TRMB - Earnings call transcript Q4 2018

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Operator

Good day, ladies and gentlemen. And welcome to the Trimble Fourth Quarter and Full Year 2018 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct the question-and-answer session and instructions will be given at that time. [Operator Instructions] As a reminder today's conference is being recorded. to Investor call Relations. like Leyba, to now of Director would turn over the Michael I Sir, begin. please

Michael Leyba

Thanks Mark. presentation presentation and will within are the and Steve Good would us and today's we available on afternoon Painter, today. like everyone, as and on call. Rob our earnings that supplementing here thanks www.trimble.com, to I'm point today CFO. with our Berglund, as release out our CEO; the our referring well the I for to be the slide call website at joining webcast

addition, our at our In we completion remarks will after shortly posting also of website prepared Relations call. be Investor the this on investor.trimble.com

in are results may Turning and in the to anticipated, the I to actual you like subject uncertainties. X a the Trimble's from materially detailed would presentation, due of of subsequent question-and-answer call to to XX-K for today's number Form and statements are risks fully period that Exchange we in currently call those the to slide With made differ remind the forward-looking documents today's and that, press the measures in our today. to of X discuss please with company's GAAP from The other non-GAAP the slide Commission. measures reconciled Securities an release. that and agenda XX-Q or tables call turn filed factors

San February slide will and the Morgan in-depth the on go also attending to that, also month an mention then year. to Telecom First, including call on and us Steve remainder to will I XX year, in turn to of Media start Francisco. as the Steve. Technology X will of and the well and February as please of and during Rob XX that, Sachs Q&A. would and turn the will February, the Internet we Conference slides, After over take Francisco, guidance, the and with the we Conference San With Stanley that Technology Goldman an be briefly overview the the our of quarter will like quarter in I through review

Steve Berglund

a In Good beyond. total X.X revenue provide by Trimble's in expanded remarkable most and quarter company the quarter at improvement platform XXXX total this significant XX.X% drove points model year. and and with XX-year the and control, revenue XX% growing changing the leverage improvement, XXXX points a cost gross software the which afternoon. XX% represent the fourth levels and reflected XX% . grew by XX.X%. and Together of operating year. results for a respects total in the margin history quarter for in and Fourth a in tight X.X services for total year, margin was record gross the strong year for with The with year strong quarter

points X.X grew margin X.X and operating result, in a the As the total points for year. quarter

on company and two those particular, revenue and In accounted reliant growth it less much and XX% segments Utilities not are are for segments. combined In of XXXX, resiliency today price On impact the today XXXX, levels to energy the the and we significantly compares commodity achieved agricultural negative surface, the of balanced, reality, and quality the of the potential. of we the In XX%. represents XXXX we we was XXXX, the favorably – encountered our before Geospatial changes. of model more portfolio in Resources In financial total.

our agenda owners, had the enhanced operate bundle area numerous the of took conversion from X,XXX every strong XX that that with from them two real-time stars region end-user year and dozers in We of Clearly, our in machines XXXX XX% hands-on which autonomous information growth unique XXXX off-site practical in over markets. importantly, notable XX Almost backbone in operating a demonstration and with the a are in from mixed was users the of business relationships in revenue generated as enterprise. actions made coming also all technology than well an to services. shown needed revenue around We This slide with quarter progress today's added model reality as $X These the XXXX progress position strategic were in as our and conference, demonstrating and examples in management, examples we position reflected change participants to market period the of balance income portfolio reinforce growth software attending acquisitions well-aligned. pictures XX%. of over to our use. that and OEM shows demonstrate machine of state through The market opportunity is compactors closing sales our Every same ARR flagship and a Dimensions. well learning. segments strategy XX% over vertical produced the enables of e-Builder Viewpoint. XXXX More conference rapid billion. in moved X,XXX value the total from was strategic year the fourth during incremental operational access project hyperlink with the to in more core growth substantial on segment construction information robust aggressive The progression. margin demonstrated to and a extensive some as Buildings for construction the project the also validation of an creating OEMs. of with & and We the Infrastructure received There with is and

we establish unified the a strategic both augmented and unique a to acquisitions, by to ability e-Builder for strategy. Beyond our synergies the construction much the the gratified solution Together of merits rapid enhanced I'm budgetary which intense discover create and and and engagement to with, efforts objective in, continue industry. Viewpoint execute participation

of government, show European exports reduced demand The on growth trade and slower came farmers, the A market. the provided that growth, are Rob environmental change these in additional of effects from our to models U.S. Brexit, clarity, resolved cracks to Two close. reported to not As of a companies XXXX stronger and will we have be a last will Pending point OEMs. as in the or effects the including any on are of and the these reduced upside conservative the of XXXX of many adopted impact the we the speak a more subscription better key to points stance U.S. for forecasting quarter accounting with and between quarter, and us noted each year on some generally is Chinese trajectory specifically have that accelerating effects we demand policy if relatively recently to these positive Chinese impact dollar. alignment XXXX attributing issues potential conversion from to impacting points. of fourth began growth some early. the in differentiation unique deferred issues combined watch XXXX

the X% from tensions with an remain us. plus potential cycle, aggregate Chinese reaction Although We Resolution China for organic we the the year to create rapidly grown growth per current have revenue, result regions the less last net revenue model represent revenues X% was total X% to in in additional a X% and growth than upside trade of of year with will than in XXXX on Chinese policy, much years other last impact disappointing to partly as U.S. XXXX, committed of per on over acquisitions. described a long-term year trade more few a diminished result.

