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

Good morning and thank you all for joining us as we discuss the third quarter financial results for Roper Technologies. We hope everyone is doing well. Joining me on the call this morning are Neil Hunn, President and Chief Executive Officer; Rob Crisci, Executive Vice President and Chief Financial Officer; Jason Conley, Vice President and Controller; and Shannon O'Callaghan, Vice President of Finance. Earlier this morning, we issued a press release announcing our financial results. The press release also includes replay information for today's call. We have prepared slides to accompany today's call, which are available through the webcast and are also available on our website. Now, if you'll please turn to Slide 2, we begin with our Safe Harbor statement. During the course of today's call, we will make forward-looking statements which are subject to risks and uncertainties as described on this page, in our press release, and in our SEC filings. You should listen to today's call in the context of that information. And now, please turn to Slide 3. Today, we will discuss our results for the quarter primarily on an adjusted non-GAAP basis. Reconciliations between GAAP and adjusted measures can be found in our press release and in the appendix of this presentation on our website. For the third quarter, the difference between our GAAP results and adjusted results consists of the following items; amortization of acquisition-related intangible assets, purchase accounting adjustments to acquired deferred revenue and related commission expense, transaction related expenses for completed acquisitions. And lastly, we've adjusted our cash flow results to exclude income tax payments deferred from Q2 to Q3 due to COVID-19 and cash taxes paid for the Gatan divestiture. As a reminder, GAAP requires tax payments for a gain on sale to be classified as an operating cash flow item, even though it is related to a divestiture. And now if you please turn to Slide 4, I'll hand the call over to Neil. After our prepared remarks, we'll take questions from our telephone participants. Neil?

Thanks, Zack, and good morning, everyone. Thanks for joining us. Let's go ahead and get into this morning's content. And as we always do, we'll start by reviewing our agenda. I'll begin discussing our enterprise highlights for the quarter, which was a very busy and very productive quarter for us. To that end, I'll briefly review our acquisition activity. Rob will then discuss our financial performance and capital market activity. Afterwards, I'll walk through a detailed segment review and associated outlook, followed by our enterprise fourth quarter and raised full year guidance. We will then look forward to your questions. Now with that, let's turn to a brief run through of our Q3 enterprise highlights. Next slide please. Third quarter demonstrated the strength our execution capabilities. First, on an operating basis. Second, on a capital deployment basis. And finally, from a capital markets perspective. Operationally, our revenues and EBITDA continue to grow, albeit modestly, despite the well documented economic challenges resulting from the pandemic situation we're all facing. At a summary level, our software recurring revenues continue to grow. Recurring revenue growth is very important for us. This indicates high levels of retention, demonstrates our ongoing and increasing relevance we have with our customers and provides for a more stable and predictable forward financial model. However, as anticipated, we experienced modest declines in our perpetual license revenue tied to lower levels of market activity across a few of our software end markets and a difficult comp from a year ago. We discussed this on each of our last few calls, COVID is absolutely driving faster adoption of our SaaS or cloud-based recurring revenue solutions. This is a very healthy and positive trend. Separately, we continue to see very nice momentum for our products and software used in the fight against…

Thanks, Neil. Good morning, everyone. We appreciate your interest as always in Roper Technologies. Turning to Page 7, looking at our Q3 income statement performance. Total revenue increased 1% to $1.369 billion. Organic revenue for the enterprise declined 3% versus prior year, similar to what we saw in Q2 and about what we would expect for Q4 as the pandemic continues. We had positive organic revenue growth in both Network Software & Systems and Measurement & Analytical Solutions. We had a slight organic decline in Application Software due to the difficult perpetual license comp we discussed last quarter. Lastly, and similar to Q2, we experienced a 25% decline in our smallest segment, Process Technologies. Margin performance was once again quite strong with gross margin of 64.2% and EBITDA margin down 10 basis points versus prior year, but up quite a bit sequentially to 36.6%. EBITDA grew in the quarter despite the pandemic to a Q3 record of $501 million. Tax rate came in at 22.2%, which was a couple of points higher than last year. So that all results in adjusted diluted earnings per share of $3.17 which was well above our guidance range aided by both better organic performance and some accretion from our Vertafore acquisition. So once again, strong execution by our business leaders in a very challenging environment. Next slide, turning to Page 8 on net working capital. Here we look at the three year trend on working capital which continues to improve. You may recall we exited last quarter with negative working capital of minus 5.4%. And now we further improved working capital as a percent of revenue down to minus 6.3%. Continuing to improve on these important working capital metrics, despite the challenging macro environment really is a testament to the excellent work of our…

