Zack Moxcey - Vice President, Investor Relations Neil Hunn - President & Chief Executive Officer Robert Crisci - Executive Vice President & Chief Financial Officer Jason Conley - Vice President and Controller Shannon O'Callaghan - Vice President of Finance Brian Jellison - Executive Chairman.

Deane Dray - RBC Capital Markets Steve Tusa - JPMorgan Julian Mitchell - Barclays Richard Eastman - Robert W. Baird Joseph Giordano - Cowen and Company.

The Roper Technologies Third Quarter 2018 Financial Results Conference Call will now begin. For your information today's conference is being recorded. I will now turn the call over to Zack Moxcey. Please go ahead..

amortization of acquisition-related intangible assets; purchase accounting adjustments to acquire deferred revenue; a onetime debt extinguishment charge; and lastly, a measurement period adjustment to 2017 provisional income tax amounts resulting from the Tax Cuts and Jobs Act.

And now if you'll please turn to slide four, I'll hand the call over to Neil. After our prepared remarks, we will take questions from our telephone participants.

Neil?.

Thanks, Zack and good morning everyone. Before going through today's agenda, we'd like to thank all of you who have reached out to express your support and concern for Brian, our Executive Chairman. On a personal note, I would like to thank Brian for his tremendous leadership and his long-term mentorship to me.

I want to assure everyone it's business as usual here at the company which you'll see throughout today's presentation. We have a very deep and talented management team both in the field and here in Sarasota that is committed to the continued execution of our proven strategy.

To that end, we recently promoted both, Rob Crisci, our CFO and John Stipancich, our General Counsel to Executive Vice President. These promotions are indicative of their past contributions to the enterprise and also their go-forward contributions to the team here at Roper.

Our CIR based processes and disciplines are deeply embedded in our culture and we'll continue working to make Roper an even better company in the years to come. Now turning to today's agenda. We'll start with our Q3 enterprise results then turn to our segment performance and outlook followed by our guidance update and then we'll open up for questions.

Next slide please. As we look at our Q3, 2018 enterprise highlights, it was really a fantastic quarter. Record results with revenue, EBITDA, net earnings, cash flow and virtually any financial category that you can look at. Revenue grew 13% to $1.32 billion with organic revenue growth of 9%.

We saw double-digit revenue growth across all four segments, really just fantastic performance and very broad execution. Gross profit grew 14% with gross margins expanding 80 basis points to a record 63.8%.

When you look at gross profit gross profit margins, it really highlights the power of our niche strategy and our team's ability to nimbly execute through the quarter. As we look at this margin, there was very little impact of tariffs or any cost push inflation that flowed through our numbers.

It was really just spectacular performance across the board relative to our margins. EBITDA grew 16% to $473 million. EBITDA margins expanded 100 basis points to 35.8%. Importantly, we saw double digit EBITDA growth and margin expansion across all four segments.

Earnings before taxes, grew 18% to $411 million DEPS grew 31% to $3.09 and free cash flow grew 34% to $404 million or 31% of revenue. So as we look at the quarter, we're certainly delighted with the breadth of the performance, but also like the top to bottom leverage.

You can see that revenue grew 13%; gross profit grew 14%; EBITDA plus 16%; earnings before taxes 18%; DEPS 31%; free cash flow 34%; leveraged all the way from the top to the bottom, really a fantastic result. Now I'll turn it over to Rob to take us through the income statement..

Thank you, Neil. Good morning everyone. So, on the next slide, we have our Q3 income statement metrics, a little bit more detail on some of the numbers that Neil had outlined on the previous slide.

On revenue, our results with a 13% overall growth and 9% organic growth, we exceeded importantly $1.3 billion in the quarter for the first time and we remain on track for double-digit revenue growth this year, our margins up, 80 basis points, our gross margins up 100 basis points, our EBITDA margin.

As Neil mentioned, EBITDA margin expansion across all four of our reporting segments and 16% EBITDA growth overall.

Again we like to point out that the growth this year in earnings before tax as many of you know, we are a company that benefits quite a bit from the recent tax reform, but even setting that aside, we're able to grow our earnings before tax at 18% in the quarter, a very nice results. And that if you carry that down to the DEPS line, we grew 31%.

