The Roper Technologies' Third Quarter 2015 Financial Results Conference Call will now begin. Today's call is being recorded. I will now turn the call over to John Humphrey, Chief Financial Officer.

Thank you, Wes, and thank you all for joining us this morning, as we discuss our third quarter results. Joining me this morning is Brian Jellison, Chairman, President and Chief Executive Officer; Paul Soni, Vice President and Controller; and Rob Crisci, Vice President of Planning and Investor Relations. Earlier this morning, we issued a press release announcing our financial results. The Press release also includes replay information for today's call. We have prepared slides to accompany today's call, which are available through the web cast, and also on our web site at www.ropertech.com. So if you please turn to slide 2, we begin with our Safe Harbor statement. During the course of today's call, we will be making forward-looking statements, which are subject to risks and uncertainties as described on this page and as further detailed in our SEC filings. You should listen to today's call in the context of that information. Next slide? Today, we will be discussing our income statement results for the quarter primarily on an adjusted basis. A full reconciliation between GAAP and adjusted measures is in our press release this morning and also included as a part of this presentation available on our web site. For the third quarter, the difference between GAAP and adjusted, consists of purchase accounting adjustments. One, to acquire deferred revenue and our recent software acquisitions, that totals $2.2 million. In addition, we have an inventory step-up expense for RF IDeas of $2 million. As a reminder, these adjustments represent -- absent our acquisitions, those businesses would have been able to recognize their profitability and revenue. Now if you please turn the slide, I’ll turn the call over to Brian Jellison, Chairman, President and Chief Executive Officer and after his prepared remarks, we will take questions from our participants. Brian?

Thank you, John, and good morning everyone. So we start here with our Q3 enterprise highlights. We had a record third quarter, which we thought, was significant, given sort of issues associated with the end markets and foreign currency. Our revenue actually was modestly up from last year at $886 million and our book-to-bill was 101 and above almost everywhere, with the exception of RF, which is of course project driven. Growth was led by Medical, which was up 12% in revenue and RF Technology, which was up 6% in revenue. The declines that we saw in industrial and energy were virtually exactly as we had modeled. FX was about a 3% headwind in the quarter, and that result was a bit of negative organic, as you can see it was about 2% with those industrial and energy headwinds. Gross margins were spectacular, they were up 130 basis points to 60.7% over last year, and even up sequentially from the second quarter. EBITDA margins were up 80 basis points to 34.4, both records. Net earnings were up 4% and our diluted earnings per share were $1.61 versus our guidance of $1.53 to $1.57. Our free cash flow was $220 million, which was up sharply from the second quarter's $162 million and the $220 million of free cash flow represents 137% conversion. We deployed $435 million in three acquisitions, RF Ideas, Atlantic Health Partners and On Center, which we have discussed earlier, and we just completed the Aderant acquisition on Wednesday, which was $675 million net of tax benefit acquisition, we will talk more about this morning, and today we are announcing two more transactions, CliniSys and Atlas Medical. So it was really an outstanding quarter and of course great capital deployment for us. Next slide; if you look at the…

So Wes, I think we are ready for the Q&A portion of the call.

[Operator Instructions]. We will take our first question from Shannon O'Callaghan at UBS.

Good morning guys.

Hey, good morning Shannon.

Hey Brian, as you further expand into software right, we are in medical, now we are adding legal, and you mentioned the ability to go into potentially other professional services. I mean, is there any eventual barrier where a certain industry has some level of domain expertise, where you guys couldn't acquire and succeed with the software business like this in that industry? Maybe just a little understanding of why can you succeed in legal or why could you take this to other areas and is there ultimately somewhere you couldn't go?

Well I think that, we are always funded by these niche transactions, right, so we don't want to go into some situation, where people are going to write software off of our software. We are really providing some kind of service to somebody, we happen to be using software to achieve the benefit of what it is. But you have to have domain experience. So our guys at the core are software people, they are domain experts who use software to create a solution for somebody, that's efficient and effective for them. So as long as we continue to see things that are in those spaces, we will be able to make the acquisitions. Couple of sessions ago, I said, when we did Sunquest and we did MHA, they were really-really as important for the future of Roper Technologies, as Neptune and Transcore back in 2003 and 2004 for Roper Industries. Sunquest and MHA gives us world class leadership organizations, that allow us to do bolt-on acquisitions and things that are complementary to them, and most of what we have done this year, has something to do with one or the other of those organizations. Aderant is similarly positioned to do that. It’s a great organization. You can go back and look at Chris Giglio, he did a YouTube video on the day of the acquisition, that was just brilliant and you can see how he is expressing the fact that now being owned by a public company, his customers could have confidence that they will get the continued investment for his program to continue to become the most important player in that area. So we are always kind of agnostic about what it is the business does. So we don't really have a boundary around the business, as long as it hits the excellent magic high recurring revenue, great cash flow, prefer to have few, if any, assets and domain experience, then we are pretty wide open on where we would deploy our capital. Now, we also have some internal things, we always want to be able to add value to the business in some meaningful way that we can understand, and we want to think that people working our government system will perform better than they were, when they weren't in it. And if we think, in our diligence process that, neither of those would happen, then we would abandon the deal.

