Earnings call transcript Q4 2022

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Operator

Good morning. My name is Audra, and I will be your conference operator today. At this time, I would like to welcome everyone to the Trimble Fourth Quarter 2022 Results Conference Call. Today’s conference is being recorded. All lines have been placed on mute to prevent any background noise. Instructions] [Operator

I Chief turn ahead. Executive time, to conference like Painter, Rob Officer. would this the to over At Please go

Rob Painter

everyone. Welcome

Before that presentation site; our back. Safe I on the get Web our Harbor is at and refer you available ask to the we started,

comparisons, of commentary financial last otherwise growth year, reflect relate to metrics, including non-GAAP unless Our will performance the will organic today which corresponding period noted.

X months, years. simultaneously balances a on X X-X-X quarters Trimble X and operating model The looking view forward

As framing parallel I look to our and about to the I there back think when back X years at quarter, XXXX at Connect XXXX, Scale think year we on journey. commentary today’s X our XXXX, months is quarters to a back fourth and look X began

divestitures any last the and when quarter, years of it COVID, X created that the definitive in disruptions discern looking progression. challenging the long a trends; to patterns supply noise given chain over the these whereas dynamic the makes year-over-year baseline especially reveals at from net signal has

on on commentary As begin XXXX, from let’s with key X prior are with quarter our the quarter. of reflect the messages, the fourth which I Slide consistent

annualized of grew ARR is the at the level billion metric which growth of expectations delivering revenue, this and for team key Our $X.XX billion. our compares which XX% $X.XX to met record a to to recurring of Congratulations record XXXX. performance, end

of $XXX range. and billion, model million, a was guidance year, $X.XX XXXX, was the up over in COVID revenue Total compounded lower towards year the last revenue with the transitions. up business record since end and XXXX, X% for our growing flat through Total quarter and X%

inventory a hardware total processing dealer delta while revenue through and their mixed continued dealers performance ARR our The to sentiment. macroeconomic slowdown sell-through the in reflects partners, as sales between

with agriculture a our agriculture hardware For compound annual years, software sum and rate, at grown the baseline. growth XX% and below survey civil, perspective, last growing X has of the this related growing above survey over and

exceeding our finished conversions Gross margin at the mix, software and a impact model chain reflecting cumulative expectations, supply disruptions. abating of XX.X%, level record of

achieved XX% annual level, basis compares gross record year, to margin up gross a margin, XXXX. in XX.X% the which year-over-year, For we points XXX a

of expectations and at up XX% in our to XX.X% XXXX. margin EBITDA in met quarter XXX the ended year, as points the for basis XX.X% compared

share $X.XX midpoint of per of quarter. exactly the earnings the for Finally, our at was guidance

and November, of strategy our Moving to of Slide great our progression X, Dimensions construction for over the The team a the which global Infrastructure. user Scale Buildings was event through our with provided look let’s forum our customers and partners. and and reporting the reconnect in Trimble conference lens X,XXX attendees to industry, where we the at big with beginning engineering had Connect segments, from

We the Construction built Microsoft launched connecting many streamline construction by Trimble to including Cloud, users, industry which cloud by and workflow. Azure, powered data innovations, new is an projects

new expanding We machine to to connect worlds. our and physical types, also control the platform reach machine extensions our technology new and OEMs further digital of announced

delivering of was growth in record quarter bookings to over addition ACV the in in achievement levels XX% levels financial record highlight The bookings. cross-sell and organic of software ARR,

wins. our acquired BidXWin where had had for newly strong early some We business, a we’ve also start cross-sell

our which in business internal we the transformation, demonstrating of signs this and interest have continue well as own capital be leveraged from we across incremental will As entirety our strong allocate doing highly and customers efficiency. our are digital company. previously partners are the generating discussed, and we efforts, The of towards as to productivity go-to-market work encouraging

face inventory of in and expected, the than dealers their levels revenue as macro Geospatial, In further demand was softening down moderated uncertainty.

optimism underlying infrastructure softness indicators, see is the a of market. remains portion expansion and the the while of by in residential, at we getting in inflation, Looking consumed

in For the continued long baseline in order double-digit ARR Strategically CAGR business perspective, talked to on collectors, achieved data to speaking, X I that launch and scanning handheld in we XD Slide performance. calibrate the takes I we look innovations GNSS, a and model XXXX in as increase laser at hold. X-year our about new strategy

as Transportation, expectations, progression and in ARR form and delivered also of expansion. Connected growth Engage the row the in of Lane. came Connected In operating fourth and a we continued addition of in Locations workflows, revenue development delivering Scale margin connected to with line in quarter such Maintenance, Connect

