Roper Technologies, Inc (NASDAQ: ROP) Q2 2025 Earnings Call dated Jul. 21, 2025
Corporate Participants:
Zack Moxcey — Vice President of Investor Relations
Neil Hunn — President and Chief Executive Officer
Jason Conley — Executive Vice President and Chief Financial Officer
Analysts:
Dylan Becker — Analyst
Brent Thill — Analyst
Joe Vruwink — Analyst
Brad Reback — Analyst
Joshua Tilton — Analyst
Ken Wong — Analyst
Terry Tillman — Analyst
Joe Giordano — Analyst
Deane Dray — Analyst
Scott Davis — Analyst
Presentation:
Operator
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 now like to turn the call over to Zack Moxcey, Vice President of Investor Relations, please.
Zack Moxcey — Vice President of Investor Relations
Good morning, and thank you all for joining us as we discuss the second quarter 2025 financial results for Roper Technologies. Joining me on the call this morning are Neil Hunn, President and Chief Executive Officer; Jason Conley, Executive Vice President and Chief Financial Officer; Brandon Cross, Vice President and Principal Accounting Officer; and Shannon O’Callaghan, Senior 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.
And now if you’ll please turn to Page 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 Page 3. Today, we will discuss our results primarily on an adjusted non-GAAP and continuing operations basis. For the second quarter, the difference between our GAAP results and adjusted results consists of the following items amortization of acquisition-related intangible assets, transaction-related expenses associated with completed acquisitions; and lastly, financial impacts associated with minority investments, including cash taxes paid resulting from the sale of our minority interest in Certinia. Reconciliations can be found in our press release and in the appendix of this presentation on our website.
And now if you please turn to Page 4, I’ll hand the call over to Neil. After our prepared remarks, we’ll take questions from our telephone participants. Neil?
Neil Hunn — President and Chief Executive Officer
Thank you, Zack, and thanks to everyone for joining us this morning. As we turn to Page 4, you’ll see the topics we plan to cover today. We’ll start with our second quarter highlights, including reviewing the platform acquisition we announced earlier today, Subsplash. Then we’ll go through our segment results and our improved outlook for the full year and then get to your questions. So let’s go ahead and get started.
Next slide, please. As we turn to Page 5, let me highlight the four key takeaways for today’s call. First, we posted another solid quarter of financial results. Total revenue grew 13%, organic revenue grew 7%. Software bookings grew in the high teens area, and we continue to deliver impressive cash flow with free cash flow margins coming in at 31% for the TTM period. Second, we announced earlier today the acquisition of another great vertical market software provider, Subsplash, which I’ll get to in a bit. Then given the strong first half performance and the anticipated completion of the Subsplash acquisition, we’re raising our full year total revenue guidance and our full year DEPS outlook. And finally, we continue to be very well positioned for capital deployment and continue to have more than $5 billion of available firepower over the course of the next 12 months.
Please turn to Page 6, where we’ll discuss Subsplash. Subsplash is a cloud-native and AI-enabled software provider serving faith-based organizations. As a leading provider of digital engagement, church management and integrated giving solutions, their purpose-built platform enables customers to serve congregations while engaging with members more effectively. Subsplash partners with 20,000 faith-based organizations to help them become digitally native by deepening member engagement, reducing manual administrative burden through automation, streamlining content distribution and integrating digital giving solutions, all supporting their customers’ core mission. Simply put, Subsplash enables these organizations to allocate more time and resources to what matters most, ministering to and engaging with their congregation in a digitally native way, whether it be online or on an in-person basis. Importantly, this customer value proposition strengthens further as the company’s AI native capabilities are further deployed across the product stack.
In terms of investment highlights, the purchase price is $800 million. We expect Subsplash to deliver $115 million of revenue and $36 million of EBITDA for the 12 months ending Q3 of 2026. This business meets all of our long-standing acquisition criteria, leader in a niche, competes on the basis of customer intimacy, has strong gross margins and converts high levels of cash flow. Subsplash reflects the maturing leader acquisition profile of being a higher organic growth business, in this case, in the high teens area and competes in a $2.5 billion US TAM with about half being currently served and potential to meaningfully expand internationally.
In addition, Subsplash is well positioned to materially improve their gross and EBITDA margins over the next three to five years, and we expect to deliver this by executing a handful of the available levers. As a result, we expect to see Subsplash’s organic revenue growth convert to high 20% EBITDA growth over the next three to five years. We will finance this transaction with a revolver and report the results in our Network Software segment. Subsplash represents another powerhouse addition, delivering critical solutions to a customer base with deep ongoing needs for these capabilities.
To the Subsplash team, we’re so excited for you to join Roper. Thank you for all of the super important work you do for your customer community and for trusting Roper to become your permanent partner.
So with that, let me turn the call over to Jason to walk through our P&L and balance sheet. Jason?
Jason Conley — Executive Vice President and Chief Financial Officer
Thanks, Neil, and good morning, everyone. I’ll now take you through our Q2 financial highlights on Slide 7. The second quarter was another solid installment in what we believe will be a good year for Roper. Revenue of $1.94 billion was up 13% over prior year and well balanced with 7% organic growth and a 6% increase from acquisitions, with CentralReach results contributing since the April 23 close date.
Organic growth was strong across the portfolio, demonstrating resilient demand for our mission-critical solutions. Importantly, and as expected, Network Software year-over-year growth notably improved from Q1, given more normal comps at MHA, increased freight match unit economics and recovery at Foundry. EBITDA of $775 million was up 12% and generated EBITDA margin of 39.9%. Core enterprise operating margin was flat to the prior year with core segment margin up 40 basis points. This follows a similar pattern to Q1, bringing our year-to-date core segment margin expansion to 70 basis points.