I would note on the tax rate for the quarter of 21.5%. That was a little bit better than we expected coming into the quarter. We would expect to be right around 23% for Q4 and that number is embedded in our guidance. Next slide please. The next slide is an important slide to Roper, the cash flow slide.

It really was an outstanding cash flow quarter, excellent growth of 32% operating cash flow and importantly an increase of over $100 million in cash flow versus last year. On the free cash flow line, $404 million of free cash flow.

As you see here $418 million of operating cash flow converts to $404 million of free cash flow, the first quarter that we've exceeded $400 million in free cash flow and that's really a testament to our asset light model with very little CapEx and the ability to really generate a lot of cash as we continue to compound.

On the full year basis, we certainly expect to be double digit cash flow growth. We're now up to 12% year-to-date versus last year and operating cash flow at $966 million year-to-date. Next slide. Again another important slide for Roper especially is our asset-light business model networking capital slide.

So as of 9/30/18, you can see on the column on the right, our inventory 4.4% of revenue; receivables 16.6% of revenue; payables and accruals 11.5%; and importantly the deferred revenue number up to 11.7%. If you net all those together, you see once again negative networking capital for the company minus 2.2%.

So we always like to look back at a little bit of a longer-term trend here really if you can see Roper's transformation over time. So if we look back to five years ago on September 30 of 2013 we had inventory of 6%, receivables of 18%, payables and accruals of 11.5% very similar to this quarter, but deferred revenue was only 6%.

So if you have to 9/30/13 to today you can see a massive increase in our ability to generate cash and working capital and that's massively negative working capital that we expect to continue.

So on our deferred revenue basis, we had about $212 million of deferred revenue back in 2013 that's now up to $620 million in 2018, and we expect that number to continue to increase moving forward. Next slide.

So as far as strong financial position, well, one of our guiding principles are our capital structure here in Roper is to always be opportunistic on when we access the bond market. As you know, we're more committed to investment grade and we always want to make sure our leverage are - is at reasonable levels.

And we're able to go ahead and complete a bond offering in mid-August and what's really a good environment with the 10-year treasury a little bit below 2.9%. So we completed 1.5 billion bond offering pretty close to evenly split between five and 10.

And as part of that we decided to go ahead and redeem our 2019 6.25% notes a little bit early, so that did result in a $16 million one-time debt extinguishment charge in the quarter.

As we look at that decision the is very attractive versus waiting to commit to next year in a rising interest rate environment, so we think the breakeven there was really kind of a no-brainer going ahead to do that. So we did that and we're happy with the result of the offering.

So where we sit today now is $4.1 billion of bonds that's after our October 1st maturity where the bonds went over to the revolver. So now we have $4.1 billion of bonds at a weighted rate of about 3.5%. So, really well positioned from an interest rate cost of capital perspective moving forward.

Our gross debt-to-EBITDA is now down to 2.8 times, and notably, as before we received the Gatan proceeds so with that transaction does close, it should bring us to another $700 million or so of after-tax proceeds that would further reduce leverage.

So we had a very strategically positioned on the balance sheet and I think very, very well positioned to fund capital deployment moving forward. So with that, I'll turn it back over to Neil..

Thanks Rob. Now let's turn to our segment detail outlook. We can turn to our RF & Software segment. In the quarter, we saw revenue of $563 million, an increase of 14% for the quarter. Organically, revenue grew 4%. Importantly, the Software business wherein the segment grew organically 6% and toll and traffic this was in line with our expectations.

Operating profit grew 16% to $168 million. Operating margin has expanded to 29.8. EBITDA grew 17% to $226 million, which represents a 40.1% EBITDA margin. In the quarter, we saw continued strong performance at Deltek across its government contracting and its professional services end market in terms of its software execution.

It's nice to see that continued benefit of our relative market share advantage and our superior product offering in the government contracting space leading continued share gains. Also Deltek's professional services software offerings continued with its positive momentum with our new product Vantage Point.

Finally, with Deltek they continue to see strength with the SaaS migration strategy driving increases in its recurring revenue. We also saw in the quarter outstanding growth at our Freight Matching business due to network expansions with increase in net subscriber adds and favorable end market conditions.

