get sort of the background on what you're seeing and what you expect for second half.

Speaker #3: Sure, I'll take that. So, yeah, you're right—it's mostly concentrated in TAP. So, core margins were down for the enterprise 70 basis points, and TAP was down substantially more than that.

Jason Conley: Sure. I'll take that. Yeah, you're right. It's mostly concentrated in TEP, so core margins were down for the enterprise. TEP was down substantially more than that. It's really the same dynamics that happened in Q2 are consistent with what happened in Q1, which is at Neptune, they had more of a mix of mechanical meters that shipped, and those have carried higher input costs. A big input cost for them is ingot, which ultimately has copper in it, and you've seen what's happened with the price of copper and fulfilling data center demand. That will, in H2, we've got some offset to that on the price side, so we'll have some better offset, and we'll also have more static meter shipments in H2 that don't have as much of that input cost.

Speaker #3: And it's really the same dynamics that happened in the second quarter are consistent with what happened in the first, which is at Neptune, they had more of a mix of mechanical meters that shipped.

Speaker #3: And those have carried higher input costs. A big input cost for them is ingot, which has ultimately has copper in it. And you've seen what's happened with the price of copper and fulfilling data center demand.

Speaker #3: So that will in the second half, we've got some offset to that that will on the price side. So we'll have some better offset.

Speaker #3: And we'll also have more static meter shipments in the second half that don't have as much of that input cost. And then on and then we just have more mix of reoccurring consumables across our NDI and Marathon business.

Jason Conley: We just have more mix of reoccurring consumables across our NDI and Verathon business, which we love because that's higher recurring and it's more secular and more predictable, but they do carry a little bit of lower margin. That's really the primary thing that's going on there. That dynamic in H2 just comps a little bit better. If you look at Q2, it's been our high water mark, but it was a little bit lower this quarter. As you roll into H2, we'll have better comps in the segment.

Speaker #3: Which we love because that's higher recurring and it's more secular and more predictable. But they do carry a little bit of lower margin. So that's really the primary thing that's going on there.

Speaker #3: And then that dynamic in the second half just comps a little bit better. So if you look at Q2, it's usually been our high watermark.

Speaker #3: But it was a little bit lower this quarter. And then as you roll into second half, we'll have better comps in the segment.

Speaker #6: Perfect. And then just on the other side of it with the I think you mentioned core margins and software. Being down based off the investment in the AI team, just curious how you expect the investment to play out.

Clarke Jeffries: Perfect. Just on the other side of it with the, I think you mentioned core margins and software being down based off the investment in the AI team. Just curious how you expect the investment to play out. I would imagine that it's heavier today in application software versus network software. Do you have insight to when investment might peak? Just any insight on the relative magnitude of investment in the AI team, maybe between the segments.

Speaker #6: I would imagine that it's heavier today in application software versus network software. Do you have insight into when investment might peak? Just any insight on the relative magnitude of investment in the AI team, maybe between the segments or over the next 12 months?

Jason Conley: Yep

Clarke Jeffries: or the sort of next 12 months.

Speaker #3: Yeah. I think you're right, right? Most of the I'd say activity right now is in application, but all the businesses will have some level of interaction with the AI team.

Jason Conley: Yeah. I think you're right. Most of the, I'd say, activity right now is in application, but all the businesses will have some level of interaction with the AI team. I think we're at maybe the halfway point of where we think that investment's going to be in terms of headcount, but probably much higher on spend because we've started at the more senior level, and then we'll add some more entry-level and more junior folks as we go through. A lot of that is already in our Q2 base and won't be that much incremental as we go forward.

Speaker #3: We're sort of I think we're at maybe the halfway point of where we think that investment is going to be in terms of headcount, but probably much higher on spend because we've started the more senior level and then we'll add some more entry-level and more junior folks as we go through.

Speaker #3: So a lot of that is already in our second quarter base. And we'll be that much incremental as we go forward.

Speaker #6: Thank you very much.

Clarke Jeffries: Thank you very much.

Speaker #1: Your next question comes from Brian Peterson with Raymond James. Your line is now open.

Operator: Your next question comes from Brian Peterson with Raymond James. Your line is now open.

Speaker #7: Hey, gentlemen. Thanks for taking the question. Neil, I know you're addressing a lot of different markets, but I'm curious in what are those markets do you think you have the earliest appetite or demand from customers for AI solutions?

Brian Peterson: Hey, gentlemen. Thanks for taking the question. Neil, I know you're addressing a lot of different markets, but I'm curious, in what of those markets do you think you have the earliest appetite or demand from customers for AI solutions? Maybe what verticals do you think will take a little bit longer to kind of test out those solutions before they step in and buy?

Speaker #7: And then maybe what verticals do you think will take a little bit longer to kind of test out those solutions before they step in and buy?

Speaker #3: Yeah. So we spent a fair amount of time thinking about this. And I think it's maybe try to answer that on two different axes.

Neil Hunn: Yeah. We spent a fair amount of time thinking about this, I'll maybe try to answer that on two different axes. There's certainly the industry end market, I don't know per se if you're in insurance versus healthcare, that the mindset is different in those end markets, one more aggressive, one more conservative. I don't think that's really the dynamic. I think the other one is, we can compare and contrast like CentralReach, which is autism therapy and freight matching automation at DAT, we have incredible take rates, adoptions in autism therapy and methodical, month-over-month growth rates are quite nice at DAT, they're not at escape velocity yet. Why is the difference? Our discernment of that is pretty simple, which is in autism therapy, you have something like 800 million therapy hours demanded, 300 million therapy hours supplied.