For the diluted EPS, we delivered $4.87 versus our guidance range of $4.80 to $4.84 on strong revenue growth and excellent core operating leverage. Finally, free cash flow of $403 million was up 10% versus prior year, which drives TTM free cash flow to over $2.3 billion. The recent passage of the Big Beautiful Bill Act provided a permanent repeal of Section 174 capitalization of R&D expenditures. We are, therefore, reducing our cash tax payments for 2025 by around $150 million to reflect the cumulative reversal of capitalization, of which about $60 million benefited our second quarter. We will also see a benefit of $120 million carry into next year due to deduction limitations in 2025. Adjusting out the Section 174 impact, our three year TTM free cash flow CAGR would be about 14%. So overall, good news in offsetting some near-term deal dilution and fueling our growth equation.
Now let’s turn to Slide 8 to discuss our strong financial position. We finished the quarter with a healthy balance sheet and substantial capacity for continued capital deployment. We exited at 2.9 times net debt to EBITDA and pro forma for Subsplash, this would be around 3.1 times. Additionally, our cash balance was $242 million, and our revolver had $1.4 billion drawn against our $3.5 billion credit facility. So even with Subsplash closing this month, as Neil outlined, this gives us over $5 billion in M&A firepower. This substantial capacity positions us very well to continue executing on our disciplined capital deployment strategy. To that end, while the sponsor to sponsor market is still somewhat muted, we are active on a number of both platform and bolt-on transactions that reflect the characteristics of higher growth and increasing long-term value capture with Subsplash being a case in point.
With that, I’ll turn it back over to Neil for our segment highlights and guidance update. Neil?
Neil Hunn — President and Chief Executive Officer
Thanks, Jason. As we turn to Page 10, let’s review our Application Software segment. Revenue for the quarter grew by 17% in total and organic revenue grew by 6%. EBITDA margins were 42.9% and core margins improved 70 basis points in the quarter.
As we turn to the businesses, we’ll start with Deltek. Deltek grew in the mid-singles range in the quarter, both recurring and total revenues. As highlighted on the slide, Deltek continues to have strong migration to their cloud offerings, while the business continues to innovate at a rapid pace and has benefited by very strong gross and net retention.
As it relates to the federal government contracting outlook, we believe the Big Beautiful Bill spending priorities and sheer volume will be a catalyst for market growth, which has been tepid for the last 24 months or so. The timing of market reacceleration is still to be determined, but we believe it will occur over the course of the next few quarters.
Importantly, during the quarter, Deltek made substantial progress in regard to their AI-based product capability and recently announced their new flagship GovCon product, CostPoint, fully embeds their AI assistant Dela to help deploy intelligent task-oriented agents to streamline repetitive processes and help users make faster, better informed decisions. Exciting stuff here and lots more to come for sure.
Aderant continues to be incredibly strong and posted their best bookings quarter in the company’s history. The booking strength is broad-based, fueled by their AI-enabled solutions and is a combination of market share gains, cloud migration and SaaS growth. Congrats and thanks to Chris and the entire team at Aderant, keep up the amazing work.
Vertafore continues once again to be steady and solid for us. We continue to see consistent ARR growth and strong customer retention here with strength across their agency, MGA and carrier solutions. This growth is enabled by their strong go-to-market capabilities and our long-term commitment to product strength. We look forward to talking about this and their AI-enabled solutions in subsequent calls.
PowerPlan continues to be outstanding. As we mentioned last quarter, the team has done a great job at making the revenue stream more recurring in nature. In addition, they continue to get amazing feedback with our innovative cloud offerings, which are driving strong SaaS migration activity. As a result, PowerPlan just continues to win in the market with their new SaaS solution and near 100% gross retention.
Procare and Transact/CBORD continue to perform very well in their respective markets, while we also saw very good results from the health care IT portion of this segment, Strata, Data Innovation and CliniSys. Finally, CentralReach is awesome in the early days, has exceptional momentum, record expansion activity and a 70% enterprise new client win rate all in the quarter.
As it relates to the outlook for the second half of the year, we continue to expect organic revenue growth to be in the mid-single-digit plus area.
Please turn with us to Page 11. Total revenue in our Network segment grew 6% and organic revenue 5% in the quarter. EBITDA margins remained strong at 54.6% and core margins improved 20 basis points.
As we dig into the individual businesses, we’ll start with DAT. DAT was solid in the quarter and had strong ARPU improvements. The market continues to be stable, albeit bouncing along the bottom. Also in the quarter, we integrated Loadlink, our Canadian freight match business with DAT. We expect the integration to deliver over time a more unified and efficiently deployed North American freight match network. DAT continues executing exceptionally well on their core strategy of driving enhanced network value for both brokers and carriers. This dual-sided approach positions us to better monetize our entire network ecosystem.
Supporting this strategy, DAT made significant progress integrating Trucker Tools, our Q4 bolt-on acquisition and completing the acquisition of Outgo, an AI-native factoring technology solution. Combined with the DAT network foundation, these integrated products and assets now deliver substantially more value to both carriers and brokers. Looking forward, DAT will maintain their aggressive execution of this network value enhancement strategy, positioning the business for continued growth and improved monetization across all.
ConstructConnect was solid for us in the quarter. The growth was fueled by strong customer bookings activity and improved customer retention. Of note, this business continues to make good progress with the emerging AI-enabled takeoff and estimating solution. Foundry declined in the quarter as expected, but we continue to see market recovery signs as they grew their sequential ARR for the first time since the actors and writers strikes. Good to see recovery start here.
Also in the quarter, Foundry’s new product, Nuke Stage, started gaining traction in the market, specifically with a very large studio and several smaller customers. Nuke Stage enables the power of post-production compositing to occur in the production phase of the pipeline, an exciting new capability that will help drive cost savings for the industry.