With our Freight Match business both sides of the network scaled quite nicely in the quarter and this is a business where the size of the network and the scale of the network matters quite a bit, so we're seeing increasing returns of scale in this business. We saw double digit add rate growth aided by share gains.

We talked in the past about the share gains in the large loss space and we continue to see those in the quarter. Also we saw good traction with our new SaaS offering targeted at the mid-law space.

PowerPlan our acquisition we announced last quarter also performed well in the quarter and it was great to see SaaS wins in the adjacent end markets of manufacture and retail. PowerPlan has onboarded quite nicely. We talked about the last quarter. They've done a great job becoming acclimated to our culture and to our strategy tools.

We're looking forward to having our planning session with them next month and we're certainly encouraged by their SaaS migration gaining traction as they talked about in our sale process. Also it's important to note, really all our software businesses did well in the quarter.

We just sort of ran out of space on the slide here to talk about iTrade, talk about ConstructConnect, talk about CBORD really the entire software franchise here did quite well. Relative to our toll and traffic business, the pipeline of opportunities is favorable as we head into 2019.

And with that as we look to Q4 we see 6% to 8% organic growth in the segment. We see the software businesses continuing with their consistent strong growth and cash performance and see this carrying into next year. Toll and traffic improves as we mentioned last quarter based on the timing of tax shipments and easier project comps.

Turning to the next page, our Medical and Scientific Imaging segment. In this segment which represents 29% of Roper's revenue, revenue grew 11% to $380 million. This is all organic growth. It's really fantastic performance in this segment.

The Medical businesses grew 7% organically and our Scientific Imaging businesses grew as expected based on delivering on the backlog. Operating profit grew 15% to $133 million, operating margin expanded 140 basis points to 35%, EBITDA grew 11% to $161 million and that represents an EBITDA margin of 42.4%.

We saw very solid growth across the majority of our niche application software businesses serving health care markets. For instance, Strata continued to gain share in its SaaS-based cost accounting and decision support applications.

SoftWriters continue to gain market share and its pharmacy operations software targeted towards institutional pharmacist also did a nice job coupling it's bolt-on products to its new customers.

SHP continued core growth in its home health business and is also launching a new product targeted towards hospitals and Data Innovations continued its global market share gains serving the middleware market. Verathon had a tremendous quarter growing double digits. The demand for our new BladderScan technology was robust.

We believe this is because the core technology embedded in the product, leads it to be the best market product in the market. Also, North American sales execution was terrific. The funnel management, their closer rates, being fully staffed, all led when combined with the product superiority to market share gains in the quarter.

And finally as it relates to Verathon and the GlideScope business, recurring revenue was quite strong. This is a result of a very large global installed base of our Video Laryngoscope System and the recurring consumables being pulled to the installed base.

For Verathon, this is one of many examples of Roper where the management team there is building this business for the long term and we expect to see this momentum carry into 2019, so really a great job by Earl and the team in Seattle. Northern Digital grew on the continued adoption of its proprietary electromagnetic measurement technology.

We often have highlight many of our specific medical technologies, but MBI and their EM technology is really a great example of our innovation. As we look to Q4, we see 5% to 6% organic growth for this segment. We see mid-single-digit growth for the medical businesses and the Gatan Divestiture expected to close by the end of 2018 and is on track.

Next page. Our industrial segment which is 17% of Roper's technology grew 15% to $230 million. Obviously this is all organic growth. Operating profit grew 19% to $74 million; operating profit margin grew 120 basis points to 32.3%; EBITDA grew 18% to $78 million which represents a 34.2% EBITDA margin.

In the segment we saw double-digit growth again at Neptune which is driven by continued share gains. Really what's happening in Neptune is we see many customer networks form and when you combine that dynamic with our strong channel management; it's really those two things that are yielding our continual share increases.

In the quarter, we also saw strong fluid handling growth across multiple end markets and applications. Roper Pump and Cornell Pump continued their share gains and we're also aided by favorable end market conditions.

