Zack Moxcey - VP, IR Brian Jellison - Chairman, President and CEO Rob Crisci - VP and CFO Neil Hunn - EVP Jason Conley - VP and Controller Shannon O'Callaghan - VP, Finance.

Scott Davis - Melius Research Christopher Glynn - Oppenheimer David Lu - RBC Capital Markets Joe Ritchie - Goldman Sachs Richard Eastman - Robert W. Baird Joseph Giordano - Cowen & Co. Jeff Sprague - Vertical Research Partners Alex Blanton - Clear Harbor Asset Management.

Good day everyone and welcome to the Roper Technologies Third Quarter 2017 Financial Results Conference Call. Today's call is being recorded. At this time, I would like turn the conference over to Zack Moxcey, Vice President, Investor Relations. Please go ahead sir..

a $12 million purchase accounting adjustment to acquire deferred revenue relating to software acquisitions, and $1 million of related commission expense.

This represents revenue and commissions that those companies would have recognized if not for our acquisition, and lastly $73 million adjustment for amortization of acquisition-related intangible assets. And now, if you will please turn to slide 4, I will hand the call over to Brian.

After his prepared remarks, we will take questions from our telephone participants.

Brian?.

Thank you Zack and good morning everyone. I don’t know how many of you were fortunate enough to stay up last night as I was to watch the second best baseball game of all time; of course the Red Sox still are number one, but what an incredible game. And anyway I made it in, so I’m very happy about that.

If look here, we’ve got the Q3 enterprise financial results we’ll start with, and then get into the segment detail and the outlook, talk a little bit about Q4 and raising guidance for 2017 and sort of an initial outlook about 2018 and then take your questions and answers. So let’s go to the next slide.

The Q3 enterprise highlights here; our summary we had record third quarter results in about every category you can imagine, certainly sales and orders and gross margin, EBITDA etcetera, very encouraged by the fact that it was very broad based strength.

We really only had one situation within medical products that’s sort of disappointing and one product portfolio business that we’ll discuss when we get into there. But notwithstanding that we still had incredible results for the quarter. Revenue was up 24% to $1.171 billion with 5% organic growth rate.

The gross margin was 63%, up 170 basis points, and what we’re particularly encouraged by that is it demonstrates our ability we think to contain the cost push challenges that other people are complaining about with material and supply chain issues, and instead of having a problem we’re up a 170 basis points.

Our diluted earnings per share were up 20% to $2.36, EBITDA was up 24% to 407 million and our margin expanded 20 basis points to 34.8%. Year-to-date, our operating cash flow has been 866 million, which represents $0.25 of every sales dollar, and that’s allowed us to reduce our debt year-to-date by $880 million.

So that’s very rapid deleveraging bringing our debt-to-EBITDA number down dramatically. Great quarter and certainly strengthening the balance sheet was really a little bit above plan. Next slide, if we look at the Q3 income statement, you can see our revenue in the quarter was up $224 million over the prior year.

EBITDA was up 24%, tax rate was with– on our adjusted numbers we apply 35% tax rate and then on the rest of the business it came out at about 28%. So we got a 29.7% tax rate and we had expected something around 30%. And then you could see net earnings up $44 million to 245 million.

Next slide, here we look at how effective our cash flow strategy continues to be and how well our field people execute. So operating cash flow year-to-date is, as we said, 866 million, 25% of revenue. Our year-to-date free cash flow is 24% of revenue. One of the things we’d like to point out to people is there is not much CapEx here.

So the difference between operating cash flow and free cash flow is only 1% of revenue. If you look back two years ago, you can see that our operating cash flow year-to-date in 2015 was 660 million. Last year, it went up by 71 million to 731 million. This year, it’s up by 135 million to 866 million. So that’s just in a two-year period, up 31%.

Our cash conversion which I hear some people stumbling around when I’m talking to folks. Our cash conversion on a GAAP basis is 156% year-to-date. It was higher than that in the third quarter actually around 160%. And our cash conversion on an adjusted net earnings number was up 118% year-to-date and up 124% in this quarter.

So I do occasionally hear people talking about cash earnings versus our adjusted earnings. Our cash earnings are higher than the adjusted earnings that we report. We reduced debt by 880 million, as I said, and all of those things demonstrate our ability to compound cash.