Finally, our network health care businesses, MHA, SHP and SoftWriters were very good in the quarter. As we turn to the outlook for the second half of the year, we expect to see revenue growth in the mid-single-digit plus range.
Now please turn to Page 12, and let’s review our TEP segment’s quarterly results. Revenue here grew 10% and organic revenue grew 9%. EBITDA margins came in at 36.7%. We’ll start with Neptune, which was once again just solid for us. Neptune continues to do a great job with our ultrasonic meter go-to-market execution and continue to see strength in their data and software offerings. Verathon continues to execute at a high level as well. In particular, in the quarter, Verathon saw continued strength in their single-use reoccurring solutions, both BFlex and GlideScope.
NDI was really good in the quarter. As discussed in prior quarters, NDI delivers proprietary and world-class precision measurement technologies to a wide variety of health care OEMs, which in turn enables the OEMs to deliver guidance-enabled solutions across many health care markets such as orthopedic surgery, interventional radiology and cardiac ablation. Finally, there was strong execution, which led to growth across CIVCO, FMI, Inovonics, IPA and rf IDEAS. Turning to the outlook for this segment. We expect to see high single-digit organic growth for the second half of the year with a stronger third quarter and a more difficult fourth quarter comp.
Before turning to our guidance outlook, I’d like to reflect on our AI perspective, its transformational potential for customers and our enterprise and the steps we’re taking to build lasting advantage. Our strategy is focused and practical, applying AI to address high-impact customer-specific challenges. We’re confident that AI-based innovation substantially expands our business’ TAMs where we have a high right to win and will be a core catalyst for our next chapter of growth. The true unlock, the magic, if you will, of AI emerges at the intersection of the specialized mission-critical workflows our customers rely on daily and our deep vertical market expertise.
Our AI initiatives span all our businesses, and we’re seeing early traction from compliance solutions to AI-enhanced products to AI assistance and intelligent agents that streamline tasks. We’re building solutions that deliver tangible, high-value outcomes. Today, we have approximately 25 AI-enabled products either in market or in development.
Importantly, our AI innovations create a positive halo effect across many of our businesses, driving booking activity for our broader product stacks. This is an exceptionally fun moment to be at the forefront of innovation, redefining and automating workflows across our vertical markets while unlocking new growth and building durable competitive advantages. Exciting stuff for sure.
So with that, please turn with us to Page 14. Let’s turn to our Q3 and increased full year 2025 guidance. Given our strong Q2 performance and anticipated closing of the Subsplash acquisition, we’re increasing our total revenue growth guide to be in the 13% range. Our organic growth rate of 6% to 7% for the full year remains unchanged.
Finally, we’re increasing our full year DEPS outlook to be $19.90 to $20.05, which includes about $0.05 of Subsplash dilution. Our guide continues to assume a full year effective tax rate in the 21% to 22% area. For the third quarter, we expect adjusted DEPS to be between $5.08 and $5.12, while absorbing $0.03 of Subsplash dilution in the quarter.
Now please turn with us to Page 15, and then we’ll open it up for your questions. We’ll conclude with the same key takeaways with which we started. First, our second quarter financial results were quite good. Second, we announced the acquisition of another market-leading vertical market software business, Subsplash. Third, given our solid start to the year, we’re raising our full year guidance. And finally, we remain well positioned for further capital deployment. Relative to our financial results, we grew total revenue 13% and organic revenue 7% in the quarter and delivered 31% free cash flow margins in the TTM period.
We’re delighted with our acquisition of Subsplash. As discussed, this vertical market leader is mission-critical to the delivery of digital engagement, church management and payments to 20,000 faith-based organizations and have several embedded growth drivers that will support its high teens revenue growth and expanding margin profile. Next, we’re raising our full year outlook.
And finally, we continue to be very well positioned with more than $5 billion of available M&A firepower to deploy capital towards leading vertical market software businesses. Our M&A pipeline continues to be very active, and our teams are engaged on several opportunities. As usual, we’re excited to pursue these opportunities with our unbiased and disciplined approach.
Prior to turning to your questions and if you could flip to the final slide, our strategic compounding flywheel, we’d like to remind everyone that what we do at Roper is simple. We compound cash flow over a long arc of time by executing a low-risk strategy and running our dual thread offense. First, we have a proven powerful business model that begins with operating a portfolio of market-leading application-specific and vertically oriented businesses. Once the company is part of Roper, we operate a decentralized environment so our businesses can compete and win based on customer intimacy. We coach our businesses on how to structurally improve their long-term and sustained organic growth rates and underlying business quality.
Second, we run a centralized process-driven capital deployment strategy that focuses in a deliberate and disciplined manner on cultivating, curating and acquiring the next great vertical market-leading business to add to our cash flow compounding flywheel. Taken together, we compound our cash flow over a long arc of time in the mid-teens area, meaning we double our cash flow every five years or so.
With that, we’d like to thank you for your continued interest and support and open the floor to your questions.
Questions and Answers:
Operator
I think you will now go to our question-and-answer portion of the call. [Operator Instructions] With that, our first question comes from the line of Dylan Becker with William Blair. Please go ahead.
Dylan Becker
Hey gentlemen, appreciate the question here. Maybe, Neil, starting for you, kind of the resiliency and strength across the software segments of the business. Can you kind of just give us a general breakdown of again, the emphasis that your customers are kind of focusing on around productivity kind of in the current context, how that’s layering in momentum around AI and maybe this prolonged period of uncertainty, if there’s any easing that you’re seeing there as they can’t necessarily sit on their hands from a decisioning standpoint forever? Thanks.