Speaker #3: I mean, there are certainly the industry and market. And I don't know per se if you're in insurance versus healthcare that the mindset is different in those end markets.

Speaker #3: One more aggressive, one more conservative. So I don't think that's really the dynamic. I think the other one is we can compare and contrast Central Reach, which is autism therapy, and freight matching automation at DAT.

Speaker #3: And we have incredible take rates adoptions in autism therapy and methodical week over month growth rates are quite nice at DAT, but they're not at a skate velocity yet.

Speaker #3: And why is the difference? And our discernment on that is pretty simple, which is in autism therapy, you have something like 800 million therapy hours demanded, 300 million therapy hours supplied.

Speaker #3: There's a line outside the door of every clinic for care. And so, to the extent that we can deliver AI solutions to give therapists more time to see patients, they're seeing patients, families are getting the services, and the clinics' revenues and earnings are going up.

Neil Hunn: There's a line outside the door of every clinic for care. To the extent that we can deliver AI solutions to give therapists more time to see patients, they're seeing patients, patient families are getting the services, the clinics' revenues and earnings are going up. Just everything is aligned. The DAT example, we can automate the manual, the dozen or so phone calls to broker a load into no phone calls and do it for a fraction of the labor cost. There, you're having to do a change management in the workflow about how loads are brokered. There's a human element of that. There's a change management element of that. Then there's going to be flavors of that in between. Like for instance, Vertafore probably sits somewhere in the middle in between those two.

Speaker #3: Just everything is aligned. And the DAT example—we can automate the manual, the dozen or so phone calls to broker a load, down to no phone calls and do it for a fraction of the labor cost.

Speaker #3: But you're having to do a change management in the workflow about how broker loads are brokered. There's a human element of that. There's a change management element of that.

Speaker #3: And then there are going to be flavors of that in between. For instance, Vertafore probably sits somewhere in the middle, between those two.

Speaker #3: So I think it's going to be more about just the level of human change more than it is industry that drives sort of the rate of adoption.

Neil Hunn: I think it's going to be more about just the level of human change more than it is like industry that drives sort of the rate of adoption.

Speaker #7: No, that's great color. And maybe just I know you mentioned some of your conversations with sponsors do you have any sense of where they are in terms of their AI investments?

Brian Peterson: No, that's great color. Maybe just, I know you mentioned some of your conversations with sponsors. Do you have any sense of where they are in terms of their AI investments, if those are really ramping up? How do we think about that investment or margin cadence of the targets you would be looking at, assuming we do see a thawing of activity in the next couple of quarters? Thanks, guys.

Speaker #7: And if those are really ramping up, how do we think about that investment or margin cadence, or the targets you would be looking at?

Speaker #7: Assuming we do see a thong of activity in the next couple of quarters. Thanks, guys.

Speaker #3: Yeah, it's probably unfair for us to characterize all sponsors the same. We'll try to do this, and we'll do it without naming names.

Neil Hunn: Yeah. This is probably unfair for us to characterize all sponsors the same. We'll try to do this out. We'll do it without naming names. There's a small number of sponsors that when the gun went off a couple of years ago with AI, like us, decided to put all of their energy around AI into playing offense, driving product velocity, driving revenue growth, and that was the principal focus.

Speaker #3: But there's a small number of sponsors that when the gun went off a couple of years ago with AI, like us, decided to put all of their energy around AI into playing offense, driving product velocity, driving revenue growth.

Speaker #3: And that was the principal focus. The vast majority of sponsors, when the gun went off, said, "Oh my goodness, I've got an opportunity to take a bunch of costs out of my business and I'll be able to capitalize that." And now they're realized, "Oh boy, I've got to get on the product journey because I can't sell a softer business unless it has a viable AI sort of product roadmap in front of it." So as a general matter, I think we're ahead.

Neil Hunn: The vast majority of sponsors when the gun went off said, Oh my goodness, I've got an opportunity to take a bunch of cost out of my business, and I'll be able to capitalize that. Now they realized, Oh boy, I've got to get on the product journey because I can't sell a software business unless it has a viable AI sort of product roadmap in front of it. As a general matter, I think we're ahead on the product side versus the sponsors, but they're catching up. They know they have to do the agentic SKU delivery and show some defensible increase in growth rate to be able to sell a business at a premium price, whatever the definition of premium is going forward. It's a broad landscape, and you can imagine there's different shades of gray across the sponsors on the AI front.

Speaker #3: On the product side versus the sponsors, but they're catching up. I mean, it's they know they have to do the agentic SKU delivery and show some defensible increase in growth rate to be able to sort of sell a business at a premium price, whatever the definition of premium is going forward.

Speaker #3: And but it's a broad landscape and you can imagine there's different shades of gray across the sponsors on the AI front. I hope that answered your question.

Neil Hunn: I hope that answered your question.

Speaker #7: Got it. Thanks, guys. Appreciate it.

Brian Peterson: No, it did. Thanks, guys. Appreciate it.