Next slide; if we look at the asset-light business model, that’s certainly well and moving ahead. I always like to look at how much progress we’ve made. If you look back five years ago, our inventory was 7.2% of revenue and today it’s 4.5%. Receivables were 17.1%, today they are 16.4%. Payable and accruals were the same in both periods 12%.

Our deferred revenue back then just five years ago was 3.4% of sales, today its 11.5%. So five years ago, our total net number on working capital was 9% of revenue. Today it’s a negative number at 2.5%. We now have over $0.5 billion of deferred revenue, 535 million as you can see at the bottom of the slide.

And the importance, of course, of the negative working capital is that we don’t need to add working capital as we grow. So we have this incredibly great model that as we grow we actually get oftentimes paid in advance for the work and so it actually strengthens the cash and our balance sheet as we grow.

All of this reflects the enterprise transformation that we’ve overtaken for a long period of time with particular effectiveness in the last five years, and it’s all really driven by our cost return on investment principles and discipline that we always like to talk about.

Next slide, here we’re just getting ready to get into the specific detail of the segments and the outlook, all of them performed very well. Their EBITDA margins were between 30% and 45% that really each one of them is sort of best-in-class for the platforms it represents.

Next slide, we thought we’d take a minute today to talk a little bit about the awards and milestones that have been accreting to the businesses, because they are really quite spectacular and we tend to talk about events within the quarter rather than the long-term trajectory of what’s going on here in these calls.

And so many good things are happening around the future which I would just share a couple. Gatan, which is in our scientific imaging segment but reported through medical created a technology a few years ago that was instrumental in identifying the Zika virus.

And the technology that we have allows Cryo-Electron Microscopy to see things that wasn’t previously able to see. As the Cryo-Electron Microscopy business picks up, this will have a dramatic effect on our Gatan business as we really have pre-eminent technology there.

Deltek this quarter was recognized as cloud-based professional services automation ERP leader by IDC MarketScape. They have sort of as people who know about the class the Magic Quadrant, this is sort of a slightly different thing, but still a very high honor to receive.

Sunquest was named the Clinical Diagnostic Laboratory IT Company of the year by Frost & Sullivan, and that really demonstrates our customer intimacy in that space.

Strata was named number one by KLAS for Hospital Decision Support Software and that’s a big pay-off for all the enhanced investment that we put in to Strata after we acquired it in the enhanced technology they’re delivering for cost [repayment] in the hospital sector.

Aderant Expert has become the number one Enterprise Practice Management System among the Am Law 200 firms. This is really about us improving a channel to market for them and the knowledge that we’re investing for their future, which is a much higher rate of course than what it had when it was inside private equity.

TransCore successfully converted the New York MTA bridges and tunnels. Those of you in New York can give us applause for that. Our ability to execute that was pre-eminent. We delivered everything on time. And really TransCore can be quite proud of what it’s been able to do and will do in the future as infrastructure spending starts to pick up.

All of this is sort of a culture of innovation we have in these niche markets. We’ve got dramatically higher RD&E investments in all of our businesses. Next slide, if we start with our largest sector that’s RF Technology and software, it’s now 42% of the entire company revenue, a little bit more than that on an EBITDA basis.

The third quarter represented nearly $0.5 billion of revenue on its own. It was up 61% with organic up 4, and we had a little bit of a pull-in from the fourth quarter at Deltek that strengthened our Q3 results. Deltek’s really had a lot of GovCon wins. We made an acquisition for them in Denmark, meaning non-US cash.

A company called WorkBook, which is going to enhance our professional services platform. ConstructConnect also was able to drive considerable growth as their recurring revenue was increasing, and we think there’ll be some Bolt-ons in the ConstructConnect space in the near future.

When you look at the core business without the acquisitions, the operating margins in the quarter were up 280 basis points, and EBITDA I can see also performed very well. We had mid-single digit growth across the other software businesses. Aderant continued to gain share.

We made an acquisition, a bolt-on for them that we called Handshake which is in Florida. It adds knowledge management software for the same firm, so it’s a common thing to add and so within our existing distribution channel. And our freight matching business continues to expand with net subscriber growth.