The systems powering cloud-based was and and memories, leading with more Transporeon in big XX global than X,XXX announcement powered The transactions X,XXX refresh management Transporeon than story, of To fourth carriers the quarter course, network XXXX. shippers. more platform in acquisition. platform, a million transportation of a operates the of XXX,XXX the integrates

me, a this is very For definition and Connect business. the of Scale

strategic to few and of I Sieber and has increased. and fit with team Stephan the January, had in a Europe chance of my level spend a cultural days only in conviction Transporeon

working the approvals still expect to deal through are in regulatory this close of half first We the and year.

are to We get together. work to excited

growth our revenue In positioning Resources utilities and by and ARR were and led businesses. services, Utilities, forestry

case, of electrical but and water precision with our utilities our covers utilities, services thought also GPS utility. as utility, as can positioning a definition Our in of be a business work this

Super crossed miles and their a that driven Cruise In we XX hurdle hands-free October, with million General of program. Motors we announced

precise maintain a and are enables X technology program OEM Tier lane to we its and position in various several on opportunities. vehicle Our other GPS working environments,

growth the excluding was agriculture agriculture, when CAGR long is revenue X-year, Russia The of business. to and and up double-digit Moving a growth and the positioning for customers. X and easier to the software now Ukraine. on bundling on access hardware, Slide With are baseline year-over-year, Scale, product flat instructive better technology Connect services, we our for guidance proposition and both our providing our a calibrating value lens

we to relationship this CNH taking on With and of we go-to-market Scale, that are pursuit Industrial. Connect are different strategy, lens the customers week center approach In our a users this with at go-to-market and a strategy. of announced our

to Trimble our transition XX-month customers, done Moving product partners, be period, aftermarket through distribution entirely dealer a independent brand. after bearing forward, with the will the

segment revenue of the Resources CNH in our network XX% their Less dealer goes to and Utilities than today. through

We distribution of fleets evolved maintain expect mixed farmers needs brand aftermarket field relationships them also our network. help direct This operations will to equipment. OEM to to with demand approach address through our solutions and revenue and enhance this dealer customers to offer to orchestrate of their independent agnostic ability with the our

center will of water aftermarket our customers, management distribution rate solution. Our variable application, our new ability selective solutions works our Connected guidance, aftermarket approach full to technology spraying, and to to improve sell range including software Farm

enhance cooperate OEMs factory-fit with industry the to for strategy will their needs also our across evolving for ability Our equipment.

Let call numbers. over to me David take now turn to the the through us

David Barnes

I'd begin my like organic by this Thank growth you, on Rob. X, business. discussing financial trends across the quarter our Starting to commentary components Slide of

revenue in uncertain ARR mentioned the with evolution fourth businesses our strength earlier, XX%. recurring the on macroeconomic of offerings our grew quarter, Rob focus environment revenue business our strongly of The weakening up recurring a validates and continued our year-on-year As in model.

revenue The quarter fourth in and hardware down. software call. our While in streams were strong related came consistent our third XX% revenue fourth revenues factors prior hardware down in hardware business of we our in and year described quarter, recurring our expectations. Organic below the quarter in the were versus was driving with the slowdown were what

less the continued both our our they improving the drop levels, economic did dealers quarter, than the and chain Geospatial uncertainty to supply was ordered our outlook. in as reduce future quarter pronounced end in execution customers during During Hardware their backlog surveying The our sequentially demand expected. in reflecting XXXX. inventory in earlier reduced fourth as most segment,

a Latin Russia down America perspective, business loss Asia Europe the trends America, were meaningfully up X% on but impacted strong were of and impact. an From in by up and both Rest in in excluding in revenues and World, Year-on-year, the basis Ukraine of geographic trends with modestly and organically that Pacific. in were Europe organic were North