Speaker #1: Your next question comes from Daniel Jester with BMO Capital Markets. Your line is now open.

Operator: Your next question comes from Daniel Jester with BMO Capital Markets. Your line is now open.

Speaker #8: Yeah. Good morning, everybody. Thank you for taking my question. I think we've maybe talked about this in a couple of different ways, but maybe I'll just double-click on it.

Daniel Jester: Yeah, good morning, everybody. Thank you for taking my question. I think we've maybe talked about this in a couple different ways, but maybe I'll just double-click on it. Really appreciate the color around SoftWriters and the details in the prepared remarks about the opportunity there. It sounds like there's incremental monetization from AI. You had a whole bunch of features that you talked about that have been launched across the portfolio in the prepared remarks as well. Can you help us maybe understand the direct monetization opportunities versus the feature and functionality and quality of life improvements that you're launching, just as we think about going into next year, how much potential monetization uplift from AI is coming in the pipeline? Thank you.

Speaker #8: Really appreciate the color around soft writers and sort of the detailed sort of in the prepared remarks about the opportunity there. And it sounds like there's incremental monetization from AI.

Speaker #8: You had a whole bunch of features that you talked about that have been launched across the portfolio. In the prepared marks as well. Can you help us maybe understand the direct monetization opportunities versus sort of the future and functionality and quality life improvements that you're launching?

Speaker #8: Just as we think about going into next year, how much potential monetization uplift from AI is coming in the pipeline? Thank you.

Speaker #3: Yeah. So maybe I can spend a minute on how we're going to monetize and then I'll try to we won't be able to give you a lot of color on the exact 27 monetization amounts but I think let me walk through this and I think it'll become evident.

Neil Hunn: Yeah. Maybe I can spend a minute on how we're going to monetize, and then we won't be able to give you a lot of color on the exact 2027 monetization amounts. Let me walk through this, and I think it'll become evident. I think we talked about this last quarter, but the principal way we're going to monetize these agentic SKUs is not going to be the SoftWriters example, which is straight transactional. Our customers have been very clear they need to have an amount that they can budget, and they can understand in a financial envelope in which they can operate in. I believe the vast majority of our agentic SKUs will be sold in a, if you will, an agent layer, an orchestration layer. The customers will pay a subscription for access to that.

Speaker #3: So I think we talked about this last quarter, but the principal way we're going to monetize these agentic SKUs is not going to be the soft writers example, which is straight transactional.

Speaker #3: Our customers have been very clear. They need to have a amount that they can budget and they can sort of understand in an envelope financial envelope in which they can operate in.

Speaker #3: So I believe the vast majority of our agentic SKUs will be sold in a, if you will, an agent layer, an orchestration layer. The customers will pay a subscription for access to that.

Speaker #3: And then, based on the consumption of the agents and the value that we deliver, they will buy larger tiers of utilization. But it's not going to be straight consumption.

Neil Hunn: Based on the consumption of the agents and the value that we deliver, they will buy larger tiers of utilization. It's not going to be straight consumption. Imagine it's going to be stairstep consumption. That'll be the majority of the way that we monetize. There'll be a few businesses, DAT, SoftWriters, that already have transactional pricing for the core of what they do that'll transactionally price the AI solutions. A couple, the most notable will be Deltek, is they're piling the majority of their AI agentic features into their cloud product, and they will monetize it on the uplift of their on-premise to the cloud and drive pricing, additional pricing in the lift and shift.

Speaker #3: Imagine it's going to be stair-step consumption. That'll be the majority of the way that we monetize. There'll be a few businesses, data soft writers, that already have transactional pricing for the core of what they do, that'll transactionally price the AI solutions.

Speaker #3: And then a couple the most notable will be Dell Tech is they're piling the majority of their AI agentic features into their cloud product and they will sort of monetize it on the uplift of their on-premise to the cloud.

Speaker #3: And drive pricing sort of additional pricing in the lift and shift. So based on some of the questions that have already been asked today, the big X factor and we're just going to call it as we see it is what's the rate of adoption at the customer level, right?

Neil Hunn: Based on some of the questions that have already been asked today, the big X factor, and we're just going to call it as we see it, is what's the rate of adoption at the customer level, right? We have the products. We're going to have more products in 3 months and more products in 6 months. We're on that train, and we're excited by that velocity. What's the pace of adoption at the customer level? That's the unknown. Until we get a clearer signal on that, we have to be unfortunately vague on the magnitude of impact in the near term.

Speaker #3: We have the products. We're going to have more products in three months and more products in six months. And that we're on that train and we're excited by that velocity.

Speaker #3: But what's the pace of adoption at the customer level? That's the unknown. And so, until we get clearer signal on that, we have to be, unfortunately, vague on the magnitude of impact in the near term.

Speaker #8: No, that's really helpful context. I appreciate all that color. And then maybe just as my follow-up, I think in the prepared remarks you talked about sort of ground-to-cloud conversions starting to improve.

Daniel Jester: No, that's really helpful context. I appreciate all that color. Maybe just as my follow-up, I think in the prepared remarks, you talked about ground to cloud conversions starting improving. I guess maybe can we just spend a moment, I guess, why do you think this is improving and I guess the confidence level that we should continue to see that improving for the rest of the year into next year? Thank you so much.