We got great execution from a margin viewpoint in our toll and traffic projects in the quarter which is very encouraging because often times this project have contingencies associated with them and performance dictates how much it really makes at the end of one of the projects.

In the fourth quarter, our software businesses are expected to continue to grow with same strong margins and cash performance that we’ve enjoyed in the third quarter. We see continued momentum for both Deltek and ConstructConnect, they really do have tailwinds behind those businesses.

We expect though we’ll get low-single digit organic growth in the segment in Q4 solely because we had the difficult comp with the MTA startup in the fourth quarter of last year. We see a lot of continuing opportunities for TransCore projects.

When we talk to our team there though, they’ve actually added people for the bidding process because there’s so much activity, and they are likely to create even better opportunities in ’18.

We used at the beginning of the year that ’18 could be a challenge because it would be hard to replace the MTA project in New York, but that’s no longer a fear and in fact we think we’re going to grow beyond this year. Next slide, here we look at medical and scientific imaging.

We had a great quarter, but a little bit abnormal around organic growth, you can see it was only up 1%. It really should be mid-single digits, and in fact many of the businesses were mid-single digits and above. Their margins in the quarter were essentially low. We expected so we’re happy with the margins.

We did mid-single digit growth in the medical businesses. If we exclude this one unusual transaction that happened in our Verathon business, which right at the end of the quarter fell short on its revenue projections in the US. And we don’t expect that to continue for long at all.

Revenue growth across all the three medical platforms and they do represent 85% of this segment. And in the products, we had terrific performance out of Northern Digital and IPA and that was offset a bit by what happened in Verathon, so we wind up within that organic one instead of four or five.

In our Acute Care Solutions, we did exceptionally well in the middleware and international arena. A little bit softer in the US, but still net positive organic growth. In the Alternate Site Healthcare business, we continue to have good growth in the Long Term Care GPO and Software businesses there and don’t see really any headwinds for those at all.

In the Scientific Imaging business, we had said at the end of quarter two that we would have a light quarter in quarter three from a revenue view point, just because of the issues associated with getting all of the Cryo-EM technology out with the cameras. And in fact that occurred, but that gives us a bolstered opportunity in Q4.

If we look at how fourth quarter is going to look, we think that the growth initiatives in our RD&E and channel access for these three medical platforms will continue to be substantial for us.

We’re spending about 14 million more this year than the prior year, all in the hopes of capturing forward growth that we’ve talked about earlier today and throughout the year. Revenue growth should occur in all three platforms, imaging ought to be a little better on timing in shipments.

We expect to have better margin improvement sequentially from the third quarter to the fourth quarter. And while we may get only two or three points of organic growth in the segment in Q4, we expect to have much better organic growth again in 2018 as we’re back to a normal pace with mid-single digit activity.

Next slide, if we look at Industrial Technology and Energy Systems, the Industrial Technology business was up 12% organically. Neptune had another record quarter, they had double digit growth and earnings. So those people that are complaining about copper, might want to pay attention to what we’re doing.

Fluid handling growth from continued share gains is doing really well with Roper Pump in with Cornell. We improved the upstream oil and gas environment it did and it helped us quite a bit.

We think fourth quarter is going to have the same kind of growth characteristics around it as the third quarter did and we expect to get leverage in these businesses above 40%. If you look at energy, organic is up 6%.

The reason for that is we have double digit growth in the oil and gas portion which is about two-thirds of our segment, but we had the expected sort of high-single digit decline and we thought we would have in CCC. So the net effect was in to double digit organic growth.

And the third of the business that reports an energy that’s really sensor technology and industrial markets, we were up sort of high mid-single digits there. We see the fourth quarter being similar growth to the third quarter with leverage again above 40%.

If you look at the two segments together, they delivered a $107 million of EBITDA and 335 million in sales, 32%. So the business has remained really outstanding. Next slide, so here we’re getting ready to talk about the guidance profile for Q4. Next slide, so we’re raising our full year guidance raised only by $0.09.

We had been 12 to 9.30; we are raising that to 9.27 and 9.33. The full year then will deliver about 22% of revenue growth of which 5% will be organic. We expect to create more than 1.150 billion of operating cash flow. In the fourth quarter guidance we came in at 256 to 262.