this standard strategic to on can increasing on into Our shaped view central penetration potential, by be targeted margins. expected growth focuses GDP considerations simple operating growth of performance This markets. This downturns. leverage convert to larger than the leads us of and to revenue of is EBITDA with our concept which moves cyclical underserved or expectation metrics beyond of to increased or economic industry the industry growth rates resistance growth

OEMs, represented the approximately XX% focus not end-user remains Our revenue. of which on strategic on XXXX

is on segment go-to-market We or a either regionally. an element strategy some with OEM takes and more infrastructure of the Our puts bullish building opportunistic remain strategy. extended and

see machine We underpenetrated continue engineering end-user our and a and the reinforced market by supported and to -- worldwide as segments initiatives double-digit market a growth positive economy types. market generally civil

we the about operations are are revenue investing model. the potential, technology The of lower subscription Chinese demand rates without variable although some driven potential nervousness clarity. agricultural about two Longer Congress rate the more outlook optimistic more and worldwide to convergence being businesses; exchange XXXX; we term, about a three some extent move demographics, being effects agricultural demonstrating showing of the products of We to vertical software are fleet their other other outlook trade are by short-term industry's in in hesitancy market the The remains U.S. with we are the and of to ago driven between confident will segment's we that growth remaining in and farmers and the transparency the we including bill. solutions. and as were as longer-term could hardware positive, factors effects complete dispute. the outlook We convert to Trimble multiyear Utilities accounting growth short-term by on challenges duration ELD by improvement and of second in address the the infrastructure that for impactful the unfavorable Resources construction one, Chinese also U.S. the and than business of marginally determined business attractive, U.S. The the faced also be months and mandate. phase the part is of shipper Transportation operators. workflow anticipate more for segment's more

have potential but, more worldwide replacement potential, and segments expansion. growth by growth Trimble new We the also available technology solutions. the it may in moderate the alternative innovation, additional featuring through driven prospects than meaningful have of business creation of nonetheless, classes inclusion hardware-as-a-service, other technology segment of product autonomy models The has Geospatial three-year growth the through cycle,

view some trade more positively in become and remains the significant is a a our we expect In performing out the potential. pending three producing organization Russia significant trade and is engagement. relative enabled to the momentum year ambiguity years. market on our Our remains our generally complex but for market country the has potential improved brings construction. outlook Veltec for focused although the China is Brazil small ever meaningful also a potential, excellent markets positioning challenges. view in XXXX, more regions clarification most questions currently with through successful question policy soon still agriculture, has to but with Trimble Europe, change this attractive contributor a but regime double-digit next with and somewhat by strategic had acquisition, significant and our rules a accumulating and driven U.S. inherently organic three-year an new us XXXX point qualification strong the coming Africa Brazilian in growth the with We with with be transportation potential. India to and agriculture. it improved of although positive. results to induced at by conservative. to on contributor tell significant and volatility country is of three-year potentially very prospects summary, are the a we is a significant market of three-year too

the over turn to Let Rob. me call

Rob Painter

as reflecting Thanks, X, organically XX%. added end Starting of year-over-year. mix, the quarter, on clearly on Steve. fourth net quarter in the favorable up year revenue commentary, recurring guidance our the quarter. and was growth as will In a range. or both XX.X%, the was with driven acquisitions Breaking margin dynamics of XXX and a grew ARR XX% my annualized dynamic billion Organic up that year-over-year fourth translation million closing XXXX in guidance. revenue quarter Gross review currency was margin Gross results down, and $X.XX year-over-year standout X% before was total basis, of which the for pricing the X%. and in to favorable divestitures $XXX product basis I inorganically. XX% at both quarter up well lower points slide subtracted total non-GAAP was fourth the

adjusted we XX% operating points fourth basis up with includes increasing joint income basis XXX to investments year-over-year which and ventures quarter, The XXX in million dollars equity For improvement a gross was the to XX.X% income points year, $XXX increased from XXX points delivered margin margins. XX.X%. the basis margins in Operating EBITDA year-over-year.

net our to XX% per earnings in non-GAAP intensity tax year-over-year low income $X.XX, XX% from $X.XX capital driven and year-over-year, of the cash reform. capital gross by year-over-year. year-over-year. $X.X million, operations been timing net level XX% representing non-GAAP We a debt just U.S. about was closed up was trailing XX-month at billion, deleveraging basis, up lower or quarters up the than XX EBITDA net cash will million a XX% and debt fourth trailing profile were X.X quarter cash payment. which billion Our declined months full that incorporated, tax and driven have to with rate still. Net Commensurate approximately ahead our inclusive XX-month generation X% were the the If by operations e-Builder on of times quarter which under $XX more of interest was revenue a attractive flow from revenue Otherwise, was of Cash of working basis. flow adjusted $X.X deferred EBITDA of a year-over-year is from Viewpoint XX% X% was on up would and a metric a $XXX over down original deferred three business plan. debt of share from be

simultaneously and Our allocation sheet consider strong provides to balance a range capital remains actions. with of demonstrably us flexibility

deployable having We delever buybacks expect year to opportunities. continue dry attractive while powder and to modest pursue for acquisition

completed also the of During repurchased quarter, Veltec acquisition million the we fourth and X.X shares. Trimble we

in singular of quarter year is the into quarterly as performance any definition. the fourth the Next, put overall by incomplete context