Speaker #8: I guess, maybe, can we just spend a moment—why do you think that this is improving? And I guess, what's the confidence level that we should continue to see that improvement for the rest of the year and into next year?

Speaker #8: Thank you so much.

Speaker #3: Sure, Dan. I can take that. So yeah, I think what we're seeing it, we have seen it for a few years now at Adderen and it's picked up velocity there.

Jason Conley: Sure, Dan, I can take that. Yeah, I think what we're seeing it, and we have seen it for a few years now at Aderant, and it's picked up velocity there. That's a legal end market, and we started with some of the smaller firms, and now we're starting to move into some of the larger firms, which is encouraging. Our PowerPlan business has moved their tax solution into the cloud, and we're getting great adoption there, and now they're moving their core accounting, tax accounting module into the cloud or suite into the cloud, and the adoption is picking up there. Lastly, as Neil talked about at Deltek, they're our largest maintenance base today. Putting new features into the cloud is certainly going to increase that adoption.

Speaker #3: So that's a legal end market and we started with some of the smaller firms and now we're starting to move into some of the larger firms, which is encouraging.

Speaker #3: Our power plant business has moved their tax solution into the cloud and we're getting great adoption there. And now they're moving their core accounting tax accounting module into the cloud or suite into the cloud.

Speaker #3: And the adoption is picking up there. And then lastly, as Neil talked about at Dell Tech, there are largest maintenance base today putting new features into the cloud is certainly going to increase that adoption.

Speaker #3: And I actually just end of life on their cost point solution. In the GovCon space, which they're going to only go back N minus two on that.

Jason Conley: They actually just end-of-life on their Costpoint solution in the GovCon space, which they're going to only go back n-2 on that. They've declared that the customers are going to move into the cloud, and that'll be a big lift for us over the next 5 years or so.

Speaker #3: So they've declared that the customers are going to move into the cloud and that'll be a big sort of lift for us over the next five years or so.

Speaker #8: Great. Thank you so much.

Daniel Jester: Great. Thank you so much.

Jason Conley: Yep.

Speaker #1: Your next question comes from Dylan Becker, which William Blair. Your line is now open.

Operator: Your next question comes from Dylan Becker with William Blair. Your line is now open.

Speaker #5: Hey, gentlemen. Appreciate it. Neil, maybe for you, obviously a lot of conversation around AI and agents. And how that's kind of TAM expansive as you go into the labor segment.

Dylan Becker: Hey, gentlemen, appreciate it. Neil, maybe for you, obviously, a lot of conversation around AI and agents, and how that's kind of TAM expansive as you go into the labor segment, but maybe wondering on the vertical approach, right, how this validates not only as the workflow system, your ability to identify those opportunities to expand the scope, but also validate the ROI and maybe improve the attach, right? To draw against that expanded TAM, if that makes sense. Maybe adjacently, right, like why customers would buy from you versus somebody else with an agent as you are kind of that workflow or orchestration layer. Thanks.

Speaker #5: But maybe wondering, on the vertical approach, right, how this validates not only as the workflow system your ability to identify those opportunities to expand the scope, but also validate the ROI and maybe improve the attach, right?

Speaker #5: So to draw against that expanded TAM, if that makes sense. And maybe adjacently, right, why customers would buy from you versus somebody else, with an agent, as you are going to that workflow or orchestration layer.

Speaker #5: Thanks.

Speaker #3: I'll try to tackle all of that. Hold me accountable if I fall short. So, the ROIs—going back to the earlier question about the hit rate—the ROIs are clear and demonstrable.

Neil Hunn: I'll try to attack all of that. Hold me accountable if I fall short. The ROIs, going back to the earlier question about the hit rate. Clear and demonstrable. I think I said it, some of the cases in the Vertafore, going from an hour to minutes. You have people that spend hours a day doing tasks that now take 30 minutes. It's very clear about the value that the customer receives, or the $100 to $200 to broker a load, and we charge a fraction of that. It's a very hard, very easy to identify ROI. We're quite bullish by that, and that's why the hit rate early on, the signals are quite positive. Why us is a question that we spend a lot of time on, and this signal here is just getting clearer and clearer. It matters a lot.

Speaker #3: I mean, it's I think I said it. Some of the cases in the vertical going from an hour to minutes, you have people that spend hours a day doing tasks and now take 30 minutes.

Speaker #3: And so it's very, very clear about the value that the customer receives or one to $200 to broker alone and we charge a fraction of that.

Speaker #3: Or it's a very hard, very easy to identify ROI. So we're quite bullish by that, and that's why the hit rate early on signals are quite positive.

Speaker #3: So, "why us?" is a question that we spend a lot of time on, and this signal here is just getting clearer and clearer and clearer.

Speaker #3: It matters a lot. I mean, it's the classic moat framework, but it matters a lot when you have a system-of-record position, which is most of what we do. You have the data, but importantly, you have the workflow depth.

Neil Hunn: It's the classic moat framework. It matters a lot when you have a system or record position, which is most of what we do. You have the data. Importantly, you have the workflow depth. Think about that SoftWriters' example. Yes, we know how to validate a pharmacy order entry. There's the AI tool to do that. Delivering it precisely in the workflow with no latency is incredibly important. There are the effects, whereas there's a learning curve and a network effect, if you will, a flywheel effect in all these solutions. As we get feedback, the models get better, the prompts get better, the result gets better, it gets more use. There's a bit of a network effect there. I think 18 of our 21 software businesses operate in a regulated end market.