Remember we did a little bit better in Q3 that took some of the fourth quarter out in to the third quarter, but on balance we’re raising the full year guidance.

I think tax rate in the fourth quarter is likely to be somewhere of what we just in the third quarter or maybe a little bit less, depending on how things go and of course we’re all waiting on what happens with the government, if there actually was a change in business text, Roper would be one of the biggest beneficiaries in the universe.

Next slide, here we look at the summary of our activity for the third quarter. As we said we had a record, third quarter really strength throughout the company. Very few headwinds have developed in 2017, and we really don’t see a many at all for 2018. Revenue as we say is up 24% to 1.171billion. Gross margins is 63% or really pretty spectacular.

Deps at 2.36 was considerably above most people expectations. EBITDA at 24% up with 407 million. Our year-to-date cash flow at 25% of revenue sort of speaks for itself. We already reduced debt by 880 million, and we are rapidly deleveraging which gives us our big reloading the balance sheet much more quickly than I think many people thought.

Our proven CRI principles and discipline really drive our ability to compound cash flow and acquire great businesses, and we’re going to see that activity accelerate in 2018.

We think over the next four years we’ll put something above $6 billion to work in acquisitions, which is simply our normal glide path when inside keeping our investment grade rating and just leveraging our free cash flow towards these acquisitions.

Another big takeaway about how the quarter is, we are just started with our 2018 to 2020 planning process and meeting with people, and seeing their initial submissions for ’18. And I have to say that the operating leaders are projecting more confidence for ’18, than any year in the last five that we’ve entered this process.

So we look forward to finishing those activities during the fourth quarter and being able to initiate guidance later around a record 2018 contribution. So with that we will open it up for questions. .

[Operator Instructions] And we’ll go to Scott Davis, Melius Research. .

I'm gone for a few months, and I come back and look at some pretty darn good numbers, so looks like you're doing your jobs. Anyways, this deferred revenue line item is just amazing. I don’t cover software companies so maybe it’s more common in that world. But the big step up, I assume a large chunk of that is Deltek.

And can you just explain to me like, give us an example of kind of the contracts and how it works and that you were able to collect so much cash upfront?.

Well, it really kind of license and maintenance, many times you get paid a year in advance for that activity. If it’s a SaaS and cloud based, you may get paid a year, you might get paid six months, you might get three months, but you’re always ahead of the curve for prepayment for the technologies that they are using routinely.

As they add seats, they’ve got to pay in advance for the seats that they add and so forth. But I want Neil to maybe give you a little more granular explanation about how the contracts work..

I would say Scott, we’re very normal and very typical on the software space. So we’re not doing something that’s abnormal in that regard. As Brian mentioned on the recurring revenue streams, which would either be the SaaS piece or the maintenance piece, we will bill those generally a year ahead on the contract cycle.

And so you get paid maybe 90 days, you’re booking 270 days of net deferred cash on your balance sheet. And similarly, when you book on a license sale, often times the payment terms on a license sale, you might get half the payment of license on signing and half when you go liveit.

And you’re normally always in a deferred revenue situation during that implementation period. So it’s a very common practice, and we are well within the sort of industry norms, but it’s part of the core business model that’s been created here at Roper over the last decade as we transform business.

Well, let me tell you that five years ago on September 30 of ’12, our deferred revenue was 181 million. So part of our acquisition strategy is purposely directed at these kind of opportunities where as you grow it doesn’t draw down your cash. .

That’s clear.

Since Neil you’re on the line, can you just give a little granularity on one-time Verathon weakness that you cited, just a sense of what that is?.

Just to stop at the top, as Brian mentioned it was really isolated to Verathon. The rest of the platform performed at or above our expectations. When you double click down into Verathon, it was isolated to the US and to our capital equipment sales to hospitals in the US in the quarter.

The consumables piece, recurring piece was quite robust, the international piece was quite robust.

And then when we get into the root cause of what happened in the US, it was a combination of channel execution challenges that are being corrected as we speak, and then a little bit of timing between product cycles, new products we’re developing and the timing of those releases, and we may have frozen our sales force, we may have frozen the market a little bit.

But those are starting to release here in Q4 through 2018, so we expect it to be corrected here rather quickly. Won’t say it will be corrected in Q4, might be a little quick, but it will take a couple of quarters to correct it and we should be back on track there.