For the outlook for Q4, we see mid single organic growth with strong leverage as we saw this quarter and the end markets continue to remain favorable. The teams and the reviews for the quarter were quite optimistic heading into Q4 and heading into 2019. Turning to our energy segment.

This segment which represents 11% of our revenue we saw revenue grow to $149 million plus 10%, 11% organically with the point of FX headwinds. Operating profit grew 27% to $46 million. Operating profit margin grew 420 basis points to 31.1% and EBITDA grew 23% to $50 million.

This represents an EBITDA margin of 33.6% and the OP leverage was 73% just stunning in the quarter. We saw double digit CCC growth from a rebound of new construction projects.

The team at CCC over the course of the past couple of years really worked hard to position the business and its products to capture the opportunities when the rebound occurred and we're seeing exactly that happen. As we see many new LNG facilities and projects come online next year, CCC is specified and the vast majority if not all of those projects.

So it's a very good job by our team there. We also saw strong growth in our upstream applications and broad-based growth across our industrial end markets.

I'll remind you the industrial business that we have here did really well, really all of them did and it's really a collection of niche leading test and measurement businesses that look at rubber testing, polymer testing, vibration monitoring, et cetera. The teams across the board here did very nice.

As we turn into look to Q4 2018, we also see mid single-digit organic growth with strong leverage and the markets remain favorable and the teams also are optimistic for the quarter heading into next year. Now let's turn to our guidance update. We are raising our full year 2018 guidance.

Our adjusted DEPS is now going to look in the range of 11.69 to 11.73, where we're previously 11.40 to 11.56. This represents organic revenue growth of at least 7% for the full year basis.

We also established in our Q4 2018 guidance with adjusted DEPS of 3.10 to 3.14, and as Rob noted earlier, a tax rate of 23%, which is slightly higher than the rate we saw in the current quarter. Now let's turn to the Q3 summary. Our asset-light diversified niche market strategy continues to produce outstanding results.

We saw 9% organic revenue growth and was broad-based across all four of our segments. We had record gross margin expansion of 80 basis points to 63.8%, and all of that got plus some carry down to EBITDA margins growing 100 basis points to 35.8%.

It's really a testament to our niche strategy, the intimacy our businesses have with our customers, and our ability to nimbly execute through various market conditions and deliver fantastic financial results. Our operating EBITDA margins expanded in all four segments and free cash flow increased 34%, which is 31% of revenue.

Also and importantly, we are strategically well positioned for continued capital deployment. First, we have a very strong balance sheet and our bond offering captured favorable fixed rates. Next, our pending and unscheduled Gatan divestiture will further enhance our acquisition powder.

And to that end, our acquisition pipeline is quite robust, as we finished the year and head into 2019. Finally, our proven business model and our CRI discipline drives the ability to compound cash flow, and there's no better example of that done this quarter. As we look to Q4, we have a positive outlook and we see that carrying in the 2019. Next page.

And just before turning to your questions, we wanted to briefly highlight the key tenets of our strategy. This strategy has proven successful for 15 years and this is thus strategy fully embracing our entire team by our board and by myself. I want to highlight three things about our strategy. First is the business type that comprises our portfolio.

Our businesses are in niches. They are clear leaders in their niches. We often have a high percentage of the revenue recurring, which provides stability. We also have the ability to compete on customer intimacy not on scale. This is a very important point, which I'll come to in a moment.

We always have new that higher gross margins are indicative of the value that our company deliver to our customers and all of our companies have the ability to grow without consuming capital. The second part of our strategy I want to highlight is the operating structure which we deploy, which many of you know is a decentralized structure.

This structure works based on the profile of the businesses that we have. When you enter niche, you need to nimbly execute and this structure allows us to do so. Local decisions are made about resource allocation at our business units. But importantly, just because we're decentralized, does not mean that we are passive owners.

We care deeply about strategic development and strategic execution and the teams building talent throughout their organizations. And we do that by deploying a set of group executives to use Socratic method to teach what it looks like across the businesses. And finally, relevant to our structure is our incentive system.

The core to our incentive system is that we reward based on growth. Simply stated this allows there to be complete alignment throughout organization about what's important here and also for trust to be pervasive through the organization. And finally, the third thing I would like to highlight is our centralized capital deployment strategy.