Speaker #3: So think about that soft writers example. Yes, we know how to validate a pharmacy entry, order entry. There's the AI tool to do that.

Speaker #3: But delivering it precisely in the workflow with no latency is incredibly important. There are the effects whereas we there's a learning curve and a network effect, if you have a flywheel effect and all these solutions as we get feedback, the models get better, the prompts get better, the result gets better.

Speaker #3: And so more use gets more use. So there's a bit of a network effect there. I think 18 of our 21 software businesses are operate in a regulated end market.

Speaker #3: So there's a regulatory burden that is that sort of then leads into a very high level of customer trust. Can be like a why a lot of vertical market software exists is because of you have end markets that are different for some reason, oftentimes from a regulated point of view.

Neil Hunn: There's a regulatory burden that leads into a very high level of customer trust. Candidly, a why a lot of vertical market software exists is because of you have end markets that are different for some reason, oftentimes from a regulated point of view, which begets trust. Let's just not forget about distribution. It's a huge deal when you can release a feature or a product, you have a customer base that is asking for that, they didn't even know they needed it, they see it like, "Oh, I need that right now." All of that comes together about why OnStack AI is a winning solution in these vertical markets. We have just a high and increasing level of confidence in that.

Neil Hunn: There's a regulatory burden that leads into a very high level of customer trust. Candidly, a why a lot of vertical market software exists is because of you have end markets that are different for some reason, oftentimes from a regulated point of view, which begets trust. Let's just not forget about distribution. It's a huge deal when you can release a feature or a product, you have a customer base that is asking for that, they didn't even know they needed it, they see it like, oh, I need that right now. All of that comes together about why OnStack AI is a winning solution in these vertical markets. We have just a high and increasing level of confidence in that.

Speaker #3: Which begets trust and then let's just not forget about distribution. I mean, it's a huge deal when you can release a feature or a product and you have a customer base that is sort of asking for that.

Speaker #3: They didn't even know they needed it, and they see it like, "Oh, I need that right now." And so all of that comes together about why on-stack AI is a winning solution in these vertical markets.

Speaker #3: And we have just a high and increasing level of confidence in that.

Speaker #5: Perfect. That's really helpful. Thanks, Neil. as well too, as we kind of think about the outlook, right? We had a strong first half of the year.

Dylan Becker: Perfect. That's really helpful. Thanks, Neil. Maybe Jason, just a quick one for you as well too, as we think about the outlook, right? We had a strong H1 of the year. We're seeing a slight acceleration and improvement in the H2. I guess, given a lot of the agentic opportunity we're talking about, I know it's not immediately monetizable, probably improving buyer sentiment. I guess, how would you attribute or weight strength in the H1, the mechanics of normalization in some of those larger businesses versus maybe that incremental improving sentiment, if you will, across those three buckets as we think about the outlook for the balance of the year? Thanks.

Speaker #5: We're seeing a slight kind of acceleration and improvement in the second half. I guess given a lot of kind of the agentic opportunity, we're talking about, I know it's not immediately monetizable, but probably improving buyer sentiment.

Speaker #5: I guess how would you attribute or weight strength in the first half, kind of the mechanics of normalization in some of those larger businesses versus maybe that incremental improving sentiment, if you will, kind of across those three buckets as we think about the outlook for the balance of the year?

Speaker #5: Thanks.

Speaker #3: Yeah. I mean, obviously we had a good first half. TEP outperformed the second quarter and most of our raises has been based on the confidence of the first half.

Jason Conley: Yeah. Obviously, we had a good H1 to have outperformed the Q2, and most of our races has been based on the confidence of the H1. I think the H2 is a lot of mechanics, as we've talked about before, with Central Region Subsplash turning organic. We haven't really baked in anything meaningful for AI above what the businesses are delivering today. That's more of playing for 2027 at this point.

Speaker #3: I think the second half is a lot of mechanics as we've talked about before with central reach and sub splash turning organic. And so we haven't really baked in anything meaningful for AI above what the businesses are delivering today.

Speaker #3: And so that's more of playing for 27 at this point.

Speaker #5: Perfect. Thank you very much.

Dylan Becker: Perfect. Thank you very much.

Dylan Becker: Perfect. Thank you very much

Speaker #1: Your next question comes from Joe Vreewink with Baird. Your line is now open.

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

Speaker #5: Great. Thanks for squeezing me. And I'll just do one. But talking about the organic recurring software, I think it was up seven and a quarter.

Joe Vruwink: Great. Thanks for squeezing me in. I'll just do one. Talking about the organic recurring software, I think it was up 7 in the quarter. You then have recurring down 2 and non-recurring down 4. I guess, one, how did the latter two compare to expectations? Then 2, given some of the early reports in software have maybe alluded to deal timing issues around license transactions, are you seeing anything pop up there that is at all a leading indicator of demand interest ahead of the H2?

Joe Vruwink: Great. Thanks for squeezing me in. I'll just do one. Talking about the organic recurring software, I think it was up seven in the quarter. You then have recurring down two and non-recurring down four. I guess, one, how did the latter two compare to expectations? Then two, given some of the early reports in software have maybe alluded to deal timing issues around license transactions, are you seeing anything pop up there that is at all a leading indicator of demand interest ahead of the H2?