Neil Hunn
Yes. So I appreciate the question. So first, it was nice to see the high teens bookings in the second quarter. It gives you a sense that in the nooks and crannies of the market that our businesses serve, things are okay. Also, I’d remind you and everybody that the end market exposure we have generally — not exclusively, but generally are less tied to macro. Think education, legal, insurance, I mean these are areas that — health care for sure, that are generally less macro sensitive. But they don’t — they’re not — they don’t ignore the macro sensitivity, but the other thing, as you say, and this is not unique to us, there’s just an unprecedented generational opportunity in front of us, all our businesses to really drive so much productivity gains inside of our customers with the use of the — of our AI tools, we can — I’m sure others will have questions on this, but lots of momentum in terms of the knowledge that’s being built up inside the company and that translating into products into the market and then many more products that are in development. So that’s very exciting. For instance, in Aderant, it was one of our faster-growing businesses in the quarter. There we’re one of the — probably our first company to get actual AI-based products, automation-based products into the market. And you see that translating into their bookings activity, not just for the AI-specific products, but for the drag along of existing tech stack with it as well.
Dylan Becker
All right. Very helpful. Thank you. And then maybe on — within some of the recent acquisitions as well too, more of a kind of a payments orientation, Outgo, obviously, within DAT as well. I guess can you just kind of give us a broader overview? You have a lot of value across the network and platform. You’re driving incremental adoption, kind of how you’re thinking about the positioning of embedded and layering in kind of more payments functionality across the suite and how that can kind of tie into broader TAM expansion? Thank you.
Neil Hunn
Yeah, so certainly, with Procare, certainly with Subsplash, a little bit with Transact and CBORD, there is a payments element. The thing that’s essential to all 3 of those is that the payments — the right to the payments opportunity is earned through the software, and that’s very much the case across all 3. So we view it as a software-led, heavy R&D led to earn the rights. It’s a very natural control point to have the payments. I’d say it’s not a thematic. I would not read too much into the last or 3 transactions for if you count ala have a payments angle that we have a strategic decision has been made that we want to layer more payments. I think it’s more coincidental than anything else. The other thing about payments is it does create — payments and software and other — a network effect as well, it just creates a ton of stickiness and these businesses tend to have very high both gross and net retention. Outgo is a little bit different. Outgo is really the first tech-only tech-forward tech native, I should say, factoring software that’s used in the transportation space for the carriers that is really a slick user interface, a slick back end to enable just an ease of factoring. And so it certainly is — it enables commerce and payments, but it’s a slightly different payments setup.
Dylan Becker
Okay, thank you guys. Appreciate it.
Operator
And your next question comes from the line of Brent Thill with Jefferies. Please go ahead.
Brent Thill
Good morning. Neil, throughout the quarter, I’m just curious, did you see any signs of the tariff headlines or government spending slowdown impact anything or perhaps throughout the quarter, maybe things got better as you went through in the back of the quarter. Can you just give us a sense of what you saw in terms of the business trends through the quarter and how that’s trended so far in July?
Neil Hunn
Yeah, so on just the broader macro, the tariffs, obviously, all in our tech business is relatively small. I think we said last quarter, it’s in the $10 million to $15 million range and that — it’s still in that. The team is working very hard to — mitigated some of that in supply chain, mitigated some of that in pricing. So I won’t — I think it’s too early to call it non-effect, but for — relative to others, it’s quite small. Relative to the broader other uncertainty, in pockets, there’s uncertainty in K-12 education. So it’s just sort of had a muted effect on bookings activity across the industry and Frontline had a slower bookings quarter, but that’s in the backdrop of high teens across the whole enterprise for enterprise bookings. Otherwise, I mean, government contracting inside of Deltek remains muted as we expected it to occur with the BBB coming through and sort of not knowing what that was going to look like as well as the sort of hangover or lasting effects of DOGE. But I said in the comments relative to Deltek, we think the Big Beautiful Bill is what the industry has been looking for, for the last 24 months or so to unlock and sort of get things moving again given that, one, there’s just a lot of spending in the bill relative to the government contracting. But more importantly or maybe equally as importantly, is the category of spend from civilian to defense, DoD, DHS goes from a relatively low spend where it’s contractor spend to a higher contractor spend. So definitely, civilian spending is a low contract percentage and defense spending is a high contract percentage. So it should be the unlock. The timing is to be determined. So there’s still got to get contract and get the spending into the market, but it should be measured in a small number of quarters, hopefully.
Jason Conley
Yes. And the timing is definitely the question because you’ve got agencies that don’t have employees that we normally interact with. So you’ve got just a tactical problem at this point. But the demand is there and the pipeline is very strong at Deltek.
Brent Thill
Okay, thanks.
Neil Hunn
I would say as you — as we switch questions, as you conclude with, I mean, we’re talking about this, we’re getting ready for a call. We — the call down to our businesses on the macro topic was our business units were cautiously optimistic coming out of the calls, and we are going into the calls, not exactly sure what we’re going to hear and we left equally cautiously optimistic about the go-forward period.
Operator
I think and your next question comes from the line of Joe Vruwink with Baird. Please go ahead.
Joe Vruwink
Okay, thanks for taking my questions. I wanted to drill down on the high teens bookings. That seems like a very impressive number, just given the year ago period was an inflection higher in its own right, and it seems like maybe GovCon or Frontline were not contributors to this quarter. So maybe the question is what did contribute to the positive trends? And at this point, given bookings have been better now for 5 quarters, I suppose, do you kind of have the backlog you need to influx your organic recurring revenue growth closer to the double-digit level?
Jason Conley
Thanks, Joe. It’s Jason. Yes. No, I think it was a very strong quarter. I think you are correct in highlighting the 2 areas of weakness that Neil alluded to was the Deltek and Frontline. Otherwise, very strong. And we mentioned that Aderant had their biggest bookings quarter in history. They landed one of the largest ground to cloud conversions ever. So that was good. And then just strength across some of their AI solutions cross-selling there. Health care was solid, I’d say, not spectacular, not above the range, but solid. So I think as we look into the — it really supports our second half guide. I think we — as you know, a lot of the bookings activity bends to Q4. So that’s planning more for ’26. But this — like after kind of a more — a little bit more of a muted first quarter, having the high teens kind of supports where we thought where we’d be year-to-date. And so I think that’s positive to get back on plane.