As decentralized as we are from an operating structure perspective, we are equal but oppositely centralized in the way we deploy capital. This allows us to take the excess free cash flow from all the businesses and deployed them in a way that is optimal for our shareholders.

We do this by deploying our cash return methodology, which allows us to select the best businesses to add to the portfolio and this allows our strategy be centered on finding amazing business models versus having an end market-oriented strategy.

The way we deploy capital was highly processed-driven using the CRI approach, using approach to evaluate management teams and using an approach to make sure that the businesses that we select to join the portfolio match all the ones we talked about before. And finally, what sits underneath all three of these tenets are three core values.

One is throughout the organization is trust and mutual respect. I fully believe this is an organization where bad news travels faster than good and I view that as a core value that makes us a wonderful place. Second, our cash return on investment methodology.

This is not just used to deploy capital, but it's used in all of our business about how to optimally grow. And finally, we work very hard to keep things very simple. As we grow the risk gets the complexity creeps and we viewed it as our core job to make sure that we keep things very simple.

So in conclusion, this strategy is everything we're doing for the last 15 years and it will be consistent for the next 15 years. And with that, we'll open up for questions..

Thank you [Operator Instructions] Our first question comes from Deane Dray of RBC Capital Markets. Please go ahead..

Thank you. Good morning everyone..

Good morning, Deane..

Hey. This is our first opportunity Neil to congratulate you on taking the helm and also congrats to Rob on his promotion. And I like that closing comments reaffirming what's unique about the Roper business model, so that was all good to hear.

So my first question is since it's such a big focus area across the industrials and you kind of downplayed the issue in your opening comments, but can you talk about any areas of input cost challenges that are unique to Roper? And we heard the tariffs are non-factor, but there have to be some input cost pressures and maybe some indirect tariff pressures as well.

But how would you describe that?.

Yes. So it's Neil. I'll take a shot at this and then Rob can add any color. Let's talk about tariffs first and we can really talk about tariffs and the inflation together. So it's important to note that none of our businesses compete on scale, right? We have these.

These are very small nimbly-oriented businesses that compete based on how quickly they can answer customers' needs. As you know our businesses are not gigantic, so as a result the supply chains are very nimble.

And the management teams ability to execute through a tariff issue with either slightly rebalancing the supply chain or working through our pricing increase or pricing policy offset that we saw it the quarter. We saw that carrying into Q4 and into the next year. It's really a very, very small impact in Q3 and Q4.

And the same can be said for input cost. If you look at our gross margins, there's just very little material that goes into what we do. And so what is there it's very minimal and that's our view. There's not much of an impact..

Great. And then if we - could you comment more on the funnel as it stands today potential size and timing? And in your response, you talked about what those market volatility at downdraft typically due to bid-ask spreads.

My experience has been sellers get awfully sticky with their memories of where there are multiple straight at higher, but what's your expectations here?.

Yes so the funnel as we talked about is quite robust, but candidly is always robust. We just see a tremendous number of opportunities and we are oftentimes just betting through the opportunities and there might be an attractive opportunity we pass on because we think there's something that's more attractive that's going to come into future.

So we continue to be very disciplined, but then that discipline is only outmatched by our patience to do what's right for the long term relative to the M&A funnel. But as it sits right now, it's quite robust and the teams are working hard to mature that.

So it's always difficult to time or predict the timing of deals because we're just going to do what's right in the long term for shareholders. Relative to sizing, Rob talked about the strength of our balance sheet. We've talked in the past about $7 billion over a four-year period.

That's just the way the math works out, but we've never - we don't feel or never have felt pressure or budget to try allocate capital or deploy capital in any specific small window of time and that remains consistent. Relative to the - if you will the valuations between private and public companies, it's something that we'll watch carefully.

I do think its public companies get mark-to-market every day private companies don't. There typically is a little bit of a lag to the extent there is a long term de-rating of public companies that does take a quarter or two, perhaps a little bit longer for private companies to sort of realize that's where the market is.

But at the same time these funds are always raising money and they have to return money to capital and so that oftentimes offsets that stickiness if you will. So it's not something that we view as any sort of material challenge to us to deploy capital going forward..