Speaker #5: You then have reoccurring down two and non-recurring down four. I guess one, how did the latter two compare to expectations? And then two, given some of the early reports and software have maybe alluded to deal timing issues around license transactions.

Speaker #5: Are you seeing anything pop up there that is at all a leading indicator of demand interest ahead of the second half?

Speaker #3: Sure. I can take that. So in application general, yeah, non-recurring was down a little bit. We expected that. Actually, I thought it was going to be a little bit worse because we didn't have the Dell tech large license deal baked in.

Jason Conley: Sure. I can take that. In Application general, yeah, non-recurring was down a little bit. We expected that. Actually, thought it was going to be a little bit worse because we didn't have the Deltek large license deal baked in. That was just really timing between PowerPlan and some others around license and service activity. Nothing to really call out there. In Network, recurring was down a little bit at our MHA business. We on the call just more large customers with lower unit economics, and that actually hits the revenue line. Really, that was the only two things to call out. Well, actually, iPipeline also in the Network segment had some service timing. Overall, though, I would just say that bookings continue to look favorable.

Speaker #3: That was just really timing—between PowerPlan and some others around license and service activity, so nothing to really call out there. And then network recurring was down a little bit at our Empathy business.

Speaker #3: So we on the call just more large customers with lower unit economics and that actually hits at the revenue line. So really that was the only two things to call out.

Speaker #3: And then actually I pipeline also in the network segment had some service timing. But so overall though, I would just say that bookings continue to look favorable.

Speaker #3: We were up. We had a tough comp in the second quarter of last year, but we're still up on a TTM basis, that single-digit plus.

Jason Conley: We had a tough comp on the Q2 of last year, but we're still up on a TTM basis, mid-single digit plus. Pipelines look really strong. I think we'd expect to see that number creep up in terms of TTM bookings as we move into the H2 of the year. The environment's been good for us in terms of commercial activity.

Speaker #3: So pipelines look really strong. I think we'd like to see we'd expect to see that number creep up in terms of TTM bookings as we move into the second half of the year.

Speaker #3: So the environment's been good for us in terms of the commercial activity.

Speaker #5: Yeah. And just to spike one thing, Jason said on the deal on the services timing, this is book deals and it was pushing of deliveries of deals versus bookings that push.

Neil Hunn: Yeah. Just to speak one thing Jason said on the services timing, this is book deals, and it was pushing of deliveries of deals versus bookings that pushed.

Speaker #2: Yep. That makes sense. Thank you.

Joe Vruwink: Yep. That makes sense. Thank you.

Speaker #5: Thanks.

Jason Conley: Yeah. Thanks.

Speaker #1: Your next question comes from George Kurosawa with Citi. Your line is now open.

Operator: Your next question comes from George Kurosawa with Citi. Your line is now open.

Speaker #2: Okay. Great. Thanks for getting me in here and taking the questions. A lot of discussion in the industry about rising AI costs, token budgets kind of swelling anecdotes of token maxing.

George Kurosawa: Okay, great. Thanks for getting me in here and taking the questions. A lot of discussion in the industry about rising AI costs, token budgets kind of swelling, anecdotes of token maxing. Maybe just when I think about your position, it seems like I'm curious if there's a part of the value prop, if you think about the portfolio of businesses is built around or emerging around the more efficient deployment of AI? Then Jason, maybe your approach to managing AI costs and governing those internally.

Speaker #2: Maybe just when I think about your position, it seems like I'm curious if there's a part of the value prop you think about the portfolio businesses that is built around or emerging around the more efficient deployment of AI and then Jason maybe just your approach to managing AI costs and governing those internally.

Speaker #3: Sure. Yeah. So, yeah, obviously spend has increased for us just like everyone else. We're up, on an annualized basis, about 3X since January.

Jason Conley: Sure. Yeah. Yeah, obviously spend's increased for us just like everyone else. We're up about, on an annualized basis, about 3x since January. We think it's going to go up by the end of the year, by the way. I think we've been pushing adoption at the enterprise level and getting the business to fully move to agentic coding, and we're in the early days of that. I will say, we had our CFO summit a couple of months ago, and all of us were talking about that. We've been sharing a lot of best practices and tools around controlling spend, be it gateways or auto routing or reporting controls. That's fully in swing. I think the good news, it's kind of a hallmark of our model, is that the businesses are driving local ownership around balancing speed with control.

Speaker #3: We've been really pushing. We think it's going to go up by the end of the year, by the way. I think we've been pushing adoption at the enterprise level and getting the business to fully move to agentic coding.

Speaker #3: And we're in the early days of that. I will say we had our CFO summit a couple of months ago and all of us were talking about that.

Speaker #3: We've been sharing a lot of best practices and tools around controlling spend, be it gateways or auto-routing or reporting control. So that's fully in swing.

Speaker #3: I think the good news—and it's kind of a hallmark of our model—is that the businesses are driving local ownership, right, around balancing speed with control, and so that's sort of how we've managed it.

Jason Conley: That's sort of how we've managed it. In terms of how it gets into the product, we don't have to use the frontier models in our product. We're using some of the lower-level tools to do that. You don't always have to use AI in every case, by the way. You can codify certain rules and don't have to continue to ping and do calls when you're spooling up the agent. Overall, we're obviously mindful of it, but think we're in a good spot there in terms of managing the token spend.