The future for that business looks like robust given the product roadmap that we have and it is executing well against that. .

[Indiscernible] This miss from them on revenue was like $5 million or $6 million. So that’s really – the deal just happens to be different than what we expected..

We’ll go next to Christopher Glynn, Oppenheimer. .

Just wanted to revisit the RF kind of EBITDA growth algorithm, I think it’s about 70% software now, if you could just mark-to-market the normal price and functionality expansion expectation. .

Sure. You’re right, the segment is now majority software, so you have the TransCore [ph] toll and traffic business which is going to be more project driven and is generally going to have lower margin than the software businesses.

The software businesses are very steady, they have been mid-single digit growth businesses here for quite a while, and those leverage ratios generally come in at 35% or higher. So I think that’s very sustainable moving forward.

So I think you see less variability in this segment than maybe you would have seen 5 or 6 years ago when it was primarily the toll and traffic business.

Now it’s really primarily the software business, and of course Deltek and ConstructConnect will both become organic in ’18, which should further boost the organic a little bit, because we said those were resulting mid-single digit growth businesses when we bought them. .

And then RF had very large core margin expansion 280 basis points.

Could you just dive into what’s going on there a little, was it just a good mix quarter?.

Well I think that one of things is that the execution at TransCore continues to improve around their project management. So that’s a favorable variable and then the growth in the software businesses does help obviously because they are higher margin businesses.

So both of those are important, and I think some of the RF business are really product businesses, and they’ve performed well in capturing leverage at pretty high levels on incremental revenue..

Yeah, that’s right. Some of the smaller businesses we don’t speak a lot about like an RFID is, which we acquired a couple of years ago had excellent growth and excellent leverage. So it really is a mix of number of businesses performing very well within that segment.

And we’ll go next to Deane Dray, RBC Capital Markets. .

This is David Lu on for Deane Dray. I want to ask about an update on the M&A pipeline? So you’re sizing over $6 billion of M&A over the next four years. What does the environment look like today, given that multiples are a little bit extended, and what are the sizes of the deals you’re looking at. Thanks. .

If our choice was, we’d do $1.5 billion in 2018 that would be good, and our next choice would be 1 billion and one 500 million or next choice would be three $500 million. So what happens now is that we do get some bolt-on opportunities. So already this year we’ve got over 50 million of work on bolt-ons; one for Aderant and one for Deltek.

And I would expect you’d see some bolt-on activity in our ConstructConnect business because there’s lot of attractive things which is unique and sort of different for us with those businesses.

With those businesses is, they have assimilated small units previously, and so they’re sort of geared up for that activity, whereas we wouldn’t have acquired a small company, but then we just wouldn’t have had the scale to be successful. So we will be able to have a mix of some smaller deals out of that 6 billion plus over the four years.

But the lion share of the money will go to large platform expansion opportunities for the company. .

And then just one follow-up, as we approach the winter we are anniversaring Deltek’s acquisition. So you mentioned mid-single digit organic growth. What’s this demand environment been like? There hasn’t really been kind of this infrastructure stimulus looking at, but it looks like underlying demand is still very strong.

So give us an update on Deltek if you could? Thanks. .

Well I think you just did. We really agree with that. It’s mid-single digit growth, maybe a little bit better from time to time. Certainly if you get an infrastructure package ever, that’s only good news for them. Getting a budget passed is good news for them.

So that’s a big deal for the customers, Deltek has to know the government got paid budget and that’s already done behind us. So we did see a little pull-in from Q4 in to Q3 at Deltek. Probably not because of that, but you never know.

So we might have a little more better performance in ’18 than we have in ’17 and then we’re going to make substantial contributions from a cash basis and the acquisitions that we just have already announced have lot of synergies inside them and their benefit will tell. .

And we’ll take our next question from Joe Ritchie, Goldman Sachs..

Can we just go back to this Verathon, I know that you guys did your product refresh at the end of last year. And I’m just trying to get a sense for how much of it was like canal challenges versus having the right products.

And then again going back to that comment around, it will take maybe a little bit more in the quarter, a couple of quarters to correct itself. I guess maybe talk a little bit about the confidence you have and it just reversing as we get through 2018. .