Okay. That helps. And then, on some of the pressure against the -- or the performances amidst the oil and gas pressure, you talked about the sequential margin improvement that you got in energy, but a little less happy with the margin performance in industrial tech in the quarter. Can you just talk about the differences in terms of -- maybe just basic blocking and tackling of costs out, or maybe just a little bit more on what drove that and what you expect to improve in the fourth quarter?

Well I think that, what we got out of deleveraging and energy was more traditional, in the sort of 30-35, 38% type of stuff that we saw in most of the businesses. We didn't think that upstream guys in oil and gas and industrial, which by the way, was less than 10% of our revenue. They delevered it more than 50%, which we though was unacceptable, and we have shared that with them [ph]. So they were moving pretty quickly, but they haven't been as used to that kind of change, because they have been driven really by the fracking opportunity, and there really wasn't any cyclical uptick -- it always has gone up, they have never really gone back for a long period of time, and they just didn't do quite as good a job as quickly, as the energy people did. But that problems are behind us.

Okay. Great, thanks guys.

You have the City of Toronto cycling through, so that's an $8 million or $9 million negative income thing, which isn't useful.

Right. Got it. All right. Thanks guys.

We will take the next question from Deane Dray at RBC Capital Markets.

Thank you. Good morning everyone.

Good morning Deane.

I'd like to stay on the oil side of the business for a moment, and you mentioned that in the energy segment, you were expecting to see some cost savings benefits flow through, as well as fourth quarter, seeing some seasonal benefits. I was hoping you could provide some color there?

Well usually, you get -- typically, our Petroleum Analyzer business will get and [indiscernible]. They get fourth quarter seasonal activity, that is oftentimes MRO that's left over. These things we have are really not capital sales, and so they have every year, even -- I think, now every year they have an increase in the fourth quarter. So that will just give us a little bit more revenue in Q4 than we enjoyed in Q3, and with that, get a little bit better margin. They have been very nimble in responding, I don't know John, if you want to add anything to that?

Yeah I mean, what I would tell you is that we are expecting some sequential increase from Q3 to Q4. Not as much as what we have seen in the past, in terms of the dollar increase. If you look back at kind of how this segment has performed in 2012, and 2013, and 2014, well we tried to add a nice jump up there. We are expecting some, but not as much as in the past, just because of the other headwinds that are present in new oil and gas markets.

And how about the cost savings benefits?

The cost savings benefit will continue to just manifest itself most of the costs out would happen in the first half. And so that, that flowthrough just continues in the fourth quarter against last year cost levels.

I do think, from a read-across [ph] basis, everybody believes there [indiscernible] of what they are seeing from a revenue viewpoint. We went through our quarterly review process and people certainly didn't have any optimism for the fourth quarter, but they all though things should pretty well bottomed out, and they were feeling better about Q4 than they did in Q3, and we don't yet have their forecast for 2016, but in the verbal discussions, people feel a little bit better. So the good news for us, is its getting to be such a small portion of the enterprise, that it doesn't have much effect, as you can see here. Because upstream is probably down 35% this year, and even with that kind of drag, we had record revenue and record cash and earnings performance in the quarter.

Thanks. And just to follow-up on Aderant, did you disclose what the growth has been for Aderant and the renewal rates?

The renewal -- we said retention was about 95%. I don't think we have said a lot about growth. But its going through a little bit of a growth spur, as its gaining share against its primary competitor, who has got some issues. They will have to deal with terms of the software that supports their system historically.

And also remember that this is another business that has a substantial install base, so you get a lot of maintenance revenue, right. So this is not a SaaS business. They have a small SaaS offering, which we think has very interesting prospects. But the majority of this business is a traditional license and maintenance model, and so when you talk about what's the growth rate -- the underlying growth rate of the ongoing maintenance, which is kind of in the low single digit range, but then you have the upside opportunity, as well as what they are capturing today, which is new share and new applications, which is growing much faster than that. So you blend it all together and it has a similar to Sunquest, kind of in the mid to high single digit, is what we expect of this business going forward.

Great. Thank you.