Speaker #3: In terms of how it gets into the product, I mean, I think we use a lot of the—we don't have to use the frontier models.

Speaker #3: In our product, we're using some of the lower level tools to do that. And you don't always have to use AI in every case.

Speaker #3: By the way, you can codify certain rules and don't have to continue to ping and do calls when you're spooling up the agent. So overall, we're obviously mindful of it, but I think we're in a good spot there in terms of managing the token spend.

Speaker #2: Okay. Great. And then I did also want to ask about Aderent. It seems like the businesses continue to see good momentum. The legal tech space is rapidly evolving.

George Kurosawa: Okay, great. I did also want to ask about Aderant. It seems like the business has continued to see good momentum. The legal tech space is rapidly evolving. A lot of fast-growing privates in the space. Maybe not directly competing with Aderant, but at least in the same world. The hourly billings model itself seems to be maybe under some level of scrutiny. Just how do you feel that business is positioned over the long term and the durability of momentum there?

Speaker #2: There are a lot of fast-growing privates in the space, maybe not directly competing with Aderant, but at least in the same world. The hourly billings model itself seems to be under some level of scrutiny. Just how do you feel that business is positioned over the long term, and the durability of momentum there?

Speaker #3: Yeah. At our business is just awesome. Just so everybody frames, a lot of what you've talked about is sort of in the practice of law and the harveys and the gores and the anthropics of the world about how you sort of make the practice law more efficient.

Neil Hunn: Yeah. The Aderant business is just awesome. Just so everybody frames, a lot of what you've talked about is sort of in the practice of law, the Harvey and the Goras and the Anthropic of the world, about how you sort of make the practice law more efficient. Aderant is all about the business of law. We're the ERP, billing, collection, cash cycle, time capture, all of that, and it's just been a great business. Since we've owned the business, the market share has gone from 35 to 65. The growth rate's tripled. It's just been a great business for us. In terms of billing, yeah. We did a tuck-in last year at ProPricer at Aderant, which is specifically leaning into how do you help law firms think about strategically changing their pricing models to be more fixed fee or fixed fee with some overages, et cetera.

Speaker #3: Aderent is all about the business of law. So we're the ERP billing collection, cash cycle, time capture, all of business. Our we own the business to market share has gone from like 35 to 65.

Speaker #3: The growth rates tripled. It's just been a great business for us. In terms of building, yeah, I mean, there was we did a tuck-in last year pro price here at Aderent, which is specifically leaning into how do you help law firms think about strategically changing their pricing models to be more fixed fee or fixed fee with some overages, etc.

Speaker #3: It still is pretty low uptake across the non-pro pricer, just that pricing model, relatively low uptake across the industry, but you can see that happening in certain situations.

Neil Hunn: It still has pretty low uptake across the, not ProPricer, just that pricing model, relatively low uptake across the industry. You can see that happening in certain situations in Aderant. That's a business of law question that we will do. Sorry, VPD. Sorry, I gave the wrong answer, wrong deal we did there. We're excited by that opportunity to partner with our customers in that regard as this market evolves. A lot of the business, the practice of law folks, by the way, very much want to partner with us because we're the one that have the matter sort of number and matter details, and they need to know what matter their AI solutions are working in so that they can be in the system the right way. We partner with those folks when as appropriate.

Speaker #3: And Aderent that's a business of law question that we will do. Sorry, virtual price, VPD, sorry, I gave the wrong answer, wrong deal we did there.

Speaker #3: But we're excited by that opportunity to partner with our customers in that regard as this market evolves. A lot of the business—the practice of law leader folks, by the way—very much want to partner with us because we're the ones that have the matter sort of number and matter details, or they need to know what matter their AI solutions are working in so that they can be in the system the right way.

Speaker #3: So we partner with those folks as appropriate.

Speaker #2: Great. Thanks for taking the questions.

George Kurosawa: Great. Thanks for taking the questions.

Speaker #1: Your next question comes from Josh Hilton with ROPE Research. Your line is now open.

Operator: Your next question comes from Joshua Tilton with Wolfe Research. Your line is now open.

Speaker #4: Hey guys, thanks for sneaking me in. I'll keep it to one, given the time. I guess if we step back from a high-level perspective, it felt like we came into the year with an outlook that had some conservatism in it for the different things going on with Dell Tech, DAT, and Neptune.

Joshua Tilton: Hey, guys. Thanks for sneaking me in. I'll keep it to one given the time. I guess if we step back from a high-level perspective, it felt like we came into the year with an outlook for the year that had some conservatism in it for the different things going on with Deltek, DAT, and Neptune. We're halfway through the year, the full-year guide's going up a little bit. It sounds like there's signs of improvement in all three of those businesses. Can you just help us understand what, if any, conservatism is left in the guide? Did anything about how you're being conservative change regarding these three businesses? How do we just reconcile or understand full-year guidance going up for the year, but also where you're still being prudent and conservative in your outlook for those three businesses that I mentioned?