Thanks, Rob. Let's turn to our Application Software segment. Revenues here were $451 million, down 1% on an organic basis; EBITDA was $201 million or 44.6% of revenue. Similar to the way we started our commentary about this segment during our last call, our retention rates and thus our recurring revenues remained strong in the quarter. In addition, we're continuing to see an acceleration of our Software as a Service or cloud solutions across this segment. This trend will provide a long-term benefit for both our customers and for our business. Our customers outsource the operations of their software applications to us and gain the benefit of being on the most recent software release at all times. Our businesses are improved by having higher levels of recurring revenue and customer intimacy. Importantly, we believe this migration to the cloud will be a net growth driver for us. So based on this SaaS migration trend, and our continued high levels of customer retention, we saw recurring revenues grow mid-single-digits in the quarter. We expect this strength to continue into next year. As an offset, and as expected, we saw declines in our perpetual revenue stream for two reasons: first, a difficult prior year license comp; and second, a slowing of new logo licenses associated with the current macro headwinds. Things remain solid at Deltek. We saw normalized bookings increase double-digits in the quarter, coming off very large perpetual bookings a quarter ago. They were seeing particular strength across their GovCon offerings and with their subscription content solutions. Recurring revenues are up double-digits versus this time last year. And as you'll note towards the bottom of this page, a business that has been negatively impacted in this segment is CBORD. To remind everyone, CBORD designs and delivers K-12 and university campus integrated…

[Operator Instructions] Our first question will come from Deane Dray with RBC Capital Markets. Please go ahead.

I was hoping you could quantify the revenue push out for the New York City congestion tolling project. We've been thinking $30 million in the fourth quarter. So that's obviously lower, but hopefully you can quantify that. And can you clarify whether there's been any change in scope? Or are these pushouts more as a result of COVID kind of logistics?

Yes, Dean, it's Neil. I'll take the second half of your question and give the first half to Rob. So scope is completely unchanged. The project continues, it's just slower, pushing a little bit as we discussed in the prepared remarks into next year. But yes, the scope is fully intact.

Yes. So it's continuing, as Neil mentioned. And so there's now, we've got about $100 million for the project this year, right? So maybe that's down $10 million or so versus what we said last quarter.

Got it. And then I don't know if it would be Neil or Rob, but could you expand the point on fourth quarter seasonality. Maybe you can start with the free cash flow expectations because just given the macro, you're concerned about what might be seasonally normal, what might not happen or play out the same? And then within the businesses, is there -- just remind us on where and how you would expect a seasonal impact in the fourth quarter?

Sure. So on cash flow, as I mentioned earlier, we feel great about where the conversion is year-to-date and Q4 is generally a high cash conversion quarter because of the annual billing of the software businesses. And the fact that we don't have -- most of the tax payments are usually in the first half of the year. So tax payments are less in the fourth quarter. On the seasonality. So yes, I think it's a good point. I mean, normally, if you go back historically, right, when Roper was more of the cyclical businesses, as a percent, you'd get the Q4 bump in what used to be our energy segment. So there's some of that. I think, sequentially, we still have -- it's just a very small part of Roper, what's happening this year, as Neil mentioned, is our medical product businesses, really specifically, Verathon had an enormous second and third quarter driven by the COVID surge. And so their fourth quarter versus the third quarter is down about $30 million of revenue. And they're still up quite a bit year-over-year. And we're hopeful that happens, right? If the COVID surge gets worse, then Verathon will sell more products, but we're hoping that doesn't happen. So that's what's all included in our guidance for Q4.

Our next question will come from Allison Poliniak with Wells Fargo. Please go ahead.

Just want to go to your comments around iTrade and Foundry. Understanding COVID is certainly having disruption. But obviously, those markets are quite a bit more challenged than maybe others. Are you seeing any sort of longer-term impairment to some of those customers? Any color?