Yes I would just add to that Deane. From a target side perspective as we've said in the past, most of the targets that we're going after - kind of north of call it $400 million if value up well over $1 billion.

I mean that tends to be kind of the sweet spot for the sort of things that we acquire, given our size and given sort of type of businesses that we're targeting. And I think most of the things in the pipeline are going to be in that general range..

Thank you and congrats again..

We will now take our next question from Steve Tusa with JPMorgan. Please go ahead..

Hi, guys. Good morning..

Good morning..

And I just wanted to publicly say, obviously, we all appreciate Brian and how unbelievable of a run that he had with this company and that wishing you Neil the best of luck in your new role, congratulations..

Well, thank you. And I'll remind you and everybody Brian is the Executive Chairman and still involved in the business in that capacity..

Yep. So just on this deferred revenue point, I mean, how fast kind of organically does that tend to kind of grow? And could you just, I'm not clearly a software analyst. Just wanted to kind of better understand how that works and kind of the dynamics into the kind of intermediate term.

What is driving that and how fast do you expect that to grow as may be kind of as a percentage of revenues or something like that?.

So it would generally grow in line with the organic growth of the software company. Sometimes if you're moving through sort of a change more towards fast some of our business are, they could go up a little bit faster. There's a little bit of seasonality with that as well so a lot of the renewals you have in the fourth quarter.

So probably generally assume that deferred revenue gets better in the fourth quarter and then after that going into the next year will depend in the quarter sort of when the renewal happen. Many of these businesses they're getting a full year's worth of revenue in advance and that's really what's driving deferred revenue number..

And when you acquire a company, does that - that's obviously reflected in that number? Or is there some acquisition kind of mechanics where that is I don't know defined differently or there was like a step-up or something like that.

Does that number just go whatever deferred revenue they had on the balance sheet that kind of goes into your deferred revenue number? How does that work?.

Yeah, so purchase accounting requires you to take a haircut on deferred revenue of what's acquired. So you'll generally have less than a sort of a normal deferred revenue on day one and then that builds up over the next year.

If you've noticed that one adjustment that we make that hit the revenue line adjusted revenue not just adding that accounting-based movement on the revenue where you're actually getting all the cost from a business, but you can't recognize some of the revenue from a GAAP standpoint. So that's where you sit the haircut.

You will generally see more deferred revenue growth sort of the first year of ownership than other years..

Okay. That's a great reminder. Just one last quick one.

How fast did Sunquest grow in the quarter?.

So Sunquest, the quarter in the Americas business continued its mid single-digits decline for the reason we talked about in the past. The global part of the business and the CliniSys piece of the IPs and the global part of Sunquest grew as we also indicated in the past couple of quarters.

So the story relative to Sunquest is the same in terms of sort of rebasing the North American business and looking forward to getting with the team in the next actually - Monday, Tuesday next week in Tucson to go through their three-year strategic road map..

And will that grow in 2019 U.S.

course?.

I think it will continue to be down. The U.S. will continue to be down in 2019..

Okay..

But today some of our businesses - yes. Steve healthcare software group we talked about that grew low single-digit organically inclusive of both the decline..

Okay. Great. Thanks for all the color and for the accounting tutorial appreciate it..

We will now take our next question from Scott Davis from Melius Research. Please go ahead..

Hi. Good morning guys..

Hi, good morning, Scott..

A couple of questions for you. But one just to start with Neptune. I don't remember a time period where Neptune was strong. I know it's lumpy, but seems like you've got some confidence going forward. I mean, you said, you made a comment about customer networks being formed.

I'd love to get a little more color on that, just not an area we spend a lot of time on. But more explicitly, why our customers picking Neptune? I mean, I understandingly the technology is offered amongst the major three players are pretty similar.

So why are you guys winning in this market?.

Well we would beg to differ that products are similar. And I think the market share gains would demonstrate the customers are voting that way. We talked in the past.

It's principally or one of the principal elements is that is the customers have been the journey of migrating from non-networks to network meters and on the network journey from mobile to fixed networks. Many, many years ago the Neptune product strategy was to allow all that to be backwards compatible.

