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?.

Solid operating performance across the enterprise; $5.8 billion of CRI accretive capital deployment; and successfully executing a capital market transaction at extremely favorable interest rates. Now let's turn to our next slide and talk to our recent acquisitions.

Okay, this was a very strong quarter for us relative to our capital deployment strategy. As we mentioned for several calls, the quality and quantity of ideas in our M&A pipeline has been robust for quite some time. We were very selective in our approach for landing on these acquisitions highlighted on this page.

First, we completed the acquisition of Vertafore for $5.35 billion. I refer you to the call we did just after announcing this transaction for all the relevant details. But the highlight, Vertafore is a business that delivers cloud-based software to the property and casualty insurance industry principally in United States.

Vertafore’s focus is straightforward, to simplify, automate and drive productivity across the complex and highly regulated processes in the P&C space. Today, the business serves over 20,000 independent agencies, 1,000 insured carriers and touches over 140 billion of premiums per year.

And high quality management teams motivated to build their businesses are super important for us. And to that end, Amy and her team have done a tremendous job building this business over the last several years. We expect Vertafore will deliver about $590 million of revenue and $290 million of EBITDA next year.

Separately, we announced and closed three strategic add-ons, one for Strata, and two for iPipeline. Relative to Strata, we acquired EPSi.

As reminder, both Strata and EPSi deliver decision support, financial planning and analytic software solutions that help hospitals manage their cost structure, and identify opportunities for operational improvements. Strata, when combined with EPSi, would serve over 400 health systems and 2000 hospitals.

The aggregate spending power of this combined customer base is approximately $1 trillion, or about 25% of the total healthcare spend in the U.S. The combination of Strata and EPSi will be a powerful one for the market and our customers. Relative by iPipeline, we acquired both WELIS and IFS.

WELIS is a nice product tuck-in that enhances iPipeline’s life insurance and annuity illustration capability. For those who don't know, the illustration is the modeled value calculation that permanent insurance carriers are required to provide to their insurers.

IFS enhances iPipeline's capabilities to better serve the financial planning channel relative to life insurance account management. We expect these three bolt-ons will deliver about $75 million of revenue and $30 million of EBITDA next year. We're looking at each of these deals either individually or together, they are right down the middle for us.

Each business has very strong cash flow capability, which is punctuated by being super asset light. Also, these businesses are, as our most Roper businesses, market leaders in their niche. Over the years when we refer to niche we mean smaller markets. We like small markets, small towns provide deterrence for new potential entrance.

On top of this, these and other Roper businesses provide deeply verticalized solutions. By this, we mean solutions that are specifically developed to address unique industry workflows or challenges.

It is at the cross section of; one, being the market leader; two, operating in smaller markets; and three, delivering vertical solutions that enable our businesses to have intense customer intimacy. This intimacy enables our businesses to invest at the pace our customers require.

Importantly, these four businesses have very high levels of recurring revenue. For instance, Vertafore has over 90% returns. Finally, these businesses grow nicely on an organic basis. Their growth drivers are diversified and are multiple. We expect these businesses to grow mid-single-digits over the long arc of time.

Taken together, the $5.8 billion in capital deployment should deliver about $665 million in revenue, and $320 million of EBITDA to our enterprise in 2021. In a few pages, Rob will discuss our financing package for these deals which as you likely know by now was quite good.

So now, I'm going to hand it over to Rob, but look forward to discussing our activities here more during the Q&A. Rob, your ball..

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 finance organizations across the Roper Enterprise. Our people do a really good job of focusing on what matters.

We will see more evidence of this as we move forward to look at cash flow and cash conversion on the next few slides. Next slide. Turning to Page 9 on compounding cash flow. Really amazing as Neil had mentioned to have our third straight quarter of double-digit cash flow growth in 2020.

As we discussed last quarter, for better compatibility and clarity, we adjusted our results for the $124 million of cash tax payments that were deferred from Q2 to Q3 due to COVID-19. So that adjustment hurt our numbers in Q2 and helps us in Q3 but has no net impact on our year-to-date results.

Next year, we expect the IRS to return back to their normal schedule. We do have one additional adjustment this quarter, as Zack mentioned, for the $192 million of cash taxes that we paid in the quarter that were due from the 2019 Gatan divestiture.

So none of those adjustments, Q3 operating cash flow grew 12% to $454 million, which represented 33% of revenue. Q3 free cash flow grew 14% to $442 million, which represented 32% of revenue. And you can see on the right hand side on a year-to-date basis, our adjusted free cash flow was up 13% to $1.1 billion.