Joe Vruwink
And then on AI, it strikes me even relative to last quarter, there’s just a lot more happening, a lot more references to what the individual business units are working on. Do you maybe have a better sense of how that starts to impact the P&L? How is it impacting like R&D spend? Are you getting engineering productivity through your own use of tools? And then when might the revenue implications start to show up?
Neil Hunn
Yes. So this is the question. So we are definitively getting the internal productivity gains that you’d expect any company to get 30% in one of our larger software businesses, 30% productivity gains in R&D, for instance, there’s productivity gains across customer support, go-to-market, obviously, content generation. There’s a long — there’s still way more to go get in that regard. And in fact, we have to-do for our businesses where they’re sort of re-underwriting or reimagining their entire business to be AI native. The first part of that is for the customer value chain, sort of first, second, third derivative. The second part that’s a fast follow is leaning in very aggressively on the productivity gains. In terms of when all this goodness hits the P&L, there’s — it’s small today. It’s tens of millions in terms of ARR today that’s direct. AI native products that didn’t exist a year or two ago. It’s a multiple of that or two. It’s hard to track, but a multiple or two of that in terms of the pull along with the rest of the other tech stack. But we are fundamental believers that this is a compounding effect. It’s compounding effect in terms of the knowledge inside the business, the skill, the curiosity. It’s a compounding effect of availing the resources and the dollars, both from freeing up legacy road map work to this work and also just having the dollars gain that we talked about at the beginning of this answer. And then that gets compounding in terms of releases and revenue recognition. So it’s going to be small for this year, and it will gain momentum that we get in the next year. Like I said, 25 products either in market or in development. That number is going to be much larger in three months. It will be much larger in 6 months, so much so that we’ll stop giving you the number because it’s — everything is just going to blur together in terms of everything is just going to be AI native, but we’re super, super bullish and man is it fun to be innovating in this market right now.
Joe Vruwink
Okay, thanks. Thanks for that.
Operator
And your next question comes from the line of Brad Reback with Stifel. Please go ahead.
Brad Reback
Great. Neil, following up on that 30% productivity gain comment. How do you decide what falls to the bottom line and what gets invested back into faster organic growth?
Neil Hunn
Yeah, so the strong push to the business is at the moment, we’ve been very consistent with this answer is we want to do more than — for the next period of time and try to get it to the bottom line. There’s so much to do, so much opportunity to drive product road map to drive go-to-market expansion, whatever it is at the individual business level. So that is the mantra for the time being is do more and drive competitive advantage and top line growth.
Brad Reback
That’s great. On the AI monetization side of the equation, there’s a lot of debate going on inside of software, especially as it relates to seat-based models. Do you have a good sense yet of early successes and the best way to price these products? Or is that still very much a work in progress? Thanks.
Neil Hunn
I think it’s a work in process, and I definitely don’t believe that — or we don’t believe there’s going to be a one size fits all. So we have products today that, again, in this early days, you have AI products, particularly at Deltek that are part of the existing subscription that’s driving an upgrade to the cloud, which is monetizing that way. That is certainly not going to be the long-term method for all, but that is clear and obvious for the customer base and that customer base right now. You have others that have a sort of a subscription with sort of a consumption overage and then you have some that are straight consumption. And so it’s going to be bespoke to the business, to the customer. But if I had to say we’re — there’s one that there’s general, some gravitation to, it’s going to be sort of a subscription with a consumption over the top of it, but it’s hard to — we’re early days in this. But that’s — those are our initial thoughts.
Brad Reback
Perfect. Thank you very much.
Operator
And your next question comes from the line of Joshua Tilton with Wolfe Research. Please go ahead.
Joshua Tilton
Hey guys, can you hear me?
Jason Conley
Yes, Josh.
Joshua Tilton
Great. Just two quick ones for me. My first one, I just want to follow up on the Deltek subject. And I guess what I’m trying to understand is, if I look last quarter, it feels like you guys pretty much called out similar growth. So no change in the growth of the business from 2Q to 1Q. But you also talked to embedding some more conservatism in your outlook for Deltek last quarter because of all the uncertainties. So I guess what I’m trying to understand is, is Deltek just performing ahead of what you initially expected when you kind of set our expectations 90 days ago?
Jason Conley
No, I wouldn’t say that. I think we’re just — the beautiful bill is giving us — I mean, we had strong pipelines coming into that, but now you’re seeing just more activity, especially in defense, which plays strongly to Deltek. I think the area that — so we’re more bullish, but I don’t think it’s a bullish for ’25 comment. It’s more about when we can actually get those orders secured from our customers. So we may — there may be some upside in the fourth quarter depending on timing, but we haven’t yet sort of contemplated that because it’s just been a very uncertain dynamic in that market.
Neil Hunn
Yeah, and the upside would come in the form of perpetual, which is in Q4. So that’s obviously hard to predict at this stage. The other part is Deltek is only 60% GovCon, 40% is in professional services markets, and they have been — that part of the business has been very strong throughout.
Joshua Tilton
Makes sense. Maybe just to put a finer point on that, I guess, does the outlook still embed that conservatism that you spoke to last quarter?
Jason Conley
Yes.
Joshua Tilton
Okay. And then maybe just a quick follow-up. Congrats on the acquisition. I feel like it is definitely the ultimate network software. The one question I have is you guys spoke to confidence in improving the growth profile of the business. We’re already at high teens. Can you just talk to what you saw during the diligence that maybe give you confidence that you could improve that profile going forward?