We have a lot of confidence, and I want to correct you on the product refresh was around our (inaudible) product. Well a lot of new technology has been launched, and that was very successful in growth outside organic growth for the last two years inside Verathon. We have another major project launch around what we call a BladderScan line of products.

We also have rate changes that we haven’t announced, but the sales forced is about to enhance some additional products on how they’re used. So if you were satisfied and you already have been briefed on all the product technology occasionally that can get in the way of people making their decision about what they’re buying this quarter.

We also are adding substantial real sales resources, because we think that within the additional new products that are happening, we’re going to get much stronger particularly in the second half of 2018 than we have enjoyed throughout 2017.

To capture that we got to have a lot more resources, and it takes time for those people to get trained in those products to get accepted, but we’re actually very excited about Verathon for 2018.

What disappointed us about Verathon third quarter was not so much that they missed by 5 million or 6 million of revenue, but it happened in the last two weeks of the quarter and it wasn’t foreseeing. And so that was the disappointment and we wouldn’t expect it to be our forecast like that.

That’s not a rope or trade and that’s one that we know Verathon is embarrassed by and is working rapidly to get that problem solved. .

That’s helpful color Brian. And maybe by follow-up here on ConstructConnect, we’ve had some companies across the space talking about labor constraints across the commercial construction space. First, I’m just curious how that potentially impacts the ConstructConnect business. And then secondly you mentioned bolt-ons earlier around this business.

Would that be adding to different verticals, different geographies, I’m trying to get a sense for what Bolt-ons would mean for ConstructConnect?.

We didn’t say geographic things. I mean there are some regional variances around small niche players. It’s more expanding than number of things. Let’s say they are very strong in certain activities we can plummet. So, the first acquisition we made in this space was On Center and that was all about [drywall].

A lot of what ConstructConnect does is terrific around a wide variety of things and they are very strong in HBAC take-offs from architects, but weak on windows or whatever. So there are certain kinds of businesses that we can add to that, that make the suite larger than it currently is and keep us in a pre-eminent spot.

Again those are the kind of things we think of. .

Got it, and on the labor constraint side of the question. .

I don’t see any relevancy to that at all. You got to think about where this is, its pre-construction activity, architectural stuff, the amount of labor could only affect them if it became a constraint on being able to put projects in place and that won’t affect the number of users we have or the number of seats that are used in our software.

So the software is frequently used in the bidding process for people, so that they have a sense of just how much material has to go in to the project. That’s what you get out of a ConstructConnect analystic and algorithm. So I really don’t think labor would have much of an affect. .

We’ll go to Richard Eastman, Robert W. Baird..

Brian, could you kind of speak a little bit to the – in Deltek, I think there’s this Handshake, and we also bumped in to Onvia, the two acquisitions and maybe just – they’re probably small, but just curious if you could just speak to those a little bit as tuck-ins or bolt-ons to Deltek?.

So Onvia is not closed, so we really can’t talk about that. But a tiny (inaudible) company gets a natural fit with Deltek. It’s something that Deltek had paid attention to in the past. It’s something that’s very synergistic to Deltek.

The company is really subscaled and hasn’t made much money at all on its own, because it just doesn’t have the channel access. So I think you’ll see our situation around that if we can ever get that deal closed, which we expect would happen in the fourth quarter will help Deltek and Deltek make or be much more effective.

On Handshake, let me ask Neil to talk about this, because it’s an exciting bolt-on for Aderant. .

So this is a bolt-on product for Aderant, its run from legal firm Knowledge Management. If you look inside, if you’re running a law firm, you basically have to have a practice management system which is core Aderant, you need to have a document management system, and you need to have a knowledge management system.

So this is firmly (inaudible) from a knowledge management space. It was sort of the recognized leader in that and we have done just a very large cross-selling opportunities in to our base to take this capability in to. Nice little bolt-on.

I would also say it fits all of the Roper acquisition criteria that (inaudible) management team negative to your eye etcetera. .

Can I just ask you a quick question about OCS and then also free cash flow being essentially flat year-over-year in the third quarter? Was there anything from the tax payment standpoint or just a little bit curious there?.