With and flat revenues for organic full on on down that fourth impact to now including like XXXX. and when quarter quarter currency acquisitions an and of backdrop, the X, turn year basis, a fourth total foreign and of as $XXX divestitures. performance Slide I’d Starting the million were financial our X% to

as mix up increases margin positive especially was shows. per and basis margin net strategy, share reflecting points, higher was on against up price of spending margin $X.XX. down accelerating EBITDA inflation. in and XXX basis our XX software cost margin digital our Scale our earnings increases toward moderating and largely and basis travel impact points, higher were the XX and Gross trade both offset operating Diluted Connect and gross the spending transformation was our shift points

tax the the being purposes. expected, single operations cash at and free to the until repurchase cash on way of Transporeon shares R&D did amortization fund flow, for of not year-on-year, we both Looking flow are and acquisition. down any de-levering not from the factor quarter, biggest repurchases do with cash the plan following We debt were, our as issuance well flow to during the restart to

success Turning X%. XXX the margin investments spending to of critical by by we reflecting Gross a impact results the positive achieved revenue year improved EBITDA we COVID as pandemic during across against been had ongoing as strategy. we our of restored XX%, our number areas even accelerated across Slide full Organic XXXX, and grew constrained number that X was basis dimensions. for and shift. a mix the of margin points,

inventories year-on-year of and down time. both was change result of principally a we our a flow in U.S to increase which legislation, in an expect Cash normalize over tax as

the take this sheet. Working negative. a move strong acquisition, capital As to complete remains we balance we with Transporeon on

agencies bond the ratings to EBITDA ratings outlooks net year-end announcement debt stood Our our the at and and maintained transaction. X.Xx the stable ratio of following

segment and to now annual quarterly X. our by Page on results Turning

and were growth growth fourth the to teens. X%. organic the construction over in of year-on-year Sales organic achieved to quarter, growth XX%, down recurring and over of leading Buildings revenue bookings civil hardware of Infrastructure XX% high by the ARR segment just for Speaking

Dimensions were inventory continued moderated. end Segment and civil at investments. demand and subscription transition market reduce XX% Connect levels, conference, and Dealers Scale down our construction their to impacted year-on-year, revenue, by lower user margins

on U.S hardware and basis, down vary sector. shipments revenues softer quarter-to-quarter end driven customers, inventory Segment market Federal Revenues also can in to pressured dealer levels to meaningfully and which by XX% the the principally difficult centric segment surveying were year-on-year demand organic Geospatial from be declining by across predict. an lower were

our in X% despite up over Resources Revenues driven Cityworks and headwinds. and margins to agriculture Segment XX% were from services sold organically remained segment by positioning Utilities growth these customers.

the under in estimated X% XX%. sequentially impacted quarter. margins in an was by improved loss revenue in segment and Russia the quarter of Ukraine, prior and year, coming in minus versus fourth agriculture just business year-on-year the Segment of the impact with Our to

ARR solutions. a segment year-on-year grew across software quarter sales grew of fourth mid-single the for dimensions. by rate Enterprise at segment driven reflect in Our Organic the higher number results digit a the revenue improvement and of in Transportation quarter. X%, Maps

Revenue offerings our in trends by highest sales the quarters, mobility managing driven largest by our XX.X% strong of customer. our from margins prior OEM to in were improved performance costs. in XXXX, Operating reflect and team since higher part sequentially

will next exclude at we a to guidance ARR, The expect acquisition for projections organic of our impact level mid-teens Starting pending Transporeon. Slide X. on in XXXX our Let’s XXXX. growth with you the with turn today I of share ARR

Our grounded we role portion solid transformation growth our cross-sell the our our that a digital the and in to momentum strong outlook software operations. XXXX, for in accelerated plays customers’ ARR growing achieved is in rolls essential as out potential business, of our bookings for the

is revenue, to $X.X range billion, in for divestitures, to excluding the X%. and X% an outlook reflecting of organic future Our growth million of acquisitions expectation $X.X

year. As in with impact biggest first revenue XXXX trends, in half the divestitures will growth reported total businesses a of the the reminder, of impact

growth growth. quarters, an for reductions rooted expectation revenue limited cautious XXXX GDP next of is and in of softer market dealer the environment demand outlook Our several continued end organic inventory an over in

software We the will be digits related year, in expect revenue revenue growth. low single the from organically down hardware strong for recurring offset by and

to points perspective, of our margin software. the expect improve shift margin gross that direction mix business basis XXX over continues From as a higher in by we margins will

as strategy to growth by. margins, in operating is We against an invest modest environment harder expect a revenue in where organic our we increase come

economic plans I'll always sharp major focus to working higher hard note than a leadership time for strategic us, never have for weak last Allocating need current priorities here and over several against that months economic our the is our in climate. is the to focus our spending a teams the capital been of adapt growth.