Neil Hunn
Yeah, no. So I think it’s — we feel confident in the ability to sustain the growth rate but improve the margin profile. And so I’m happy to get into that, but if that answers your question, I’ll stop there.
Joshua Tilton
I’d love to hear that as well, please.
Neil Hunn
Figured as much. So just to give you a sense on the growth rate of the business. So faith-based organizations, churches are super early in their modernization or digitization, if you will. I mean it’s — the TAM is only 50% served from a tech point of view. And really just now the technology is and the competitors and vendors in the space can sort of have a modern church management that manages the church, manages the engagement with the guests as well as the closed-loop donation, donor sort of economics and sort of how that ties together in a single platform. So there is just a general wave that we get to ride there.
Second is Subsplash is, I would call it really the second-generation technology platform that’s in the market. So very similar to, gosh, a decade ago with our Strata business where we bought the new tech stack, it has a — it’s demonstrated its ability to gain market share in this growing market, which is why this business will continue to grow above the market at the top line. Now on the margin structure, there is a — the prior owner, K1, did a great job from growing this business from a small business to a slightly larger business, but left lots of opportunity to sort of, if you would just generically call it, professionalize the business. Tim has done a great job running the business for sure, but there’s opportunities in almost every part of the cost part you look at, cost of sales, go-to-market, R&D. The way you can improve the payments sort of what’s underneath the hood relative to payments infrastructure. So there’s a dozen plus more levers available. We’ve underwritten to about half of those in the margin improvement where over the course of the next three to five years, it will look like not quite as high as the network margin, but meaningfully improve, substantially improve from where it is.
Final thing I’d say on that is, just to remind everybody, our strategy for the last couple of 3 years is to buy these maturing leader profiles, which this is just that. And so you get a business that is earlier in its life cycle relative to the SAM/TAM conversion and then they get the scale and other cost structure, which unlocks more value for our shareholders over time.
Joshua Tilton
Very helpful. Glad, I ask you the follow-up.
Operator
Thank you. And your next question comes from the line of Ken Wong with Oppenheimer. Please go ahead.
Ken Wong
First question on the Big Beautiful Bill, clearly, some impact on Deltek, timing unknown. As we think about some of your other segments, are you guys — have you guys thought through what tailwinds, headwinds might potentially impact some of the other sectors that you guys cater to?
Neil Hunn
Yeah, so quite a bit, as you’d expect. So I think we’ve drained the Deltek, so I’ll leave that unless you have follow-up questions there. Obviously, we have a lot of exposure to health care, but whether it’s all indirect to the payer, to Medicaid, it’s — everything is indirect, obviously. We serve providers of health care, either through health care IT or with medical products. As you dig into sort of what the 10-year Medicaid sort of impact is going to be, roughly 12 — the estimate is roughly 12 million people will roll off of Medicaid, but somewhere between 5 million and 7 million of those will go on to some other commercial or ACA coverage. So the net effect of total dollars is going to be — our estimate is flat to up over this period of time. So we would expect there to be minimal, if any, impact, call it, just neutral for our franchise. Final thing I’d say, I’ve been around health care IT for my entire career 25 years or so. And the one constant is there is always reimbursement pressure on the providers, whether it’s commercial, Medicaid, Medicare, whatever it is, and it’s just a way of life. And when you serve that community, if you do one or two things, you generally are going to be in a good spot, which is if you deliver a tangible hard dollar ROI, which essentially all of our health care IT assets do, or if you deliver a clinical benefit that is unique and compelling, which every one of our medical product businesses do. And so it’s sort of a neutral.
And then on K-12 and higher ed, we would call that neutral-ish as well. Certainly, K-12, there’s very — there’s small dollars that are tilting towards private, but for the larger K-12 public enterprise, it’s largely a non-event. And on the higher ed, it puts more pressure on performance, if you will, for the higher ed institutions, which plays into the theme of our transact investment, which is better engagement of the students so they can attract the students and retain the students, which is exactly what our software capability is there.
Jason Conley
And I would just add on health care, our CentralReach business, the Medicaid impact is more to adults and children and most of the end consumers in children. So fairly muted impact there. And then a lot of our alternate site health care businesses are more indexed to Medicare versus Medicaid. So again, not a huge impact.
Ken Wong
Got it. Fantastic. And then just a quick follow-up on the record Aderant quarter. Any unique legal tailwinds that are driving that? Or is this more specific to idiosyncratic dynamics that you’re seeing within your business? I think you guys called out maybe starting to see some AI flow through. Would just love to hear what you guys are seeing drive that outsized performance.
Neil Hunn
Yes. So just to frame Aderant and so everybody understands it doesn’t paint too broad of a brush with legal tech. Aderant is in the business of law, not the practice of law. So think about and their principal go-to-market AI-based products right now are on the concept of how you automate and streamline time entry to cash collection and substantial gains — still gains to happen on the technology and product side. So we just — Aderant over 8 or 9 years has been the clear market share winner. I mean, now ongoing from 30% to 55% market share, plus or minus in the largest law firms in the world. And there’s a large move to cloud that is still happening there, which is driving the bookings. But let’s make no mistake about it. Aderant has the technology halo in the market right now on the business of law, period, full stop. Final thing is the largest law firms are winning in the market, right? They’re gaining share, and so we’re riding along with that as well.
Ken Wong
Perfect. Thank you.
Operator
And your next question comes from the line of Terry Tillman with Truist Securities. Please go ahead.
Terry Tillman
Hey thanks. Hi Neil, Jason and Zack. A lot of my questions have been answered, but you have a bunch of platform businesses, so I still have a few. The one thing I was going to ask about Procare is it’s starting to move into the organic calculation. I think you all had some leadership changes, go-to-market investments. And also, I think you were working on improving attach rate of payments. Just how is Procare performing, particularly as it’s becoming more of an organic calculation? And then I had a Neptune follow-up.
