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. Software bookings grew in the high teens area, and we continued 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 debt outlook. 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. Importantly, this customer value proposition strengthens further as the company's AI-native capabilities are further deployed across the product stack. 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 longstanding acquisition criteria: leader in a niche, competes on the basis of customer intimacy, has strong gross margins, and converts high levels of cash flow. 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. 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 23rd close date.
| Metric | Period | Current guidance |
|---|---|---|
| Total revenue growth | FY2025 | ~13% (Raised given strong Q2 and anticipated Subsplash close) |
| Organic revenue growth | FY2025 | 6-7% (Unchanged) |
| Adjusted diluted EPS | FY2025 | $19.90-$20.05 (Raised; includes ~$0.05 of Subsplash dilution) |
| Effective tax rate | FY2025 | 21-22% (Maintained) |
| Adjusted diluted EPS | Q3 2025 | $5.08-$5.12 (Absorbs $0.03 of Subsplash dilution) |
| Metric | YoY | Note |
|---|---|---|
| Application software segment revenue | +17% total, +6% organic | Strength at Aderant, PowerPlan, Vertafore and CentralReach plus contribution from acquisitions; core margins up 70 bps. |
| Network software segment revenue | +6% total, +5% organic | Improved comps at MHA, better freight match unit economics, and Foundry recovery; EBITDA margins of 54.6%. |
| TEP segment revenue | +10% total, +9% organic | Solid Neptune execution, Verathon single-use strength, and strong NDI results; EBITDA margins of 36.7%. |
| Deltek | Mid-single digits | Strong cloud migration and retention, but federal GovCon demand muted pending Big Beautiful Bill spending. |
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|
| AI-enabled products | Discussed prior quarter | ~25 AI-enabled products in market or development; ~30% R&D productivity gains in a larger software business; tens of millions in AI-native ARR today | Rising |
| M&A and capital deployment | Active pipeline | Subsplash $800M acquisition announced; over $5 billion firepower; net debt to EBITDA 2.9x (3.1x pro forma) | Steady |
| Big Beautiful Bill / GovCon outlook | — | Expected catalyst for federal contracting via higher defense spend and Section 174 R&D repeal; timing to be determined | Rising |
| Maturing leader acquisition strategy | Strategy of past 2-3 years | Subsplash fits profile of higher organic growth with margin expansion potential; ProCare lessons applied to integrations | Steady |