$XX We million. expense equity net achieve in to relatively strategy are plan. approximately can of interest at the expected project $X.XX. the per of to our operating to continue $X.XX and XXXX, within Netting that range we forecast is constraints investments Income flat confident with we our progress to is this from be out, share earnings

driven by grow reductions flow in expect levels. in in XXXX We cash inventory significantly will that part

free cash income. Xx net for the expect approximately We non-GAAP year of flow

flow a in time allow now U.S us of cash costs XXX XXXX. Our that tax tax assumes forecast the not will year under code for repealed amortization within Section that of R&D frame made recover this to be we will accelerated that the payments

issue is our within tax immaterial an payments cash of would impacts timing While tax $XXXM. believe next If the support for this months, of is free impact this Section to a we that less we this by than help soon are several XXX that has this change, rate. our legislation and will reminder, pass flow approximately on there were bipartisan we way benefit repealed the us enough quarter confident year. By ago

guidance excludes costs impact of cash transactional Transporeon to Note acquisition. that related the pending our flow the

not quarterly a our are results of year While to guidance, few the factors impact sequential offering are as we progresses. evolution the financial likely

organic be the to expect and that first We in of related saw down half and reflecting in first revenue half XXXX. flat of year, growth the offerings the in strong hardware quarter the first the we in

expect in half revenue the these revenue expect high-single be relatively be to and mid- patterns, in by digits in and in first growth operating half. organic up up to flat we year. year, second the second the the of the half We margins of to EBITDA Influenced the

likely the to lower slightly growth from While customers. we a small by year, is be first in for expect half ARR churn mid-teens driven number of planned the growth organic

ARR expect growth to through year. improve We sequentially the

the as segment are we quarter From Utilities, in strong expect Infrastructure. highest decline perspective, of strongest year, expected in organic the from XXXX. and segment growth quarter we Building in and to the with lap the Geospatial first segments, with a organic in for the numbers Resources decline the the levels Buildings revenue for the and first year Transportation Revenues of growth Infrastructure, and

trends Geospatial in and markets. ongoing segment’s reductions impacted inventory by the demand through of be levels will XXXX number to continue dealer in in a end softness

margins, down to Resources Transportation expect project the Buildings growth be Utilities. in Infrastructure We while in We year. be and for margins stable and and modestly Geospatial margins will

Back to you Rob.

Rob Painter

to and received culture and and thank our approval emissions me Initiative. our for and we progression. announce I’m colleagues, say to their and that to Let by customers in financial partners of continue awards, strategic proud support their we reduction our win the proud work Targets that innovation targets Science Based

and is objective scope a X X, Our X emissions by XXXX. XX% reduction in

first released report. margin metrics highlight related we addition, ARR In were force on and our climate financial task expansion. gross XXXX, In our financial growth disclosures

stream remains at confidence ARR ACV revenue bookings XXXX XXXX. can to us the hardest a we give rate double-digit grow that Our Hardware demand continue to in predict.

are signals in attractiveness the the a even confusing remains. While mixed, secular long-term bit and the short-term,

foundation win of in our uniquely remains the our markets. the for to and ability right guiding Our our provides digital served and a light connect business physical worlds to

across moderated certain on to business environment. and discipline conviction Company by structure to execute an uncertain is focus grow and What strategy. We in surgically to and Connect reduced customers remains Scale our the our our spending our have continuing and expense focusing our ensure

now questions. let’s the Operator, open for line

Operator

you. William We first will Jonathan Blair. to Thank go at [Operator Ho Instructions]

Jonathan Ho

maybe you more dealers? as bit makes segment, with deal. and it just now the wanted do Hi, I for resources morning. to maybe out on Can why give do what CNH the potentially utility aftermarket you with the color more this little a independent engage this to start and particularly could good us sense

Rob Painter

Jonathan. good morning, Hey, Rob. It's

it you next and three give steps. down context, in respects, -- me strategy break let So

and closer users the and Connect we means that our farmer. And Scale, data and be the our and that that the are connect workflow strategy about customers believe need to we For context, users center let's of at talk universe. to user, in to

obviously, in OEMs X the a here we the do customers, they're Japan, farmers talk visited when them today, is mixed to last So U.S. what and with, we Brazil, us the to months Mexico, and in help work over the Australia, XXX way in the I And to personally fleet. Germany, by Chile, farmers asking manage themselves, and

go-to-market multiple avenues strategy customers So -- reach the our strategy to we we is we today sell-through sell. is

dealers the as sell-through selling OEMs, CNH We the well over through we particularly farms, have we Trimble work channel sales, and a down in the channel, XXX direct sell-through today enterprise the with a a already reach aftermarket. aftermarket then breaks channel we that we OEMs and to as have into