Josh Tilton: Hey, guys. Thanks for sneaking me in. I'll keep it to one given the time. I guess if we step back from a high-level perspective, it felt like we came into the year with an outlook for the year that had some conservatism in it for the different things going on with Deltek, DAT, and Neptune. We're halfway through the year, the full-year guide's going up a little bit. It sounds like there's signs of improvement in all three of those businesses. Can you just help us understand what, if any, conservatism is left in the guide? Did anything about how you're being conservative change regarding these three businesses? How do we just reconcile or understand full-year guidance going up for the year, but also where you're still being prudent and conservative in your outlook for those three businesses that I mentioned?

Speaker #4: We're halfway through the year. The full-year guide's going up a little bit. It sounds like there are signs of improvement in all three of those businesses.

Speaker #4: Can you just help us understand what, if any, conservatism is left in the guide? Did anything about how you're being conservative change regarding these three businesses?

Speaker #4: How should we reconcile or understand full-year guidance going up for the year, while you're still being prudent and conservative in your outlook for those three businesses that I mentioned?

Speaker #3: Yeah. I mean, I'll take a crack at that and then ask Jason if he wants to add any color. So just to reiterate what's already been said, it was a lot of the increase is sort of in the bank.

Neil Hunn: Yeah. I'll take a crack at that and then ask Jason if he wants to add any color. Just to reiterate what's already been said. A lot of the increase is sort of in the bank. It's H1 doing better than we thought. Then there's the mechanics of the H2 of Subsplash, CentralReach turning organic and then sort of easier comps, especially in the Q3, at TEP. Then we have DAT doing a little bit better. Those are the good things. There's still some range of outcome here that we want to remain prudent in the outlook, so that we can finish the year with strength.

Speaker #3: It's first half doing better than we thought. And then there's the mechanics in the second half of subsplash central reach turning organic and then sort of easier comps especially in the third quarter.

Speaker #3: At TEP, and then we have DAT doing a little bit better. So that's sort of good things. But there's still some range of outcome here that we want to remain prudent in the outlook.

Speaker #3: So that we can finish the year with strength.

Speaker #1: Your next question comes from Ken Wong with Oppenheimer. Your line is now open.

Operator: Your next question comes from Ken Wong with Oppenheimer. Your line is now open.

Speaker #4: Great. Thanks for taking my question. I'll just ask one as well. You talked about DAT market improvement. Is that something baked into the guide and the back half?

Ken Wong: Great. Thanks for taking my question. I'll just ask one as well. You talked about DAT market improvement. Is that something baked into the guide in the H2? Any thoughts on the freight broker liabilities ruling and how that might impact the business?

Speaker #4: And then, any thoughts on the freight broker liabilities ruling and how that might impact the business?

Speaker #3: Hey Ken. Yeah. So the way DAT's business works, as you know, it's mainly the carrier front. It's monthly subscriptions. So we've seen good progress in the first half.

Jason Conley: Hey, Ken. Yeah. The way DAT's business works, as you know, is being on the carrier front, it's monthly subscriptions. We've seen good progress in the H1. We think that'll continue into the H2, not baking in a massive inflection up.

Speaker #3: That'll continue. We think that'll continue into the second half, not baking in a massive inflection up, just continued slight improvement. And how that, as you know, how that works is sort of snowballs and then that'll roll over into '27.

Zack Moxcey: Continued slight improvement. As you know how that works, it sort of snowballs and then that'll roll over into 2027. Playing more for 2027 growth there, but certainly have some of that baked into the H2 in NS.

Jason Conley: Continued slight improvement. As you know how that works, it sort of snowballs and then that'll roll over into 2027. Playing more for 2027 growth there, but certainly have some of that baked into the H2 in NS.

Speaker #3: So, playing more for '27 growth there, but certainly have some of that baked into the second half and then us.

Speaker #5: And on the Montgomery SCOTUS broker liability, case, the couple of things on that. The punchline is we think this is a good thing for us in that what first of all, what's happened is a bunch of state laws on this basically got harmonized at the federal level.

Neil Hunn: On the Montgomery SCOTUS broker liability case, couple things on that. The punchline is we think this is a good thing for us in that first of all, what's happened is a bunch of state laws on this basically got harmonized at the federal level. At least we know there's one set of rules in which to play by now, which is good. What this really does is put more emphasis on the brokers to vet the carriers, which is precisely what Convoy and DAT does extremely well. This goes into the whole fraud situation from a year ago. We're part of the solution here, and we're encouraged that we get one set of rules to play with, and now we'll be part of a solution that everybody's focused on.

Speaker #5: So at least we know there's one set of rules in which to play by now, which is good. And then what this really does is put more emphasis on the brokers to vet the carriers, which is precisely what Convoy and DAT does extremely well.

Speaker #5: This goes into the whole fraud situation from a year ago and so this is where part of the solution here. And we're encouraged that we get one set of rules to play with and now be part of a solution that everybody's focused on.

Speaker #4: Great. Thanks a lot, guys.

Ken Wong: Great. Thanks a lot, guys.

Speaker #3: You bet.

Neil Hunn: You bet.

Speaker #1: This concludes our question and answer session. We will now return to Zack Moxie for any closing remarks.

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

Speaker #3: Thanks, everyone, for joining us today. We look forward to speaking with you during our next earnings call.

Zack Moxcey: Thanks 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.

Q2 2026 Roper Technologies Inc Earnings Call

Request DemoDemo

Roper Technologies

Earnings