So as a takeaway reads, really consistent cash flow performance in a very challenging environment. Next slide, on Page 10, turning to Roper's strong cash conversion. So through three quarters of 2020, 28% of our revenue and 78% of our EBITDA has converted to free cash flow.

So comparing our 2020 year-to-date to our full year cash conversion over the past few years, we actually see that we are trending ahead of where we've been historically on cash conversion. Even better, Q4 is typically a seasonally strong quarter for cash conversion driven by annual billing cycles and lower tax payments.

So, we are quite confident we are heading for a very strong cash result in 2020. Our consistently high cash conversion is important because it further demonstrates the high quality of our EBITDA, which allows us to quickly and predictably reduce leverage after large acquisitions. Next slide, turning to Page 11, updating on our balance sheet.

So you can see here where we stand after the completion of the Vertafore acquisition in September. Our cash balance is reduced to a normal level of about $300 million, down from $1.8 billion at the end of the second quarter. That excess cash was used to partially fund the acquisitions. Net debt to trailing EBITDA ended the quarter at 4.8 times.

Importantly, this calculation does not include the pro forma impacts of the Vertafore acquisition. Including a full year of Vertafore’s EBITDA would push this ratio down into the low 4s. We expect our leverage to decline quickly over the next year as the EBITDA flows through and we use our generated cash flow to reduce our debt. Next slide.

So on Page 12, we'll talk about the financing activities that occurred in the third quarter.

Including the EPSi deal that closed in October, we recently deployed a little over $5.8 billion of capital financed by our excess cash on hand, a meaningful amount of which was generated from last year's Gatan divestiture, new investment grade debt and a draw on our credit facility.

We launched a bond offering in August and benefited from strong demand from Roper's debt investors, consistent with what we had experienced when we accessed the high grade bond market in June.

So we ended up spreading the $2.7 billion of principal over four tranches which resulted in a very good blended interest rate of 1.3% and duration of a little over seven years. Notably, and importantly, no changes to Roper credit ratings.

We remain triple B plus at S&P and Baa2 at Moody's and we remain committed to maintaining solid investment grade ratings moving forward. We also successfully extended our revolving credit facility out three years and also upsized it from $2.5 billion to $3 billion. The current floating borrowing rate on the revolver is about 1.2%.

So we like to strike a balance between fixed rate debt and prepayable floating debt to enable us to delever quickly. So in summary, these financing activities are consistent with our long-term strategy of augmenting our internally generated cash flow with investment grade debt.

Then we use our consistent and durable cash flow generation to rapidly reduce leverage, which we plan to do over the next 12 to 18 months. So with that, I'll pass it back over to Neil..

operational; capital deployment; and capital markets. Operationally, revenue grew 1% overall and declined 3% on an organic basis. EBITDA grew and margins remained strong. Most importantly, free cash flow grew 14% in the quarter.

Throughout this year, our asset-light niche and market-leading businesses remain focused on investing for higher levels of long-term and sustainable organic growth. As such, this year, we are seeing increased levels of R&D across many of our businesses.

Also, and it's worth repeating, we meaningfully enhanced our portfolio by successfully deploying $5.8 billion. Following these acquisitions, two-thirds of Roper's EBITDA will be generated from our software group of businesses. These acquisitions further add to our recurring revenue profile and our ability to compound our cash flows moving forward.

Given our recent capital deployment and our commitment to investment-grade ratings, we are focusing our efforts for the next few quarters on operating our businesses and generating our durable cash flow, which will allow us to delever just as we did following our Deltek acquisition in 2016.

So with all of this, we continue to be bullish about the coming quarter, about 2021 and about our longer-term future. And finally, and relative to our long-term strategy model, I'll conclude by highlighting, we compound cash flow. That's our job. Our cash flows are remarkably durable as demonstrated this year.

We do this by operating a portfolio of businesses that have leading positions in small, niche and growing markets. Also, our businesses, whether our product or software, deliver highly application-specific or vertical solutions. Taken together, our businesses are awarded with intense customer intimacy.

This intimacy allows us to innovate at the pace required by our customers. Our businesses have high-margin and asset-light economic models that naturally generate high levels of operating cash flow as they grow. To this end, we incent our management teams based on growth. And finally, we take the excess free cash flow generated by our businesses.

And by this, we mean the cash flow that the businesses generate beyond investments required to drive organic growth, combine it with investment-grade leverage, and acquire businesses that have better cash returns than our existing company, that in turn, improve Roper and further accelerate our cash flow compounding.

This very model, this very strategy, are the simple ideas that deliver our powerful results. So with that, let's get to your questions..

[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..