Sure. A little bit higher in terms of tax payment. I think as we look in to Q4 we would expect quite a bit of growth in Q4, as we mentioned 11.50 or greater for the full year means that we’ll have nice growth in the fourth quarter. I think from a working capita standpoint performance was okay in the third quarter.

We expect it to be much better in the fourth quarter just around timing of some receivables and so we feel great about the fourth quarter. But I think we are in line with where we said we’d be at this point. .

We’ll go next to Joseph Giordano, Cowen & Company. .

Can you just explain to me what knowledge management actually is? I feel like that sounds like something we can all use a little or is that not really what that means. .

Let’s you call your attorney and you ask if there’s an expert on a particular topic in the firm and that firm has thousand attorneys, how do they answer that question. Well they join a Handshake software, they do a query and look across all the various systems inside that law firm and give you an answer.

For instance, (inaudible) about firm knowledge and who has it inside the law firm. .

So want to drill down a little bit on some of the comps that – for things like the imaging business, you know we talk about the backlog in it and the outlook for Cryo-EM looking really strong. I know it’s been a drag for a while down again here. When does that start to like, it’s a longer cycle business I understand that.

So when does that start to loosen up for and you start comping up something that looks kind of on the easier side and same with CCC..

I think with imaging it will do a little better in the fourth quarter, but it’s really 2018 is when they’ll have easier comps. And remember we keep pruning imaging, and we’re investing a lot in this technology at hand and limit (inaudible). We generally are pruning those businesses to try to have less unique, one-off, camera things or sciences.

So it’s wonderful to win the Noble Prize, but generally speaking there is only camera [recorder]. So we’d like to have more application and it’s a business probably it shouldn’t really be reported in that segment. It’s really a precision technology business, more fitting with a storage or something like that.

So we like the business, we particularly what its contributing from a social view point. You can really proud about discovering the Zika virus. But it’s not an overly material business for Roper Technology.

What was the other question?.

CCC that is the business that still doesn’t have a big new construction project going on this space. It’s going to be a little bit later in the rebound before we get revenue from those types of project that really aren’t happening yet. So it is down and not down a lot.

We’ll see when we do guidance both for ’18, and we would expect it go down much more to kind of bouncing around in sort of the bottom. But they’ve done a really nice job executing. Their field service business has been improving. I think the management team has done a great job in a difficult environment.

Great margin and I think the business will do well here whenever there is a little bit of an uptick in that part of the market. .

And maybe last from me on Neptune, Brian you talked about Copper. I think I know the answer to this, but like given record quarter here, what’s the order intake kind of been looking like and just your view on the underlying markets there and I guess we’ve had a couple of one-off data points that people got freaked out about.

But it seems like, looks like pretty green light there. .

I know the Neptune guys will be smiling when they are listening to other peoples’ calls so I can tell you that. There are a lot of people bad-mouthing the activity we don’t see it. It will be a record year for us.

It’s a record quarter, we’re up double digits, but the one of the great investment houses has said Copper would be 245 at the end of the year. It’s 315 invested by a mile. But our people, we are absolutely briefly integrated. We have our own foundry, we make lead-free products, we are just incredibly efficient.

So we just aren’t feeling the difficulties that other people are. There’s certainly enough activity for bids. We have the biggest installed base that’s really valuable to haven an installed base, when you are looking at it and we believe we have the best distribution in the US. So that’s helps.

And then periodically we get a little bit of international business that could help and we see some of those opportunities that might emerge in 2018. So it’s a very resilient, extremely nimble place. .

We’ll go next to Jeff Sprague, Vertical Research Partners..

Just a few lose ends maybe for me to clean up. First, can you give us some idea of how big the MTA comp is? Brian you spoke your confidence in kind of getting over that hurdle.

But kind of literally talking about there as we look into 2018?.

On the MTA we still have a strong fourth quarter, but will be against the startup from last year. So if we look at ’18, strictly on MTA it’s probably 15 to 20. Well it could be as much as kind of $20 million headwind.

But as Brian mentioned there are a number of projects that we’re bidding, so it’s really too early to tell that we might not be able to replace that or even more. But just on that particular projects, around 20 million. .

We’ve gotten our people look at it as, how much do you have to kind of like net new business and software, how much net new business do you need out of TransCore makeup for projects that are rolling off and that number is probably something around $50 million a year of projects.