independent CNH call do than the we're do what from to we'll be selling from will to -- to dealers be CNH water state That's is variable Trimble and Trimble the we also to [ph], going So do CNH CNH Trimble the capable management, dealers. the so moving selective independent --from we more to And of which because full straight we reach software. be the guidance, dealer. where Cat is of those to sell from today, corporate do we line we spraying, rate, it

capabilities well strategy. which field, when successful equipment. a become there because as manage success, in are part fleet the and a help mixed they this, end integrate can forward us of dealers And of that think we sign for the will the as and of asking be as we up independent to be So can to technology to set look to take users customers those them, available customer help transition, the expand to incrementally we of more think our think Trimble. we of we it out need help the talking have And and we users to market, we we're work is context fleet they dealers of to closer products technology and the technology the directly to with in as through with mixed

Jonathan Ho

as then given also those investments that us where that additional follow-up, just Scale the for understand like you. those the to timeframe. Connect that you XXXX Can you'd think Thank I to sense to going a make go? makes And macro now, it. why again, referenced help you've maybe and make investments And are Got some in environment? investments

Rob Painter

Sure.

strategy So say it the And we've it the where of evidence growth the for been investing of in years. really incrementally, demonstrable of and we of I'd is in see momentum last couple attractiveness for ARR. the this

our particularly front the and software work of first, we recurring So doing more touching have. that revenue really businesses up we're is businesses the

on This is XX% a the would continued growth, I be So have valuable at the organic from shareholder this as supporting growth X.X a billion. most post and ARR, and of think value growth the company. revenue that stream we perspective,

up, doing. to at efficiently the I they That's pick up, retention. facing the Customer The customer net people scale at think part -- look us We a a facing, about up, and grow. enabling we're you perspective work systems, metric for from pick they Look they of Connect at and success. investments, effectively The and people connect customer customer that so success. from pick process, systems Success internal and is Scale, look

powerful. economics very net are retention And of the very,

this balance So path. down a we're this mind, of continue continue more the And more, in with I'm this of behind that EBITDA all anything, XX.X% of down there's quarter. we a a conviction. strong mind sheet if And path we

So emphatically this we to at the this believe moment. thing right do is

Jonathan Ho

you. Thank

Rob Painter

Thanks, Jonathan.

Operator

Melius to go Research. Rob Wertheimer at We'll next

Rob Wertheimer

guess, and next we bigger continuing there's morning, structural surprise, in of It just on which the is, a thought. the have a I like guess, quarter lot destock for than I us seems would good on margins hardware Hey, progress ARR, was everybody.

is mix as what your away. that dealers happened questions maybe are a trying mean, your the or previously were to continuing projects around fragmented why whether normal just big see to to context more had been able guess I how and those a of outlook, that. ones. and levels will anyway, to in so, North there's large But than in they of couple is for characterization One be you go around projects look seems customers I you there's any And for I and the debate low? in in, look construction after America elevated that case. inventory, decline I'm of that the big is. your fill smaller it And is,

David Barnes

Barnes. Yes, Its hey, Rob. David

the constraints, dealer predict in to make the inventory, the I'll and some has supply in and constraints chain, understand. point is our moved that removed that around our challenging shipments, to really First cases, trends were in then hard

way of high backlog had undesirably by hardware we reminder, just XXXX. early and So in unsustainably

that freed Our it supply of today chain up isn't happened up, end dramatically second very extent even the it quarter. fully freed but the at to

up of you'll that way hardware that was So timeframe. the we at recall product, a shipped lot revenue

grow. how out that dealer So say it quickly find customers inventory. were us I'll and exactly for that dealers And while inventories a to able figure did took the residential And that the to happened of the probably our which There's exposure geospatial Trimble within markets dealers indirect, slowed. end serve construction, while level the highest slow, and in side. home direct some particularly to of deploy

anxiety economic some outlook. the There's about general

destocking things supply together, and of our QX will given that it have anything pretty two We period quarter a in about the It's be lots dealers we've guess QX and sustained we'll freeing the that have that reflects dealers So smaller. expectation. guidance through it I where over quarters, they yet. a We're that all talked be of up to happened our where big my up. has these think sense of of ago, more not and picked created our But will after good inventory we reductions shipments we chains, and two very backlog, time. want be the and meaningful

Rob Wertheimer

guess point, quarters dealers than any happen, channel, they and visibility would I don't understand. have perfect that maybe And those two be at on into normal or the lower if

David Barnes

a good. have so isolated For do pre-COVID, be they'll still there that though. is to one -- I at reasons that Yes, much had some think challenges of what Supply supply be cases they have is in have would I'll Ag, than we really But say them. may our not of dealers well, that more little point, inventory

at multiyear one I you presentation look on still 'XX. another, had in first noise in chart good we were. the half trend. increases a We're Rob decline, of of And remind to of as big thing quarter the just we above the way where the we this reported, Rob, Hey, his

So any the lot fundamental demand. we in of noise the of of supply this factor a chain. the than change resetting That's that do is bigger think really the

Rob Wertheimer

Thank you. perfect. That's

Operator

take from our next at question Dillard Chad We'll Bernstein.