Neil Hunn
Yes, sure. So Procare, the first year was mixed. In the first year, it underdelivered on our expectation on growth. It was more like a 10-ish percent grower with our expectation of 15%. The root causes of that are known and already counter measured and you alluded to some of them. So it’s been a complete change of the leadership team to be more growth-oriented, to be more process-oriented. So there’s a new CEO, CFO, CRO, CTO, right? So that’s — those are the leadership changes. So what’s happened as a result of leadership changes is the go-to-market is massively improved where we are winning in the market and the principal competitor is not. So that’s a great outcome. The product — the customer support, there’s a great lean Kaizen event on how to solve customer support tickets more quickly about six or eight weeks ago, already having an impact. And so you’re seeing rotation there. We expect that, by the way, for the second half of the year to be back on slope of 15% mid-teens organic growth for the reasons I cited. So feel very good on a go-forward trajectory of Procare. It was just a little worse than we thought early on. In terms of attach of payments, it’s been solid. Help me keep me honest, Jason, in the 75% plus or minus range, right? So that’s been a consistent attach rate. And also, I’d say payments is another thing I’d say the whole payments apparatus has improved from a functional — operational point of view in the period that we’ve owned them as well.
Terry Tillman
Thanks Neil, that’s a lot of great color. I’m glad I asked about Procare. And I guess just a follow-up on Neptune, and it relates to kind of TEPS more broadly. But with this meter data management solutions, the billing acquisition, and then on top of just ultrasonic meter reading, like do these just create opportunities for solid for longer or potentially some reacceleration of growth from some of these newer dynamics? Thank you.
Neil Hunn
Yes. So there’s a long answer, which we can all spare everybody with. The short answer is we think these are — the connecting the meter to cash is a unique, compelling and really Neptune is only one playing running that strategy, and we think it’s highly, highly compelling, especially in the segment of the market where Neptune really competes and wins, which is in a long tail of smaller municipalities, where they want to have a single vendor that stitches all this together in that compelling way. And then when you put in — once you have that, then you can do leak detection and you can help them engage with the — municipalities engage with their end customers with more automation and more perhaps AI-based communications. We’ll see what that looks like. It’s very early days. And so we’re competing and winning today based on the strength of the go-to-market channel and the product that we have, which we would make — we would claim very aggressively that we have the best static meter from a readability point of view. And in the future, we expect that to pick up, but it’s going to — the growth to pick up, but it’s going to take some time for this to fully get into the market.
Terry Tillman
Thanks Neil.
Operator
And your next question comes from the line of Joe Giordano with TD Cowen. Please go ahead.
Joe Giordano
Hey, good morning guys.
Neil Hunn
Good morning.
Joe Giordano
Hey, so when — just based on your comments on Procare that you just gave, like when you reflect on that, like how do you kind of prevent similar things from happening? I know they’re totally different markets, but like when you look at CentralReach/Subsplash now that you’re going to bring onboard, like how do you kind of prevent those things before they start?
Neil Hunn
Yes. So I’d like to ask Jason to add some comments to this when I’m done. So we’ve learned a lot in the Procare maturing leader. I think at the end of the day, this is a [Technical Issues] we had Jason, we had Janet who leads our capital deployment. We had Shannon, who is here with us in FP&A and our group executives sort of in weekly and every other weekly meetings. And we saw some of these challenges occurring and some of which we moved very quickly and some of which we waited. And I think the Number one learning is we — you just don’t wait, right? It’s the Number one learning. It’s simple and it’s so fundamental of the learning as that is, it is true and we’ve observed it. And so in Transact or Subsplash or CentralReach to the extent we see something, we’re just not going to wait in the early ones. The other — but I’ll let you take it from there. Anything you want to add, Jason?
Jason Conley
Yes. No, I think it starts in diligence, and we have now, I think, staffed up appropriately in certain areas where if we don’t see the proper telemetry on a business or just some of the infrastructure, we can help the business sort of illuminate that so that we can have conversations that will drive actions quicker. And so that was another key learning at Procare. And so we’ve got a pretty rigorous schedule and execution plan on every deal. We thought we had one with Procare, but now we’ve — as you learn, you fine-tune that a little bit more. And since then, be it Transact or CentralReach, we’ve had a much smoother integration. Both of those are tracking really well on our value creation plan. And so a good lesson learned for us.
Neil Hunn
Final thing I’d say on that is when we did our postmortem with Procare, the Board at the last Board meeting, we summarized it in that we got the slope right. So the market, the market growth, the competitive intensity, the competitive positioning, the number of jump balls, the right to win in payments, all of that is — the slope of the forward growth rate, we got exactly right, if you will, slope. The intercept we got wrong, right? And so the good news is the intercept is things are 99% in our control about the way we operate the business. And so I just want to give you the context. We went straight into what we did, but it would be harder and be a bigger issue if the slope was wrong. If we got something wrong about the market growth rate or the competitive intensity, but that is all fully intact.
Joe Giordano
Fair. On Subsplash specifically, can you talk about the market landscape there a little bit and the competitive landscape? I mean, I guess it doesn’t feel like a structural growing market in terms of like the total TAM, I guess, but it was interesting to hear like only 50% served. So just curious to hear like what the competitive landscape is.