And so as the customers - and customer any region with network of meters, they sort of plan that migration over a series of years, not in big burst events and the backward compatibility has enabled this market share shift to happen because that we - the customers don't have to abandon their historical investment.

So that's been a key tenet to the market share shift. And when we talked about - I talked about the mini network effect that's happening at the local customer level..

Okay. That's helpful. And then, I'll follow on a little bit on Steve's question. I mean, Sunquest, the beauty of Sunquest is you didn't pay much for it. The downside is the outlook I think when you bought it you knew it wasn't going to grow much.

But in your deal model, did you have it at some point hitting a decline in growth profile? I mean, I think you pay like 12 times EBITDA which is pretty low for this type of business?.

I think it was more like 10 times is what we paid for. So we as a group it's worth just reemphasizing as a group of Acute Care Software assets they are growing and we see that continuing. If you peel off what we're talking about a part of the group and a part of a business that we're talking about which is the North American Sunquest business.

And so certainly in our deal model, we didn't model that it was going to go back mid-single digits. We had it flat to up lows and going back over history right we bought it there was a meaningful use, tailwind that drove sort of outsized onetime growth over the course of 12 months to 18 months then we had to lap over that.

And then we're here with this pressure - competitive pressure in the North American market that we've been experiencing this year a little bit last year and we'll continue to experience in the next year..

I guess a different way to ask the question is are you on the deal model then? Do you look at it that way, even though it's been a while?.

This was - there's been so many years..

Yes, we added a number of acquisitions to it which we wouldn't have added in the initial model and those all out. So, overall very good platform growth..

I think we acquired in 2000…six years..

Yes I know I know but there's a lot of noise around it obviously and a lot of skeptics and I suspected the time that was in the purchase price. But just kind of point out I was trying to get to. But anyways, I'll pass it on. Thank you, guys..

We will now take our next question from Julian Mitchell from Barclays. Please go ahead..

Hi, good morning and congratulations to Neil and his role.

In terms of my first question, just wanted to circle back to the industrial revenue growth outlook, wonder if it was just conservatism whereby you do have that steep slowdown in the core growth dialed in and may be allied to that if you can give any color on the order trends or book-to-bill rates in recent weeks?.

Yes. So for the industrial segment, the mid-single-digit organic guidance for Q4 is exactly consistent with what we said three months ago when we saw how the year would play out. Neptune as we've spoken about on the call is by far the largest business in the segment and they had sort of an unusually strong Q4 from a seasonality standpoint last year.

They generally - in that business seasonality for Q4 is lighter than Q3 and last year for various factors, it wasn't - there is really wasn't any sort of a sequential to down Q3 and Q4, we see more normal seasonality this year. That's a big driver of it.

I'd say that the order trends across the industrial and the energy businesses which is really the only place is really can give you an insights here, I mean at Roper or given some of the software, but these businesses we do of course look at the orders on individual basis and I would say they are very supportive of mid-single-digit organic and there's certainly optimism moving forward into next year.

But we feel really good about the guide. I'd say on the energy businesses from a seasonality standpoint, we're probably assuming a little bit less than normal Q4 uptick in terms of seasonality and energy businesses.

We just think that's prudent, some of that certainly will have great visibility in here and so we're not assuming a little bit less than what is normal, so could be there in that, but who knows..

Makes sense. Thank you.

And then just wanted to circle back to RF and PowerPlan, just remind us what kind of organic growth that business is delivering right now and whether that earnings accretion number for the second half, I think you talked about $0.12 or $0.13 last time, how you're tracking relative to that?.

Yes we're on track. It's mid to high single-digit organic growth business, a little bit better coming in. It's certainly on track, so that is performing as we expected. I think the team has been a really nice job of quickly getting up to sort of the Roper processes.

We had a great quarterly call with them last week and I think we feel really good about the trends of that business..

Great. Thank you..

Thank you..

We will now take our next question from Richard Eastman from Robert W. Baird. Please go ahead,.

Yes, good morning. Just very quickly just to stand RF Tech. Just a couple of questions, I presume from kind of waiting out the patience here the tolling and traffic was flattish in the quarter. But you did mention a number of pipeline opportunities there.