The next question will come from Scott Davis at Barclays.

Hi. Good morning guys.

Good morning Scott.

I have been following your stock for a long time. I don't think I remember a time period where you have had such a flurry of deals and pretty attractive stuff on the surface at least. But talk to us a little bit about what would you attribute that to? I mean, sometimes maybe these things work out in the timing. But is there an acceleration on part of sponsors to try to pare some assets off their books at this time, and you're benefiting from that?

I think that might be the case more so in the next 18 months than it has been in the last 18 months. There has been a lot of stuff for sale, but there is always a lot of stuff in the pipeline. But I do think you are starting to see the signs of people getting worried about -- to get any kind of uptick on the risk premium around CCC credits and financing. People are going to start to worry about their exit multiples versus what their entrance multiples order. So I think everybody is wondering about what their exit time ought to be, if it should be moved up. But boy, the guys that we work with and talk to all the time, I mean, they are still deploying capital like crazy. So you see them making big bets and the launch of [indiscernible] very high trailing multiples at least, for what they hope will be able to grow into. So I don't think that there was anything particularly unusual, I think that we have owned Sunquest long enough, that we have a real purposeful strategy about what we are building out there, that's just starting to be able to be seen. We are still going to tell everybody exactly what we are doing. But when you look back and you see what we have done with data acquisitions and with strategic healthcare partners for MHA and Atlantic Healthcare. For MHa, and what we are doing here with CliniSys and what we are doing with Atlas, a couple of years from now I think people will -- we won't ever get another question about what ring counts look like.

Understood. And just to follow-up -- and I understand that's business as well. But you talked about CliniSys being kind of the Sunquest of Europe. I mean, is the product offering comparable enough that you could consider merging these two entities or having commonality in management or any kind of synergies that would be not traditional or less traditional for Roper?

Well the problem of course is the U.K. health system, right. So Germany is different, U.K. is different. So there are regionally specific regulated industries that require different kinds of performance criteria versus what Sunquest faces in the U.S. There certainly will be synergies in the sense of improving our software development capability for those entities, and that's good. I can see, John's anxious to add too.

Yeah I don't think there is any -- in fact, I know there is no plan to merge those things. What we do see is the opportunity for these businesses to work together, to bring new solutions to the market. There are kind of similar unmet needs and opportunities to do things, whether its around blood bank or other solutions. So there may be opportunities for the two businesses to work together in the future. But as far as the core offering, its very-very niche and kind of purpose built, and we don't expect those things to have any overlap.

Fair enough. Thanks good luck guys. Thank you.

We will take our next question from Joe Ritchie at Goldman Sachs.

Thanks. Good morning guys.

Good morning Joe.

So, you guys operated really well this quarter, despite organic growth turning negative, and I guess I am just trying to parse out some of the comments for 4Q and beyond. Do you guys see the third quarter as a trough in your organic growth? And as you kind of think about 2016, clearly, there are some headwinds this year, with energy, the Toronto Project, tough software comps and Sunquest. I am just trying to get a sense for just general comments across your portfolio on your organic growth in 2016?

Well I think 2016 is going to be a lot easier for us, because the headwinds that we faced this year should all subside. So I don't think that oil and gas would be worse in 2016 in a material way than it has been in 2015. Its likely to be stable or perhaps up a little bit on some of the areas. I think our fourth quarter will be kind of similar to the third quarter, but 2016 is a different story. So we are going to enjoy some of the acquisitions that we have made, will become organic in 2016 and that always helps. So just about everything is favorable. In 2016, you get rid of the City of Toronto drag, which, to bear, we get rid of the Rugged Mobile kind of winding, that has been down. We do get rid of a lot of drags. And so organic, these will be more favorable next year.

Okay. That's helpful Brian. And maybe on my follow-up, it seems like this year you have been a little bit more apt to take a look at your portfolio, little bit closer with the divestitures of both Black Diamond and Abel. I am just curious, whether you guys are -- as you think over the next couple of years, will there be continued portfolio pruning as you continue to become more of a software type entity?

Well, we still love our cash generation businesses out there. They don't have any amortization. I don't know, maybe one of these days, we are going to report it on our cash earnings. It would be a different story. But man, the EPS we get out of our historical business is pretty spectacular, 33% EBITDA and fluid handling. Its hard to bind something with 33% EBITDA, right. So these businesses are really great. We think they are valued pretty highly inside our overall portfolio. I think people approach us -- I mean, our phone rang off the hook, when people saw -- we sold Abel, everybody in the world is calling us up about, hey can we buy your pump businesses, can we buy your energy business, can we do this, can we do that? And the answer is no. I mean, what are you talking about, you guys traded at a multiple that's lower than the imputed value on our business. And if we are going to do it, then we are going to do it for shareholders, so that shareholders get a premium to what they would be. So I do think there are creative things that people kind approach us on, and I was willing to listen to various things, but we like the businesses that we own today, for the most part.