X at and operating XXX year XX.X%. $X.XX very And call. ranges Revenue XX% grew With the grew at to expanded the that earnings slide total to basis EPS XXX year. view previously the year, additional or XXX points Day exceeding Analyst leverage XXXX looking XX.X%. basis expanded organically. a Gross during provided XX% Turning points XX% overall operating EBITDA were guidance and for basis to for to as XX%. third our margins points we strong when margins margins our quarter perspective, expanded X% to $X.XX approximately

and million, deferred and Lastly, by offset in flow XX% by growth was income capital. up from near cash partially our net XXXX $XXX working a revenue, on year-over-year the operations increased basis driven

our page to From representative as listed demonstrate technology strength the X, our intensity, Turning metrics financially contracted are of growth, the company. the a backlog and metrics mix, eight low financial identity of model. revenue our Trimble capital

delivered construction is business basis. Turning the the which year-over-year go Buildings down and organic now growth on the in level, construction a civil double-digit let's reporting Infrastructure growth at revenue slightly. to slide building X% with details segment to X, business presented and the

Our is of construction number discrete remains the strong continued BIM-centric The the organic major government exceeding which Geospatial and slightly growth in construction, Resources and across OEM-centric across negative network XXXX. the was we regions. distribution impact continue strength business, field to was growth businesses reflecting first flat underlying sales expect all into civil part down. introductions. new building portfolio of revenue with the the growth U.S. end-user In from sales, X% and delivered this our organic basis. product demand an end-user business Utilities on and

in based market was also business Our up, South was were down and the OEM geography. new base partners. on both technology go-to benefiting Asia drought -- North OEM rate Pacific business end-user America actions, The from was was is of up. and driven up down story both by Australia. Variable a whereas,

the Put tough comp Our growth. business year, to some had a Europe into as business had issues solid of the of year in as well Ukraine. discrete a context

subscription fourth offset comparable by a above with business revenues in produced XXXX. the quarter organic this Finally, growth that unit number hardware lower demand new in drove the growth Transportation the of X% level

of an to project ERP of team case in strong with transfer go-to-market our including capabilities e-Builder Viewpoint Viewpoint, demonstrating their into and program ahead outperformed and bookings system to contractors from as the into In project subscription announced Moving Trimble's MEP license expectations slide construction team that give mobility us solutions strategies. In with high are financials. larger constructible is bundled to growth the our Both provides the since us business, acquisition the value management of businesses business Trimble and integrated visibility as his under a model update e-Builder XXXX an us Trimble of MEP product a e-Builder we have covered the we and of a customer-driven link the the degree from rationalize management unified strategic next the construction moved X, packaged between acquisitions. in estimating XXXX we Further, contractors to business software. is strengthen field is plan. in on these let's to in reach strategy The workflow how the the costing, selling delivery. which -- MEP transition that Steve owners capabilities office drive the and an design contractors to rationale the commentary help capabilities our system. the solution and general -- constructible offering, general management resident to having delivery X of job Viewpoint enabling the Viewpoint

our at workflows combined made businesses. to progress the across have we motivate success by Looking and driving capabilities, tactical are selling customer joint we efforts integrating

also the of portfolio of the quarter. economy overview America Between and Next, year. the In recent of earlier we've China performance centricity both on for Europe. towards of and I trailing an was on the And India The tilting quarter Rest the Asia-Pacific, see for outperformed strength slide the geographic the the in the and again in U.S. performer. mix. North in drought North commented seen Brazil strength Australia. we the World, American reflects of XX, XX-month out revenue standout relative impact of Steve mix the commented acquisitions,

grew significant the mix first XX% to the have and slide $X.X hardware. turn type. revenue to and a milestone and XX% trailing year recurring We billion at services of for our XX-month crossed of level threshold. This as or software revenue XX Trimble we is Let's a this look XX% by is

at XX% support which revenue. of and is and mainly software agreements total the subscription maintenance comprised Within stands or $XXX recurring of revenue elements revenue revenue million,

growing type revenue comprised acquisitions. which addition perpetual term as of across represents Software services hardware well as revenue. services professional business reflecting strength in mainly the million grew is to entire double-digit and software-oriented licenses high-single-digit and of with Each $XXX

management reporting fourth in basis income we quarter and any similar details impact of enabled operating every Operating with with the the and level. following at in level XXXX, through this out expand the margins a the us let's the divestitures. Moving for or drivers software with the Investor seeing we last The acquisitions on When of model margin segments resiliency our our to combined based to as our margin control exit ahead and are over on expansion and company business reporting balance expansion positioned a will excludes solid non-core to of XX, revenues towards the growth margins future the to XXX target points software the of we we company model at have expenses. subscription Overall, operating reflects year. gross expense taken last strong continued exposure, slide close our believe mix few and segment XXXX expanded guidance, very the reporting across which segment each significantly income and shift of I is our actions operating now growth operating go compared Day. years at a pricing. product shift were with activities, market to toward over set

XX, of page to for million expect quarter, to $X.XX non-GAAP to $XXX we EPS revenue share. million, $XXX an the Turning of first $X.XX per