Neil Hunn
Yeah. So just to give you some sense of the market size or the market, it’s about a $2.5 billion market for software. Like I said, about half served. In terms of church attendance, call it, flattish over a 20-year period of time. The last two or three years is up low single digits, but we’ve sort of assumed just flattish church attendance. And this is all US, I should say. We — the number of faith-based organizations, the number of buildings is actually up a couple of percent. And then giving is actually up about 4% or 5% over the last 10 or 20 years. And then on top of that, then you have the digitization going from essentially no technology to manage, operate, engage with the congregates to now starting to do that. And so that’s why you have a sort of, call it, 9-ish percent growth rate in the market and then and then the ability for this company to compete and win on top of that, which they’ve been — which they’ve done for the last five, six, seven years. So there’s a lot of penetration to still happen there. The important — also relative to the competitive intensity, there is engagement technology, which Subsplash really created and invented is the clear market leader. When you engage — when you use modern day engagement technologies, and this is more than just websites and live streaming for churches, then you find there’s a 15% increase in donations when you engage the congregate that way, which then loops in the ability to drag along the church management software and other elements into the single stack. So lots of good flywheel effects here that the company has demonstrated in their most recent history, and we’ve underwritten to going forward. Final thing is, something like 50% of donations and churches are still cash and check. So there’s still a large digitization of payments as well.
Operator
Thank you. And your next question comes from the line of Deane Dray with RBC Capital Markets. Please go ahead.
Deane Dray
Thank you. Good morning everyone.
Neil Hunn
Good morning Deane.
Deane Dray
Just want to circle back on the DAT and Loadlink combination. It makes intuitive sense here. But can you flesh out like what the synergies are expected to be both on kind of go-to-market, but might there be any cost synergies?
Neil Hunn
Yes. I think it’s — the first big opportunity for us is there’s a managerial synergy, if you will. We’ve got an amazing leadership team at DAT and the businesses are essentially the same, one in the Canadian market, one in the US market. So we just get a network-oriented leadership team thinking about the network is one. Two, there is a cross-border US to Canada and maybe in the future, US to Mexico subtlety in the freight matching business, which we’ll be able to better manage when we sort of have the businesses together. In terms of the actual network, the underlying technology itself, that’s — we’re sort of taking a wait-and-see approach on that. I mean the two markets, the two networks fundamentally operate very, very well today. DAT in the US is extraordinarily busy. in an exciting way, integrating the Trucker Tools transaction, the Outgo transaction and executing the monetization strategy.
So as you know, essentially, every broker and every carrier in the U.S., North America is on the DAT network, and we monetize both sides through a subscription. And now we’re going down looking at the value stack of a carrier, in this case, factoring. We have that captive now in the DAT, and we have partnerships, for instance, with legal services and fuel cards. And on the broker side, you look at what their — what we can do to help them, it starts with tracking with Trucker Tools and there’s other things that DAT is working on. And so you have that sort of US-centric oriented that, that port into the Canadian market over time as well. So it’s really playing the longer — the medium to long game here, Deane, versus some short-term synergy play.
Deane Dray
Great. That was really helpful. And just a follow-up, and Neil, I’m not sure how much you can comment, but has there been any change in the Board’s thinking about potentially exiting some of the non-software businesses. There was a media article suggesting Neptune might be exited. Can you comment on this? Anything about potential timing? Thanks.
Neil Hunn
Yes, Deane, I’ll say what we said publicly for the better part of 2.5 years, which is it was really just November of 2022 when this — the current portfolio came into existence when — and as you know, the driving force behind divesting TransCore and Zetec and the industrial businesses CD&R in various Singapore telecom engineering, et cetera, was to beat the cyclicality out of our business. And so that was the decision that we made, and we like that decision with the product businesses we have today are great businesses. They meet all of our criteria, leaders in niche markets that compete on intimacy that have great unit economics and margin profile they’re consistent or slightly better than organic growth aspirations. And so they have a — they’re doing particularly well in the portfolio, not — and proving to be noncyclical. So that’s our strategy, and we’re going to play this one through.
Deane Dray
Thank you.
Operator
And your next question comes from the line of Scott Davis with Melius Research. Please go ahead.
Scott Davis
Hey, good morning guys. Good morning Scott. Thanks for joining. Thanks for having me. I just want to follow on kind of Deane’s question, but in a different way. When you think about the structural change that has occurred at Roper, which has been pretty meaningful in the last few years, what do you — what would — and now you include Subsplash, which seems like it’s a pretty interesting deal. But what do you think your core growth rate or kind of entitlement growth rate has changed kind of, I don’t know, just say, 2022 to 2026?
Neil Hunn
Yeah, so our — the portfolio that in the Thanksgiving of 2022 time, we snap the chalk line with the divestitures we talked about the historical growth rate of that portfolio was somewhere in the 6%, 6.5% range. We believe that we have improved the sort of through cycle, if you will, sort of the minimal cycle that we have, puts or takes in a given year to be in the 7%, 7.5% range. We’ve said that for the last couple of years. This isn’t any guidance to this year or next year. This is sort of through year-over-year, so people aren’t confused. And the art of the possible is in the mid-8s with this portfolio. Then as we buy businesses that are growth accretive, Subsplash is something like 15 basis points growth accretive organic. I think Central Reach was 30 or 40 basis points, something like that. Then it either, a, provides a hedge to what I just said or b, provides an opportunity to stack on top of that. So that’s — I hope that answers your question, but happy to clarify anything I just said.
Scott Davis
No, that does answer it. And then, look, there’s been a lot of questions on Subsplash. But just to be clear, in — with — I’m not asking for an exact number, but within your deal model, are you assuming that Subsplash will be somewhere around segment average EBITDA margin year five-ish? Does that sound about right?
Jason Conley
It’s going to be a little bit below, Scott, because networks in sort of the mid- to high 50s EBITDA. And so we’d say it’d be in the low 40s.
Neil Hunn
Yeah.
Scott Davis
Okay. I got you. Okay, thank you guys.
Neil Hunn
You bet.
Operator
And this concludes our question-and-answer session. I would like to turn it back to Zack Moxcey for any closing remarks.
Zack Moxcey
Thank you, everyone, for joining us today. We look forward to speaking with you during our next earnings call.
Operator
[Operator Closing Remarks]
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