So it’s about every business doing a little bit better on a sustainable basis.
Christopher Glynn: Thanks, Neil.
Neil Hunn: You bet.
Operator: And our next question comes from Joe Giordano with TD Cowen. Please go ahead.
Joe Giordano: Hi guys, good morning.
Neil Hunn: Good morning.
Joe Giordano: Hi, like, on DAT, obviously the free market is weak. Can you just — I know we’ve talked about that relationship Kind of being somewhat inverse in weak markets where they actually tend to do better. Is that — like just to put a finer point on that. Is that more like on negative inflections in the market where it kind of spikes and then if it’s like prolong weakness, that it ultimately is forced to like trickle into DAT? is that how we should really think about that?
Neil Hunn: So DAT dynamics are a little bit different than what you described. DAT is when the freight markets are very strong, DAT grows in-line or maybe ahead of that strength. When the freight markets are weaker, they tend to slow down and then they sort of — so therefore if you looked at their growth, it’s more like stairstep type growth in this particular case, because we’re coming off such a search for a couple of three years, it’s a little bit more exaggerated. The dynamic that you’re describing perfectly describes our ConstructConnect business, which is the construction analytics business, where — when you think about building product manufacturers and contractors and subcontractors, subscribed or content about what commercial real estate buildings are in the process of being planned and built, they want to look for where their next jobs are going to come from.
So in the construction markets, real estate markets are white hot and contractors are fully subscribed years out. You the value of our information is less when the market slows and their backlog is standing, then the value of what we offer is much higher. So we tend to have a little bit of a countercyclical sort of demand driver inside the ConstructConnect. We go by the way, Matt and his team for their ConstructConnect are working to balance out and have done a good job. So hopefully the go-forward will be up in up that markets and up-and-down markets. But that’s the — that’s what our product strategy is trying to execute.
Joe Giordano: That’s good color. Just a — like a broader question. Obviously, we’re getting like more-and-more layoff announcements, like I guess that companies across the spectrum from tech to UPS. So how are you guys, like in your discussions with your customers. And what’s the most recent kind of read they’re having on where head count stands and what the implications are for your businesses there that somewhat dependent on that?
Neil Hunn: I think unfortunately our read across the macro market is in a great win, right, because we operate at these relatively insulated end-markets, government contractors, property and casualty insurance, or brokerages where employment is higher, life insurance where employment is higher, healthcare where employment is higher, education where employment seems stable if not higher, right? We’re in the sort of relatively isolated protected end-markets where the macro swings aren’t — don’t impact that much. It doesn’t have that much impact on the way we drive compliance bookings across our portfolio. I will say for labor market generally loosening up. It’s been advantageous for us. We’re also been able to not just fully staff at our business level, but use this opportunity to last probably 12 months plus to significantly upgrade talent across the organization.
Joe Giordano: Fair enough. Thanks, guys
Neil Hunn: Thank you.
Operator: Thank you. And our next question comes from Terry Tillman with Truist. Please go ahead
Terry Tillman: Yes. Can you all hear me okay?
Neil Hunn: Hi, Terry. Good morning
Terry Tillman: Hi, good morning, everyone, and thanks for fitting me in as well. Maybe just one question for you. I guess it’s for you, Neil, is what we’ve seen with our vertical SaaS companies and even horizontal SaaS companies in the past, when they get those customers on the new modern architecture, it really can start to reduce the friction to buy those other add-on modules. And so what I’m curious about is, you just called out some of your businesses in the past like Deltek that have seen improving growth. Anything you can share around net revenue retention from those customers that move to cloud? And I know it’s still early days, but is there a propensity to buy those add-on modules? Does it speed up? Does it quick in? And that’s just one of these things that could be a cumulative benefit over time, and also help on that organic growth. And then I had a follow-up
Neil Hunn: Super. Appreciate that question. The short answer is categorically yes. And we see that — first when you when you do the lift and shift from a legacy product to the current cloud-delivered product, there is a — there is migratory benefits as we talked about Strata as a good example. Same-store sales, 2 to 2.5 times uplift. But then while they’re doing that, the checkbooks open and they buy more modules at that moment where total ARR goes up over 3 times and they lift and shift their customer base. Same can be said, saw a different metrics, Aderant, Vertafore, etc. And so, what you’re talking about is one of the principal benefits both to the customer and to us, our companies for delivering cloud-delivered, SaaS deliver software, which is being able to be on the most recent release.
So, be able to take advantage of all the R&D innovation and more easily be able to take additional products because the delivery mechanism is faster and the implementations are more smooth. So you’re exactly right , we’re seeing it across the portfolio and expect to see a lot more of that in the years to come.
Terry Tillman: That’s great. I appreciate that. And I guess just a follow-up question. And I know you want to be careful and not revealing too much. But if the M&A environment does start opening up more and there’s more shots on goal and just more things that are interesting, albeit, taking into account your discipline, I’m curious just bigger-picture, usually it’s vertical SaaS, but what about interesting niche horizontal SaaS solutions? Whether it’s back-office or kind of middle office or front office and/or second secondarily the idea of maybe software companies with a meaningful payments business. Thank you.
Neil Hunn: So, as we always said we’re going to be business model pickers. The reason, historically we’ve been attracted to vertical, small market verticalized software businesses is because the basis of competition needs to be able to be understood and observed. We want to be able to compete based on both the value proposition of the product but also the intimacy with the customer and the customer relationship. The vast majority of our companies. Their customers want us to win, right, that we are so integral to what they do, they want us to win there always giving us input and feedback about how to be better how to deliver more value to them. And so it’s those dynamics that we look for. There were certainly some nichey horizontal type things that meet those criteria, but not a lot.