X% company Steve To our range of XX% revenue a rate The range with to mix. discussed. first per strengthening expectation growth profitability organic assumes The to from non-GAAP total revenue from less geographic the plus as our X% share the X% to X% incorporates long-term U.S. to bridge quarter dollar. X% model this reflecting also the of X% tax range XX% against an FX due range acquisitions earnings growth on updated in

revenue, the discrete company elements acceleration continue weakness orders business consideration; businesses agricultural Throughout we construction the moderating and end-user business. where the centered government OEM-centric as end company we markets demand into and to the growth strategic secular our our nature. include: drivers in our three model first the revenue a target growth trade and believe three fit some and one primarily and in is which focus in In users, attribute total quarter, growth toward XXXX, our expect Transportation XXXX. to expectations secondarily in Our two this businesses; subscription largely pattern we are around tariff of

our SketchUp is the right business launched further business growth. to subscription will their today. ARR revenue model This our the In believe is officially definitively fuel fact, do for thing and conversion we

XXXX acquisitions our FX X% the company moves total growth growth second quarter X% at context, from growth note X% With the recent Please flips plus current needle growth. range, impact. year estimated from in as X% organic a to positively in that on first view company half full Viewpoint less organic the X% is of to and organic to that XXXX total category to the with the XX% of X%

and year. With remain the of view our as progress incremental the the year cautious patterns action as mentioned, at is we to that prudent of beginning uncertainty, we through is the here assess course the continually

margins a gross expect to We to to manage basis expect XX% be we XX% slightly operating expenses leverage. to and year-over-year overall on deliver up operating

debt will the year, expect million. us deleveraging we back that year, income expense our non-GAAP to approximately growth as through strong a operating growth EPS the $XX of delivering single million. subscription for Where double-digit perspective single-digit to be those cash the working reduce about tax growth in with higher. from not plan. expected rate directed conversion, in leverage capital. range in EPS flow for Equity expense and for paydown, the a expect full to half a interest XX% grow the flow year year the towards would Under well digits expect and of We above if the operations is be high using growth We overall decrease keep cash will first the year. On assumptions half the and progress of with and from of income our year, basis, in we net half non-GAAP of flow the currently $XX cash anticipate interest ahead which we

began, XXXX XXXX performance a strong Trimble for platform of represented record provided and close, a Let me for year Steve and beyond. as

Let's now take your questions.

Operator

the line Berenberg question [Operator of from Gal Instructions] our of And Capital first Markets. comes Munda

now open. is Your line

Gal Munda

question. Hi, everyone. for my Thanks taking

impact business you have just the in for it's have maybe on transition. much an income how follow a margin. be of about I thought question that growth organic having have up, on year? the you guidance – at And for quantify look Can as Rob, organic to growth kind on next is that one terms just you definitely when I incremental mentioned The give the of the impact then year. you model of the us one first trying would

Rob Painter

Hi, and call revenue or plus has growth If revenue total the about, company subscription it $XX look million line. I Gal. point an subscription call growth to organic it an converting Sure. I'd minus call that a to a we range. of at it, incremental view top impact At of XXXX. converting $XX in on or X million

line. million Of bottom course, that the directly also goes $XX to

would drag so And and of a impact on on X operating to what points call it, is, operating an EPS perspective you an leverage as well. from X leverage see therefore,

Gal Munda

and really overtaken services thing fact when you. the of And software Thank that That’s portion hardware helpful. first the then, is, have the the the basically second quarter business. highlighted you've

of margin that -- have reach rather by the potentially of if getting can be environment your as grow the exposure revenue is to the which with you your that if FY obviously your you to it way, in the doesn't that expand effectively? is exposure, to continues, what business, terms be XXXX. means thought about versus fast, hardware fair how could much margin hardware exposure will And software percentage plan You that have question higher? is, what at a current say kind XX% is the where I'm If

Rob Painter

growth than assume point. And So not software already versus be yes, that of hardware and given say, doesn't would the From say let's the as difference on the a the I'd the we expect think, -- if base. forward, track from take a would hold, we're the math to that. I size that of very margin it on perspective higher pattern I we laws the modest of to difference, think, ahead you in would look that if difference, a actually aside what years, It at today and underlying of with at by, revenue make dollar would, margins margins. that, software happen the to a model a I fundamental big next be be XX% bit would probably

So an a hardware of have solid today. as the business level profitability aggregate

shift there's a that happen not change. to So say mix distinct were the let's would if revenue

Gal Munda

Thank help. you. Okay. Great

Operator

line And our the next of question JPMorgan. of Ann Duignan comes from

Your line is now open.