No, I don't think so at all. Take iTrade, as I mentioned in our prepared remarks, I mean, that business is partially indexed to sort of the institutional food, and that's also partially indexed to retail. So institutional down, retail up, it just balances a little bit towards the negative. The renewal rates for the more institutional side have been fine. There's no -- they're not dropping off. Obviously, the contract sizes have gotten a little smaller, but the retention rates of the actual customers are the same. On Foundry, Foundry has had a good year. Recurring revenues are up. The EBITDA is up in that business. It's just there's the way that the flow of work happens in converting live production into post and to releasing content, either film or television. There was a fair amount of backlog being worked on in the first half of the year. Then there was this pause in 2Q of live action, came back on slowly in Q3. It's fully ramped up right now across the globe. That creates more content for post. And so there's a couple of quarters inside the middle of this year where the number of net new software sales to new customers paused or waned a bit, but the recurrence was high and we expect that to fully bounce back as the pipeline is filling back up with content.

Understood. And then just kind of going back to TransCore and some of the other projects. Anything tied to municipal in your portfolio that you're starting to see incremental challenges or delays there?

I would say no. I mean, if you -- on the municipal side, the -- on TransCore, no, I mean, the bidding activity, the sort of the sales pipeline of the TransCore are quite good. There are a large number of projects that are sort of in the process of being awarded now. So that's a good leading indicator. The municipal budgets at Neptune are largely intact and then renewed and sort of dollars are being spent against them on that municipal side. So no, I mean, I think we feel pretty good about the spending -- the budgets that are out there to be spent across the municipal parts of our business.

Yes. It’s really just project slowing, which is probably mostly due to COVID, right? It's just things are just taking longer to get going at TransCore for the most part.

Our next question will come from Christopher Glynn with Oppenheimer. Please go ahead.

So I was curious about Sunquest. It sounds like you have some fresh momentum going there. Are you moving past the kind of net attrition, modest slide that, that business has been seeing?

So I’d characterize Sunquest -- hey, they've had just a great year. They're actually going to be up a little bit in EBITDA this year versus last year. Based on all the activities going on around COVID and a little bit of strength we're seeing in the diagnostic, the molecular part of their business, a new product offering and some public health offerings they have as well. That said, I think we still got -- I sort of view this year as a pause in the longer-term trend. I would expect that business to have faced a little bit, maybe a year or so, maybe it's hard to pinpoint it precisely, but call it a year to 2 of headwinds, then it will normalize, stabilize and get back into sort of maybe a low-single-digit organic growth sort of business.

Okay. And as you're focused on debt reduction in the next year, year and a half, would you still anticipate some EPSi or WELIS type of additions to existing platforms?

It was going to be -- the bar is very high for those. It wouldn't surprise me. That said, if there was a little bit of bolt-on activity, but our principal focus here is to deleverage for the next year or so.

Our next question will come from Steve Tusa with JPMorgan. Please go ahead.

Can you just give us some color on how, with a little more precision, your revenue performed in license, maintenance and recurring? I mean, you guys are definitely giving a lot more really solid color directionally on this stuff. But just love to understand, you can talk about it enterprise-wise, if you want. Just a little more precision on kind of how those 3 buckets performed in the quarter?

Yes. So I think overall, recurring revenue, which right is maintenance plus subscription, as I think Neil mentioned earlier, was up mid-single digits. The license and the services piece is impacted by COVID, as we talked about all throughout the year. So there's some declines there, and that's what we get you to that. Basically, overall, the software businesses were in line, a tad better than we had coming in really since the pandemic began. I think overall, our software revenue is about 80% recurring, and that's the maintenance and the subscription piece, which continues to grow. Our retention rates continue to be very, very high. So it all bodes well for next year when the services and the perpetual stuff should start to come back.

So I guess, shouldn't that be dilutive to margins for you guys? Is it, aren't licensed higher-margin than the recurring side?

Yes. I mean, the perpetual…..

Not services.

Yes, perpetual licenses or high-margin services is the lowest margin part of a software business and recurring revenue was quite high, as you know. Also, these -- not just us, pretty much every business on the planet, their cost structure is lower this year because of the COVID -- you just couldn't spend money on travel and customer meetings and things like that. So that became a natural offset to some of the perpetual headwinds.

Our next question will come from Julian Mitchell with Barclays. Please go ahead.