Thanks Brian. Helpful color.

We will take the next question from Christopher Glynn at Oppenheimer.

Thanks. Good morning. I will resist the temptation to cease this leading [ph] opportunity to ask about rate comps [ph]. Speaking with energy, you did have a really dramatic sequential improvement on flat revenues with margin there, so just wonder if there are any trade-offs with that kind of material, really bring up some margin upside? And then how to think about, what that says about the leverage or the margin performance, as those markets actually return?

All good news. As they -- let us know when they are going to return by the way, we are not aware of that yet, Chris. But if they do come back, we will be printing money there. There is no question about that. We are already printing money in a hideous market. So yeah, that's all good news. But there is a little bit of a loss [indiscernible] numbers. The difference I think, if you look at the op and energy in the second quarter, and the op and the energy in the third quarter, we are up about $4 million in operating profit quarter-over-quarter on the same revenue. So you get sort of a nice kick there.

And also Chris -- so structural. So the structural piece of these businesses, is the fact that they have a highly variable cost structure. So we don't have a lot of fixed costs that are hard and expensive and time consuming to take out, and then also, hard and expensive and time consuming to put back in. So these are primarily people related expenses, and so I don't expect that to be structural from that standpoint. Its flexible, and that's the important thing for those businesses, and to make sure that they are able to flex very quickly with volume decreases, but also be able to capture opportunities when volume comes back.

Makes sense. Great. Thanks.

We will get next to Jeffrey Sprague at Vertical Research Partners.

Thank you. Good morning gentlemen.

Hey, good morning Jeff.

I just wanted to circle back to kind of the deal activity again. A lot of moving pieces there. First, just to help us get our head around everything? Can you just kind of square us up? I am sure you don't want to go through every deal individually, but collectively, the $1.7 billion you're spending here in 2015, kind of what the combined EBITDA multiple might be or the run rate revenues from this basket of deals?

Well, we get some tax benefits in there, but on balance, I'd say, our purchase price for these things has been around 11 times, first year EBITDA. So you can kind of use that as a guidepost into what we would expect for next year.

Net of revenue?

In terms of revenue, for our first 12 months of ownership for all of that, right? So the first 12 months for Strata and SoftWriters and Data Innovations is largely in our numbers this year. But when we add all of that up, we get to something in the $375 million range.

Right. That's helpful. Thank you. And then just a -- actually just a quick modeling question, John, has the tax rate got a downward bias here, is that part of the guidance construct in the Q4?

Not really. Probably 31% or something like that into the fourth quarter, right? 31.5. But its hard to feel you have a downward bias, when you pay our tax rates. We are not in aversion, we just don't have any kind of things that are going on around the world. So our tax rate, pretty much for the year, if you look back historically, its going to be around 29% to 30% most of the time.

Right. And then just one other one, Brian, I totally get your point on the industrial businesses, right, they get a Roper multiple instead of some other multiple, which makes it difficult to exit and you got a lot of cash you can deploy. But can you just give us a little bit of additional color on why Abel and why that might be different from the others and how you will be looking at this thing; because I am sure, you do have an open mind around value over time. What's just kind of the overall thought process there?

So Abel is really unique. In terms of the pumping technology it uses, it is unrelated to what we do at Cornell and its unrelated to what we do at Roper, which are our other two pump businesses. So it really offers us no surges of any kind, from a technological development viewpoint. The PP&E that's used to generate an Abel pump, these are really large. They are more like Flowserve or Dresser-Rand or something like that, or just totally -- typically in large test facilities, mostly witness tests. A lot of their growth, which should be quite good, will be in India, related to power generation. So the end markets that they serve, we are going to require additional capital deployment for us, to continue to grow those businesses. And it wasn't the place we felt like we should invest, therefore, we really felt that that would be better, if we cut this loose to somebody who is seeing it as a growth platform, which it can become. I think it’s a good acquisition for the people that bought it, and I think it will perform quite well for them. But we are able to get out if it at €95 million and, would be hard pressed to say, sort of 12 times trailing number was something we should turn down.

All right. Thank you.

We will take our next question from Richard Eastman at Robert W. Baird.

Yes. Good morning, Brian, John, Rob.

Hey, good morning.