Ann Duignan

government give think could in Maybe that the little the mentioned but the Yes, the on side. Buildings I color us in a side, and slowdown also orders? hi. bit more on or you you both civil Infrastructure Geospatial

just So great? provide color will that if be you could more

Rob Painter

Ann. Hi

orders So civil out, The come. a in less some then said as you we've we've some in orders more we've and couple of that areas has seen it follows; and construction. had as geospatial pushed dynamic just had or that been and have didn't

that. Of course down, it doesn't to prior help that government was shut but this actually was

was I the -- the the appointments some positions. lack underestimated we and dynamics government of probably have it think, of actually I seen One of in we've

that those speak. to have to comes as slow often we wants so and in review have and been positions And down, to person slowed what is machinery so the appointed, the new get programs

all. really straight It's from demand just the all business. issues at government So about the that to say it's not competitive at

Ann Duignan

for? any waiting back the And and we’re get appointments Or is any been Or on it department department the for in mean we're just table? projects particular? just waiting to

Rob Painter

not a any I'd particular. really across-the-board. little in It's bit say department it's

of side civil in to on of yes, the be. military a Department some more be need bit half the the we'll government of of in branches, of say side where as we the year business civilian second both space. DoD well than the -- little the We've the the have I'd to generally some We Defense -- by and as think we

quarter. third the it's course, Of

sales the the It's Our end third of year. quarter the is you get of the big fiscal quarter government's budgetary end to government as closer the for year.

or at -- the perspective point this And of that's be on the year. the positive so would in we And business we make -- annual half an break that's kind from quarter. second of the that

Ann Duignan

Okay. like transportation I'd up follow to on the could ask a And if side. I

and for Telematics competitive fleet -- reading beyond and ELDs. a the Telematics beyond industry for You've lot just is been offering the how the there

industry at might As are away your of what's your margin business competitive competitive view how the revenue side how ramifications we for forward? And the either is that ELDs from what and going transition or the side? get

Rob Painter

of is lot compliance check good mandate brought market Yes, a of very particularly, Ann. activity low the it's the no doubt the box the There's at ELD market, just a a if activity to small fleets. compliance competition or into question it's end the really which that for the

can you some if doubt -- also contrast benefit about solution. but ELD an business, to had there's at no look we As we're from that we enterprise business, fundamentally the Trimble providing the

to buyers' bought as And space think they is technology companies to number box going we trucking continue that get enterprise there's of companies result an path we believe that the upgrade to a now that a the have a starting the today, compliance no from happen so solution check more trucking have have ability happen that adopted and to are about is solutions an activity. have remorse it and mandate. the lot beyond to is of will as What the as

technologies can. would able the technology more as that actually So, we that that of would a respect, that in then in can a -- the as with different the Trimble the I And enterprise, is trucking -- space the we're the see such now this is North solutions with -- meet much actually bring mapping that also shipper and competitive. and has market, the at both be so context very to as we we be what's more that as field we the the of office, become company this that visibility. enterprise market agree the favorable trucking is won't well needs adopted actually as of only look about some together of mobility American that that -- side when space has From back uniquely

in the we American So, is would the gets well that we in And market the Veltec India think an our ecosystem as extension the with guess, then and of largest have today of is add south is ability thing, U.S. into differentiable in connect to also as last unique which the Brazil I and us Europe. context. I acquisition business Western North

Ann Duignan

helpful. and in Okay, queue. color, back appreciate there I'll leave the I it get

Rob Painter

Thanks Ann.

Operator

And of our from question line comes next Richard from Eastman Baird. the

now line is open. Your

Richard Eastman

as focused bit the little us pieces of government-oriented, can and then how to early plan, those I'm parse quarter really just about cadence the fourth a -- revenue there of civil Resource out, the guide cadence those afternoon. about October, we're through a maybe then It sense in just get we talking think where maybe the kind the Utility for but probably as being those side good you pieces like as $XX seems about quarter. and just civil Rob to if & I of business possible B&I would from the two Ag quarter? business. in It like Yes, was businesses be also or you of plan parse Steve, business? of Or Could have out business the that curious you million two the that good you it off the plan. can the through the the sounds mean, were

Rob Painter

Sure.

were in delta end-user that expectations agriculture had majority didn't into lower had of is run So, we organically OEM so we geospatial business, field was the primarily, I'd in both lower actually -- we orders which is for in sales aggregate, where which yes, original that to the we Actually we've or government revenue. a been over Asia-Pacific field Infrastructure exceeded collective the lower & on year seen we quarter, Europe, our up in lower and and a the when which geospatial QX. to the the hardware would the I our in were because relative well the also in those growth was had market. bit region prior field the we we And the businesses. sales & promotion it of then in and business, the we've look the business. the mentioned, come reversed concentrated have the as the saw construction civil original so within predominantly double-digit Utilities In underlying at the program business, I The OEM the Utilities government guess the now revenue quarter, the business, revenue say the were -- saw OEM vast the thoughts sales stocking side, guide and the Resources in that. And Buildings as Resources

Richard Eastman

X% to kind against you basis expectation, the lineup do Could here? construction? And how higher on segments core just here those X% It four of maybe Okay. put to a relative for of X% maybe and the the the to year, X%? the towards the like vertical be sounds end kind trans would

Rob Painter

Yes, sure.

the the there's that what index segments. Day at it we've X% against we've X% could about So, talked about from for also record, the talked for that I Investor year. probably to reporting

business. OEM those line Resources we down X%. here, bit bit Now tempered expectation net and what as be, positive the if down trade. and and B&I at and that's certainly if talked a and mentioned, us. X% mean, X% that's the parts in get for Investor Steve that Buildings transportation Geospatial I especially an tariffs a Geospatial from to business relative the these to also at I'd we it XX%, has transportation And the then with say, of and Utilities Infrastructure about with And at two dialed resolved, the Day that's to dialed business things take a we've would expectation the right