This is Jeff Hou on for Julian. Maybe just asking on, you guys mentioned the short-cycle business is seeing a bit of recovery here. Any -- is there any color you can give on sort of how the cadence of that has looked? Was there some pent-up demand earlier in the quarter? Or are we still seeing kind of more gradual sequential improvement that should continue ahead?

Yes. I appreciate the question. It's such a small part of our business, we reported and talked about last quarter is the consumable piece was starting to pick up. That continued -- the strength of that continued through the quarter. We saw some pickup of the capital spending, particularly at our Struers business. I think the pace throughout the quarter was just improving a little bit sequentially through the quarter. I mean, it was pretty straightforward for us.

Yes, very gradual sequential improvement. That's a good way of stating it.

Thanks for that. And then Rob, you touched on it earlier, but obviously, we're seeing COVID cases and hospitalization rates kind of going up over the past week or two. How does this kind of line up with the Q4 outlook and sort of the expectations for the medical businesses that are benefiting from COVID, the ones that are sort of -- would benefit from more normalization?

Yes. So we've really had 5 businesses this year, right, that have benefited from COVID financially. Verathon, IPA, we talked a lot about in our 3 businesses and our laboratory software platform, and they're all at the frontlines of fighting this thing. And so there would be some give and take, if COVID surged and you had more hospitalizations, which I don't think has happened yet, if that started to happen and those businesses would probably do more and then that could hurt other areas. So it's great of having this big diversified portfolio of businesses. Whereas we'll do great in a post-COVID world, we can't wait for it to happen, but you get a little bit of financial benefit in the short-term. Do you have anything to add to that, Neil?

No.

Our next question will come from Scott Davis with Melius Research. Please go ahead.

What you -- I'm sure you guys have seen the news with all these new stacks coming out, seems to be literally hundreds of them, but -- or many of them, I should say. Is there any concern that, that's going to provide a new competitor for you guys? Or do you think you're too niche for really that type of a vehicle?

Yes. So we spent a little bit of time on this. We've got some -- we studied it with some advisers on this very question, Scott, is that a new competitor emerging for capital deployment. And our conclusion to that is no. And the reason is that a SPAC -- the seller is obviously doing a backdoor IPO. The seller is getting a percentage of their proceeds at closing, not the whole thing. And then you also -- there's other factors around the business dynamic and the leadership team and the ability for it to be a public company that investors have appetite for. And so principally, no. Could there be 1 or 2 on the fringe? Maybe, but it's not like a full-on competitor relative to our capital deployment. And by the way, SPACs have been around in big volume for the last 3 or 4 years, it's obviously increased a bit here. There'll be a lot of the SPAC money that doesn't get deployed or recycled. It's just because you raised, it doesn't mean that the deal is going to happen. And so it's not a totally new phenomenon. It's just catching some, obviously, mainstream media right now.

Yes. Makes sense. I'm glad you've studied it. But a question about Vertafore. The SaaS versus perpetual, obviously, higher than most of the other software businesses you have. Is there a particular reason why that product sells better into a SaaS versus perpetual? Or is it -- how you go-to-market and how you price it? Is it the product or is it the pricing? I guess is kind of the question.

Well, I think it's that they started the journey to migrating to SaaS earlier than many of our other businesses. So they just got to the point where they have about 80% deployed in SaaS and a little over 90% recurring to their revenue stream. Where, for instance, Deltek is midstream in that conversion, going that way, by the way, I mean Deltek is 75% recurring, pushing to 80% this year, and it'll get -- fast forward 5 years, it'll look more like [Mike Deltek]. And then companies like CBORD, Aderant, PowerPlan are just beginning that migration. Again, all of this paced by our customers. Our customers decide when they're ready to go to the cloud and when the value and when the timing is right for them. And because of that pacing it elongates over multiple years. We don't run sort of any of this Adobe risk where you have the J-curve and go backwards before you go forward. And as we said many, many times, this is all a net growth driver for us as you migrate that, the maintenance part up to the cloud, you get an uplift on that. And then obviously, you're selling net new SaaS licenses which drive your recurring revenue base up. I think it's just that Vertafore started earlier in this process than some of our other companies.

Our next question comes from Joe Giordano with Cowen. Please go ahead.