And the opportunity against which we are bidding is substantially larger than that $50 million hurdle for new business each year. So I think people feel pretty good about that, and I think the organization increasingly gets more affective.

I think they’ve gotten substantially better about the administrative side and what do you have to do to bid in those arenas. I think they’ve gotten better racial management.

We’ve a relatively new CFO in that business, he’s certainly helping to make a contribution and then Tracy Marks, who runs it is really the domain expert in North America and around the world for these things. So people come to TransCore to brainstorm, and it just gives them a math.

And then in some of the other arenas where they’re doing back office work, the number of other people have had big fears that are embarrassing. And so TransCore or TransSuites are for TransCore’s administrative routine around the infinity lane technology we have really give us a substantial advantage to competition here. .

And then just two more quick ones, just based on tax, you’re making some good progress on tax and advance the tax reform. I wonder if you could elaborate on what’s driving that. I just want to clarify Verathon also, I think at the beginning of the call it was characterized as four or five points of growth, which is more like 15 million, not 5 million.

Can you just kind of clarify that and (inaudible)..

I didn’t hear anything like that, maybe when I said it was around $5 million or $6 million or so. It might have been that inside the medical business, maybe somebody is thinking about, we had 1% organic growth that clearly would have been more like 4% organic growth is (inaudible) we have that. Maybe that’s what you heard..

The mix versus our external model on medical was high single digits, it was like 8 or so of revenue, versus our model 8 or 9 and 6 of that Verathon and the majority of the rest was around the camera businesses and just kind of noise..

And on tax?.

Tax, yeah we were north of 29% in the third quarter. That benefited a little bit by favorable resolution from audit activity and we have been working with the tax department on a number of things to try and lower the rate certainly as much as we can prior to hopefully tax reform that went lower in a big way.

But we’ve been in a sort of a similar tax range here for the last couple of years. .

And I think we expected about 30% and it came it at 29. So it wasn’t really material variance on tax I think. We might be a little bit better in the fourth quarter than we did in the third I hope.

But the big benefit would be when you got probably close to two-thirds or 70% of the incomes in the US and you’re paying 35% plus that goes to 20, and you can kind of do the math on that, and that a huge deal for us. .

We’ll go to Alex Blanton, Clear Harbor Asset Management..

I just wanted to trick something that you said, you missed the revenue from Verathon probably 5 million to 6 million in the last two weeks.

So does that come up to about $0.02 a share?.

I don’t. Didn’t help..

It would be dependent on the incremental..

If we had 6 million and it is incrementally 40% and it would be 2.4 and take a third of it away for tax, it would be 1.5 million. So it might round to $0.02, but it’s probably more likely a penny and a half..

And the problem there was that you introduced some new products. So the customers decided to wait and buy the new product instead of the existing one.

Is that what happened?.

I think it was more about our sales force than our customers. If you’re having a good year and you’ve been having a good year for a while and you know you got a lot of new stuff that’s coming in to the bag, sometimes you can get behavior there that’s not perfect.

So the products are generally speaking the best in the industry, I think they’re going to be even better. So how of it is that? I don’t know. I think it’s also that we were adding quite a few sales people. So I think there are just some noise that (inaudible) as you’re changing territories and moving things around, that’s frictional.

But in a quarter where we did a $1.171 billion and delivered 407 million of EBITDA, there’s too much focus and worry about the $5 million of revenue variance in one business out of 50. .

And one final question and that is about the perspective deduction in corporate tax rate.

My feeling is that for most companies a lot of that benefit will eventually be competed away because every industry has sort of a normal rate of return, and if you suddenly get a big increase in the rate of return because of the tax cut, tax reduction than it opens a door for competition to compete that benefit away back to the normal rate of return.

I mean think about each industry, why is the return where it is? Because that’s a normal return. But in your case since you dominate so many industries and have so little competition in many cases. It would seem to me that that effect would be less that you would keep perhaps more of the potential corporate tax reduction than the average.

Would you agree with that?.

Yes..

That concludes the Roper Technologies question and answer session. We will now return to Zack Moxcey for closing remarks. .

Thank you everyone for joining us today. And we look forward to speaking with your during our next earnings call. .

Thank you. And that does conclude today’s conference. Thank you for your participation..