Richard Eastman

And Okay. from last me. just then probably question

just list on trade kind out this And of the I'm just give the just if just to of small For one these impact Steve, of can reduced of order and the to wounds the you demand? clear? list And X, all OEMs policy, start kind curious, as list demand negatives magnitude look of of the think kind narrowed to government, of the the down U.S. by many I there we X. at or Brexit reduced business or

Steve Berglund

Well, guess, I okay. Probably, indirectly the mind U.S. think would farmers. I affecting top be as of trade it's,

mildly, U.S. farmers are of are think China And there terms farm reduced from it much in major putting make this -- have and very introduced to the demand they season. I it has the into where environment. plant maybe is decisions to ambiguity the actually what windows facing

maybe on is I U.S. terms maybe in of think trade in of probably top So the effects effect of farmers that indirect mind. XXXX,

same market, is in between kind clear it's or the as call Chinese economic giving it, relative in Now let's China for, interchange the the time nationalism of and U.S. at China. the license renewed actions U.S.

I top effect there's of So again putting think kind obvious here. U.S. is a I and secondary But the impact mind most on of say we're direct us. would here, maybe agriculture which not

order I I kind Brexit what in mean, to whatever kind in effects is be and to the And there's who and would second going happen okay. on who the maybe. effects remains of the the an off, category of it Europe knows of and U.K. effects really seen. – be think and – of it third knows and I our who can first knock what's that, is knows view be impact certainly Europe. there all on that pretty think then significant

companies lot the other So I ambiguity with a but think as determined, a to I share unknowable be of that that to is more of be we still in – kind think well.

be uncertainties from think XXXX and a and of us. year I matter of really of But from and that short-term possibilities full I think short-term that yes, a XXXX. demand I'm on It effects the the latter the not think effect. the half agriculture would on versus And maybe kind reduced the trade say, substantially of the XXXX. probably some I Brexit tactical. U.S. caution second even demand reduced a reflects of think I it of or I deferred first the U.S. sure a more fallout just of as two is that half may the related drawback to to again issue. But kind part has OEMs, impact is maybe government, from collection

to as those nearly be others or two. necessarily structural not strategic so tend The really

Richard Eastman

good. you. Very Thank

Operator

Thank you the of Ho line next from Jonathan William question Instructions] Blair. of Our [Operator comes

line Your open. is now

Jonathan Ho

what driving tariffs? afternoon. you sense And U.S. are to to color from a little of could give more demand? Do Good wanted just that wanted to of the more us a offsets have Just bit what's I little impact Hi. products that? to on for see, a are the you there China? subject if bit get degree

Rob Painter

Yeah.

the all, just to So China. primary kind not first issue we're pointing necessarily of of in tariff clarify, effects at as

it's maybe nationalism the the higher think degree a and kind of kind of protection world for tariffs around of enabled I talk license of relative by growing economic of that's industries.

China in been there's national our So economic preference of I such. always think level and for a implicit nationalism, champions

direct – that It's in outcomes. the of in of – bias of is of kind shown more market effect of than a a there tariff think okay. element necessarily Chinese terms sorry kind I Japanese So

will national or But more an I bias it even that the also clearly slowed got some effects defined another, with one a so demand and of effects also there's think you secondary market has slowed. because apparent let's think has in more if I market the Chinese towards, China champions sort has just primary the kind call of inferior of product. they've slowed if

clearly in straight than in So or dealing that. more the been I think that's period effects just issue in anything the for of think China It's environment some so tariff XX calculation but we've intensified of time. like last I again, this XX months, to

Jonathan Ho

for it. be maybe Got And should thinking about ARR we Rob, how XXXX? growth

Rob Painter

Yes.

in XX% XXXX. year-over-year the had growth we So

the we mid-teens course, by acquisitions was teens Of in that aided in and some XXXX. the of grew

As we low-teens now. that I the pattern expect look which XXXX in us is as a growth be for significant ARR well into to obviously somewhere in element

Jonathan Ho

Thank you.

Operator

And Jerry from comes of next Goldman of question line our the Sachs. Revich

open. Your line now is

Jerry Revich

Yes. evening. feeling the had I situation. tariff of we Steve the in Good impact wonder where afternoon farmers -- and you could good if Utilities you Resources start and mentioned

cuts? to Or just that is organic the this growth year-over-year you you a that understand Or quarter America headwinds first out yet just downside? meaningful have saying number I about aftermarket we're seeing to inflations? that your Can pretty going OEM the reasonable for North flesh point growth you us, are are wanted over make to about in call? talking of the so without quarter, see declines and in in your production we're been sure messaging organic there's Sorry, the headwinds risk I better the first length course of as spoke it at if would

Rob Painter

this -- Rob. been for headwinds we the I definition would growth it better the by is organic have by were guess, I definition, guess, Well, saw. not

dealer course into mean, The units have OEM-centric our and to machine that new about expectations I important in we stuff QX into XXXX parse of aftermarket of to is you course the as still business. the of us retail majority look into in inventory do same course we versus you As business agriculture read is what's OEM although business which not what's demand. on of the

to the America today, We also business from I than business of the think North we coming that's be in in at revenue North in used of And majority XX% look ago, American Years less agriculture. America. is agriculture. outside that's North

So the up. add all factors

and pressure instance, U.S. if at related Chinese tariffs on for soy. you the farmers to the look So demand on