I just wanted to understand the puts and takes in the guide here. So like -- I think you beat the midpoint of your prior guide by $0.22. You're raising the full year by $0.45. How much of that incremental is from the deals? And how would we think about like the core guidance ex the M&A versus what it was 3 months ago?

Yes. So think of the deals is $0.45 to $0.50 to the second half. Some of that we got in Q3, about $0.12 and the rest in Q4. And then everything else is pretty much a wash. There's $0.04 or $0.05 from tax. There's the Verathon and TransCore sort of pushed to the right. And then quite frankly, a lot of investment that we're doing in the fourth quarter with businesses like Verathon, to continue to position ourselves well for next year. So think about the operational stuff as sort of washed in. So when you add the M&A, there’s the midpoint change.

Okay. Fair enough. And then just curious on Deltek. What are your guys there saying about like the potential for that business in Biden administration, given the spending plans that they have and things like that?

Yes. It's -- often -- it's a frequent question around elections for Deltek that goes back a lot of years, many elections. And what -- the short answer is, either administration, either way is fine for Deltek. The principal reason for that is these government subcontractors just gravitate towards the rapid or fast current government spending. And so for instance, with Obama, it was healthcare; if Biden wins, it’s infrastructure. They will just migrate. And so that where that spending is. There might be a few incremental sort of subcontractors -- government subcontractors that might show up in infrastructure, though it might be a little bit incrementally then special for Deltek but not a meaningful growth driver. The great thing about this business is it does well in almost any government spending environment because as you know government spending always increases.

Our next question comes from Blake Gendron with Wolfe Research. Please go ahead.

So we've been focused on the better-than-expected recovery in non-emergent hospital activity. You mentioned, and you've been very descriptive with the Verathon, IPA impacts of COVID. So wondering if this healthcare recovery is driving somewhat of a subdued non-emergent healthcare exposed businesses versus the Verathon and IPA tailwinds? I'm just wondering how we in aggregate maybe frame the improvement in the non-emergent side of the healthcare business?

Yes. So the other medical products businesses that aren't Verathon, right, have been down this year quite a bit. So really double-digits, and that's starting to moderate a little bit in the fourth quarter, whether they're going to be probably more flattish year-over-year. And then they would grow quite a bit coming out of that, right? These are the businesses, as Neil has mentioned, that grow mid-single-digit organically like clockwork literally going back 10 years. And so as you get more procedures happening, then those businesses become -- get back to normal and probably have some catch-up as well.

Yes. And just a little more color on that. I mean, hospitals, like a lot of businesses, right, when things got economically really challenged and patient volumes were down quite a bit in Q2 and coming into Q3, hospitals may took dramatic cost actions on the operating side, but also basically froze all capital spending. And hospital budgets as they cycle back in next year, there'll be some level of capital spending, and that's likely going to be on things that are more akin to what we do. I mean, we're like mainstream procedure type things, not esoteric or sort of super high-technology that is super high dollar and sometimes questionable at the hospital level.

Understood. And just a follow-up here. So the question was asked last quarter, businesses like that and ConstructConnect getting more sign-on, just given the sheer dynamism in the market. The shorter-cycle industrial recovery broadly seems to be plateauing or stabilizing. How do you expect this to impact new logos in some of these businesses versus the opportunity to expand existing customer touches through things like product enhancement, perhaps R&D maybe is folded in here?

Yes. So a couple of things on ConstructConnect. The business has been -- the team there spent really 3 years building the software capability that's part of the workflow of both general contractors and subcontractors and building product manufacturers. It's no longer just a content business, essentially identifying leads for new projects, really working to drive habitualization of the software and the daily workflow of all the users. And so when you get into an environment like the one we're in, the environment opens up, meaning there's more people that are looking for work. So they come to ConstructConnect and buy the first product. The cross-sell into some of the workflow products, now we actually have the ability to do it, and we're seeing decent and better-than-decent attach rates at multiple products. And importantly, then we're seeing what we hope to see, which is the increase of the daily use. And so we think the long-term retention rates will be higher. We think this is going to continue for quite some time. I mean, ConstructConnect services, sub-10% of the market and there's 90% of the market is unvended. And that market is the one that -- unvended market is the one that is coming to ConstructConnect in an environment like this.

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

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

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