Brian, a quick question. TransCore has had some really nice wins, recently in Massachusetts, Central Florida. There has also been some commentary about Saudi Arabia and the Riyadh, maybe dialing down the metro spend in Riyadh. And I am just curious, when you sit through all that and put the wins there, with potential -- a little bit of softness in Riyadh, how does that business look over the next 12 months? Is the backlog support -- comfortably support a mid-single digit growth rate for TransCore?

Yeah. I think so. I mean, its cyclical up and down in terms of projects, its not sort of cyclical with the economy, but we are certainly not seeing any slowness. In Riyadh, they are expanding the project. Somebody said to me I think this morning, oh my goodness, Saudi Arabia, they need to borrow money, they want a bit of cash, they can't do any of that. I mean, wow, people do react on a lot of various things. I do not think Saudi Arabia is going out of business in the next month and a half, and I don't think Riyadh is either. So this is a multiyear contract, and once you have the work deployed, people have to have the backroom operations, they can't do it on their own. So there is a lot of different things that happen. Now this is mostly a traffic translink project, with a lot of upfront opportunity that's more civil engineering, and as that gets behind us, then actually margins will improve.

Okay. And then again, with the wins, it seems like most of that is incremental in new wins, so you have to feel pretty comfortable about the business then?

We have ample opportunities to go through with TransCore and the rest of our businesses to see what the next 12 months or the next three years looks like, and we will be able to share that totality of that picture at the fourth quarter, when we initiate guidance for 2016. So I mean, just taking out one piece, yeah, we feel very good about that. But wait for the whole picture.

Okay. And then, can I also just ask you internally, with Atlantic and mHA and all the conversations going on around generic pricing on the drug side, what have been the internal discussions there on the price component at those two GPOs? It sounds like you had some new customer wins here, which is really a positive, but any internal discussions around this generic pricing issue, and the impact, positive or negative it could have on those two businesses?

I mean so far, it has been modestly positive. But I would say that we are not in those conversations. We don't set prices, we help our members negotiate the best pricing and the best supply chain solutions that they can obtain. So it has been modestly helpful, but not by any stretch, is it the largest piece of the MHA growth that we have experienced.

Okay. Nice work and congrats on the quarter.

Thank you.

We will take the next question from Joe Giordano at Cowen.

Hi everyone. Good morning. Thanks for taking my questions.

Good morning.

I had a question on CliniSys and maybe if you can help frame that market generally. You have your positioning in Sunquest kind of niche in the United States and then CliniSys you said is the Sunquest of Europe type property. Maybe, some color on how many -- if we look globally, what does this market look like, how many major players of that kind of size really are there?

Here is a situation, we just signed the agreement. When we are filing-- a lot of material like, either we do here with HSR, so that's all going into customary merger control reviews. So we have agreed with the seller, that we are not going to provide any information until after the deal closes. So I can't tell you a lot about that. But the end markets are quite similar to what happens here in the United States, the hospitals. While people think that there is universal healthcare in the U.K., there is actually a wide variety of potential providers that side that system, and CliniSys allows these people to have a uniform operated platform around all the things that go on, lapse. And we will be able to make them be more efficient for the healthcare system, because they will now get access to our Data Innovations technology and they will get access to some of the ways we do things at Sunquest. So we think from an end user viewpoint, the owner who has built this very good business in the U.K. and recently acquired business similar to it -- and Germany will benefit from providing additional services and clarity to the people that use hoar [ph] system to try it in laboratories. So we are bullish about that, but that's about as far as I can go, Joe.

Fair enough. You mentioned a slight strength in the materials analysis and industrial tech, and I am just trying to get a sense of how much is that market dynamic or how much is that unique to your businesses there? Maybe we can touch on that for a second?

Its probably about 50-50. As you see global industrial production, whether that's around steel or automobile, so that is -- Joe we have got a little bit of positive tailwind. But you also have a lot of new and upgraded products and the expansion of Struers' global reach, and so it puts them in a very good position to continue to take some share. And we also have a very good line of other things, not just on the material analysis, their traditional area, but also some new things around hardness testing and some things they are introducing there, that has helped them. So it’s a little bit of both, little bit of market, little bit of self-help.

Great. And then just lastly, one quick housekeeping one; are you guys having any impact of Aderant in the fourth quarter guidance that you put up?

Sure.

Like on an adjusted level, you have adjusted accretion in there?

Yes. I mean, it will help us out by a couple of pennies.

Okay. Fair enough. Thanks guys. Appreciate it.

You're welcome.

That will end our question-and-answer session for this call. We now return back to John Humphrey for any closing remarks.

Okay. Well thank you all for joining us this morning, and we look forward to talking to you again in late January.

And that concludes today's call. Thank you for your participation. You may now disconnect.