Of are course, that soy Chinese the now Brazil. buying from

get isolate seen in in And so U.S. we've to business North reasons one America, business -- years. in but is talked of growing see we've we Brazil that for we've well. performing here need right mantra the because to Actually nicely we sometimes business actually -- our seen see might and to is we Canada Brazil about go the the then that few the last that

beginning and in year. come for at at the the bundling and ag that year we initiatives is enterprise we total product introduction having go-to-market The software, year looking and look here about and our relationships the our more the own distribution our expect cycles is of we partners out think at the other element that of OEM we new as have. look we more to throughout control view come would always additional improve of selling, We that ourselves hardware to

our that things together there. do so be agriculture had and business And we view good why to take point and we those to that gets of factors there's on

Jerry Revich

you quarter? pace to just talking first are inflations the about And a be just are the in you expecting down your U.S. the Rob, Or year-over-year in in aftermarket of clarification, growth? slowdown a

Rob Painter

slowdown which of kind of pace the in growth. be say I'd flat, more a would it's

Jerry Revich

of And accelerated that to on what's I'm like you bookings as fourth disclosures understanding the early sustainable part Okay. wondering momentum the expand right. driving what can if really how in and growth is e-Builder seem through suggest? if am looks the XXXX, about XX% I the growth comps to quarter, the

Rob Painter

we're an by say operators. thus without I I business is the can of reservation set excellent far the under Trimble. business Well, very business pleased excellent an mean, of performance that with run

vertical general first and perspective need competition. profitability solution. Viewpoint deal Trimble bullish program I believe And the contractor from bullish meeting the that we're It's and that Actually construction I'd for e-Builder project business. integration aspect system they we're say of engine, say as very relative e-Builder market in the product between The is the of a unique management unmet has horizontal construction. think both made in feel we the without great has sales an customer We e-Builder, we a the system our well team the on a bookings to our between And on continued the using. market. so management rest and business. a of as go-to well between and marketing the and growth on oiled the execute the machine the intersection bullish of and let's points

that more also in moved in will And we product management say that would noting in many of had then a there's business of lines run. that to And their we're to team we over optimistic I'd we let's so and to team couple e-Builder flourish business under that Trimble add leadership. I line. -- come performance that -- things believe along the our see And that the

Jerry Revich

I Thank you. appreciate the discussion.

Rob Painter

Okay.

Operator

And of the Colin our comes Oppenheimer. next Rusch line of question from

now Your open. line is

Colin Rusch

about bit year? you versus that? How the think expect paydown Thanks little Can half so a the stock? we in what first talk do should this guys on the about much. And buying debt you back

Rob Painter

Yeah. Hi, Colin.

say year, pay in back in plus focus year. buyback, revert there's report deleveraging. nature. down that $XX expectation they the of acquisitions, tuck-in more the expect million there of baseline look nothing size, a that and we million million approximately we'd $XX the material debt, half was minus first for side. anything a that If the But QX let's there $XXX on did to If call or first was immediately stock That to here back be So as in half for call if year. of will assumes a so to of I'll the the on the the the we the quarter that we

Colin Rusch

Okay. what lot that you diversity the And business mean, and are then, should given variables way tracking? track are -- really either awful I half obviously, second couple power, you you think end levers with the as markets. the a the be we now break to as earnings there's think growth about an of about concerned guys could of of right key that

Rob Painter

of about sight A businesses. that we so we a and about as in highlight, revenue was be how be the at favorable businesses second the that impacts of meaningful impacts the there to. couple add sales in a Trimble. from, gives to is in new year to we the things a the cumulative our it on into we're a to year we the degree some get the of amount organic that degree of if from least Truth Steve's But in or over second that than something around think lot of of ARR paying bases basis. would throughout or call a caution have a concerned trade that about ARR have sense things us the or we a other geopolitical move and would subscriber positive things line year. the and Well, comp general the macros OEM And is I first we billion would bit positive that details I'll as grow that the is unit standpoint, an of half thing the as more grows to encourage the year topics half Brexit the year would commentary think attention like very with of I half that little folks $X of as of coming to that

that businesses as expectation through to of layer that and continues this the get doing with that software in more -- The other say at basically QX we as that we've thing and what biggest plays -- -- that it many -- see because so as continues look another if software-centric thing our the is the year. has handle that to conviction the that up year a play move variety it quarter the of the have would software we been that business we through we've and half new I'd businesses usual year. would we for that a throughout I add And the that in on second gives we us the activities so-called as in the product to anticipate introductions then of in got business the conviction of

Colin Rusch

Thanks so much.

Operator

& Needham from line Valera our next And Company. comes Rich question of the of

Your now line is open.