I'm curious are those opportunities are backlog? Does the backlog add to toll and traffic provide any kind of insight into possible low single-digit or mid-single-digit growth for 2019?.

Yeah. So you're right in the quarter on the distinct flash and again it's in line with our expectations. And I think the pipeline as it sits today now, it's big, it's robust and we're not going to add 100% against that pipeline.

But if it falls at this does historically then we would see certain low single-digit possibly a little bit better as we head into 2019 with that business..

Okay. And then just the other piece of this application software where we kind of spoken to Deltek and Aderant some like really good growth rates.

But when you look at the software businesses, the app software businesses combined and you see this kind of 6% growth rate combined, what's your feeling from that from a cyclical standpoint? I know this is - there's a lot of recurring revenue in there, but again, you're selling to legal firms and Deltek sales into the government market where there's some pacing of spend.

Is the 6% number for that piece of the business running may be a couple points hot relative to a cyclical growth rate for your app software businesses?.

Yeah, we view this business is to be very consistent growers just very little of any cyclicality associated with them. So double-click for instance with Deltek I can certainly understand that concept that as government spending goes so is spending on the systems.

But over history that's not the case because what happens to government contractors flow to where the money is and there's always money being spent. And so that's rising need for them to have the software to drive the compliance and the operations for instance. So we view these as consistent and not like a cyclical business is going forward..

Okay. Very good. Thank you..

We will now take our next question from Joseph Giordano of Cowen and Company. Please go ahead..

Yeah. Good morning guys..

Good morning..

So on RF Tech, if we just assume like for sake of argument that we stop doing M&A and the deal that you've done kind of start slowing will the normalize drop down of that segment be materially higher than what we're seeing now? I mean just feel like that subs we've added over the last couple of years the characteristics of those business are a lot different than what has been in there historically.

So like how would you think about what that normalize drop down x the impact of like the upfront cost of acquisitions?.

So are we talking from a leverage standpoint on the incremental go?.

Yeah..

Yeah. So the software businesses generally has EBITDA margins 40% plus and the toll and traffic as you know is lower than that. So right, as these businesses ago the earnings leverage 40% plus probably a little bit better than that..

Okay. Is Neptune….

That leveraged all traffic business so better leverage as we move more towards software and less cyclicality of course and a lot more recurring revenues and better growth..

Yeah. That's the point okay. Okay. Is Neptune facing any issues currently with like sourcing of electronics environment we've heard a little bit about that on the call side from some of that occurred in that space.

I'm just curious if it's anything that you guys are seeing there?.

There's pockets of that as we do in our reviews really over the course of the last several quarters not unique to this quarter. I think it goes again to the nimbleness of the supply chains of these businesses to the extent there is an issue.

They're really sole-sourced supply because again we are not buying things in a massive scale so we can shift production are shift the supply chain where it's needed. But we have seen as I mentioned in some pocket some component shortages, electronic component shortages..

Okay. And then just last for me kind of more of a conceptual one.

Neil, how do you see just in terms of style, I know you have the core fundamental beliefs that Roper is going to remain the same and how did you go about your business, but stylistically anything that you're bringing differences to the environment there? Maybe, how you take input from people or you have a different amount of people around you.

Just may be talk about, how you plan on running things versus how it's been?.

Sure. I appreciate the question. I view it to be very - I mean, the strategy is the same, the structure is the same. The way we deploy capital and the process rigor around that is the same. Stylistically, Brian and I certainly are different people with modestly different styles. I think both are - have been accepted by the organization.

I think me having grown up here as a group executive in the trenches across the medical businesses and the application software businesses, as I sort of look to the next several years it's trying to bring a little bit of process - a little bit more process rigor about how we - the companies in the field develop strategy, how we get very focused on how to deploy that strategy and then also how the teams build the talent and build the talent offense within their teams.

So it's less stylistically, but more having just grown up in the trenches here where Brian's always been the CEO from the day he started is maybe a little bit different perspective remains which I'll look through for the next few years..

Great color. Thanks guys..

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

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

That will conclude today's conference call. Thank you for your participation ladies and gentlemen. You may now disconnect..