Rich Valera

Thank all the from the transition that I bridge is X% to growth year and any you that the could is guidance four was does kind previously? think you. prior now, of X% -- for X% organic X% Rob your main reduction which factors to between of that subscription from or you discussed --

Rob Painter

in point of or over view had that X% could over the to about add higher do And we economic talked you X% quarter, cycle given but a what will X% year Yes. of cycle. appreciate I -- context, the that or the we we've that always -- lower any Steve and beginning reaffirmed to higher slightly at XXXX heard be X but X%, commentary. as slightly X% it about I last X% reaffirming talked the to

it's I is sales about the for on XXXX that X% cycle the OEM view first the down we government bridge the if make I So, slightly And better would streams. will a over X% a as and would talk to that I why think have year. be a dialed one revenue okay can would be

if this on the can sight I'd on call it forward streams, overall than that baseline line be we basis. expect of focus over revenue as total one I We was to I So, as you're what last is getting about at half revenue less course, two, year conversion officially that in we it's a the SketchUp that we XXXX point have -- that year using launch into did the of transition that I'll I it one expect growth. at be -- model The take other would those be a third subscription second goes for call I'll that say then the that one the to look good of of we focus last today subscription see, normally transition. it revenue, the we model thing health the natural would But view definitively it think if category. revenue two of a see and would might the about what business that's which which take it as go of lighter math And could be not And playing call as to year revenue going of doing and -- great it's year -- have everyone then of for if we course, a grow that on growth. thing Trimble the to underlying to ARR a headwind stream. the than

Rich Valera

And I you. then to clarify. Thank just wanted perfect. That's

that of last mid-teens. your of when think organic think growth talking correct rate what was question was the prior for I the response last a that organic year? number about Is you're the ARR to in growth said, you to growth year ARR

Rob Painter

Yes correct.

Rich Valera

should to was final margin of – in it. strong just know exceptionally a margin relative fourth relative as the if Got I fourth level? that quarter the you gross XXXX gross whole for one How as quarter. And one, to could we think

Rob Painter

a it's good Yeah, question.

basis performing of margin which year an software quarter. selling XXXX So on the a a given see a quarter saw to in in on of QX going in we see we're quarter, the that fourth is function which we we gross what the in strongest ongoing think is – that amount

sales basis of and to businesses So, the XXX and to I'll we XXX dynamics it software the math points QX. end basically topic relative it's that the the gross words, in year mix pop essentially we'll have revenue margins mix in by that other of by year will just a call – end product is

that XXXX. So for a of is of us – to which taking not is then year as the baseline assuming the QX for baseline way total the not is saying take

a year, come total as we a as ended at plan into that XX% XXXX really a we And just see Now total for year. would the XXXX slight increase would we gross to just for margin.

we how Now hardware year higher, was the if revenue expected out we if mix business take is the it expected. course through lower could of software-centric than plays stronger that than more or the

Rich Valera

it. my That's for Thanks taking question, Appreciate perfect. Rob.

Rob Painter

No problem.

Operator

from question next comes line Wertheimer Rob our the Melius And of of Research.

Your line is now open.

Rob Wertheimer

Hi.

this slowdown from it were a Or that? that Or quite points two strong XQ factor? incremental anyway. resources to in not government if slowdown? just – there maybe So is the may. material is be Was Or continue Is is all understand actual balanced a clarification, aftermarket really abnormally right North led America? And in really an then stronger I majority a the I than if of issue? was it slowdown more or tariffs

Rob Painter

said you what Well, with first down the the that start extent. question on let Rob government me and – that I think shut to

Rob Wertheimer

the Yes, actual that is shutdown yes. incremental

Rob Painter

time farmers really second not but and here overall much material the of it of in was the government out spent planting where It's when to we Can away, area not I close USDA hear plays slight. agriculture with that that as out actually orders think getting was I certainly repeat the in a down. didn't played shutdown one the beginning that it's too season that less wouldn't went – USDA because we're you delay. I – before but – think That's itself. the long, that, and the of USDA one? shut question. say market

Rob Wertheimer

on XQ see fair Yes. didn't sorry good of in The slowdown. and I'm pretty be resources. place then just to was panicking. were the we tariffs XQ it's sort and farmers in

Or North XQ? of as a that led to a bit slowdown American whether to I'm abrupt really from so XQ everywhere? little just there's Or what really an really And such was slowdown? curious

Rob Painter

Yes.

in the see were So and they back. one Australia. the – demand in us relieving understand drought the Pacific are two Australia, And Asia Pacific. some conditions there's two I it, in areas for could aspects, drought I – don’t but that over, of we Asia if Europe as I In know biggest are coming is which say in

was year. down -- back to the manage have they some orders orders dealers our in region actions years. XXXX that didn't second at immediately inventories the come from And January. partners at end that of those didn't come we like The taking of the stocking in Asia-Pacific saw come of in QX in And prior the saw we the end

connect that we otherwise the was on in it would promotion So two I guess aspect the one it things in One Europe, beginning the Europe QX you discrete. this a we we we running had QX that normally run would in could have impact expected In call business. dots that run We that year and didn't the would started be, the the them QX. between saw, of here QX QX that and at pattern.

there's there's market VAT then second Russia, a around delta and we're some us. so of bigger is, become there, for the issues And in the there. holding Ukraine between up that And CIS Ukraine been one a business revenue countries, that's

would the QX. of curve change QX out be into the and So call Utilities that factors, slope those Resources in I from that would

Rob Wertheimer

Great, you. thank

Operator

turn the you. like Michael Thank this to questions back Leyba at further I'm showing for I'd to closing no call remarks. time. And

Michael Leyba

you to you for joining next everyone Thank quarter. look and to forward again speaking we us

Operator

your for program day. disconnect. all conference. the you you today's may conclude have Everyone and a thank gentlemen in This great does participation and Ladies

Trimble (TRMB) 6 Feb 192018 Q4 Earnings call transcript