Chad Dillard

good morning, Hi, guys.

Rob Painter

Hey. Hi Chad.

when just needs I potential done I in to independent in within go channel to CNH of expect to you can just just you'll So CNH. want how portfolio, to channel. to And think understand what able that product able better the medium-term maybe growth sell back be be your to versus place, you're talk the much that organic much and about be and agreement. you set to sell with up the how

Rob Painter

was Hey, surveys, been had Ag start construction, Ag quantitative the a over this are XX%. if a above And X exclude growth has and so years. Those businesses X were you and even the Russia. it And been And more slide selling We this The which businesses has that Ukraine, year. framework. showed last Ag. on is over with grew of years. XX%. civil quite that to bit Chad, we the the kit of Rob. last chart three Russia grew the second I'll hardware CAGR

year, this that so later we'll mid year. And to lap this start

look growing, we terms in our context, that give at think at when we on we some units, holding call Brazil. market a to we've look the and growth we own that look wallet, basis we you at and growing had. pricing, of -- we I'll of and in, look more Europe share, growing at we're And share in So global look holding around America probably context North at

your to to turn of the part So we now CNH the question.

about we're business aftermarket For we have that the this that CNH. for only with talking

and primarily we business -- sell-through aftermarket guidance. today the we that that As into CNH is

opportunity have Trimble an we in agriculture. we remember And today, today as have to dealers dealers Trimble, four we independent independent move they're dealers. So line

Those independent we we As product the already positive the with goes set a I it's may been having to a CNH the or will want dealers. Dealer, with a And happen to with the could that us very say dealers CNH XX-month we us Trimble it CNH conversation. opportunity at that a transition on be part gives this portfolio with direct CNH, through work team. have to direct of that independent fully the an arrangement. well New dealers relationship of very move a a that with today, expand route in be business we've with just

optimistic here, with So up. customers for. asking the right time it's what it work do it's thing And to set to get are to to our

That's second then my question. helpful. And just

So transformation? digital you -- you 'XX. on the What areas for can for talk the are give and incremental the an like this some you just of can done update cost percentage focus to [indiscernible] you Can about year, quantify coming if expecting execute 'XX.

David Barnes

the as we've well. bottom part, this the about is to what with we line year XXX So from the consistent incremental -- I'll bps second cost with start had

cost of So equation. that's the side the

transformation side us. meta transformation, than focus a the there's a the digital of theme, for its On more system equation, the

about I and others. And specs that go-to-market businesses, And about one right process So, and the particularly think it's businesses now that our and systems themselves. on Trimble of dialogue the we the with about the transformation. digital construction systems think and software focused you we've I connects think had supporting then with within primarily buildings, software think infrastructure. people, about And

the retention When so, reference as go-to-market. point a for net ARR. and the of sales with itself growth at is look key the indicator the I We the team ACB first organization the the at inside grow of to that metric And well of leading bookings, is which as we continuing at look look go-to-market.

together, software the we've construction team sales France, organization. put in So Benelux, as team X

done mostly in that North as well. We've America

the contractors and -- And Construction general to more then and sell aligned a it team sales in sector. be to getting the Construction we of One. targeted Trimble consolidated as public bundles. then general Trimble engineers. it's so releasing sell with offering to to sell will out started One, And architects We we owners persona-based Remember,

go-to-market team, the equipped to comes sell a and do. more we be more X targeted everything that to and together, So with portfolios we to sales to organization enabled personas have team that sell as those

an On big moves Those are release the from to lens. second own have And the our commerce effectiveness the -- external having system systems -- e-commerce capabilities quarter, side, an in sellers. of systems. meant closer next, closer the of I'll increase capabilities we'll the with say, efficiency it and and to external

for the then side, goes that continue into in our and business, how On Trimble software customer and in side, that the hardware into that next parts developing to playbooks wave go-to-market with the after sell-through of continue but the success. process channels. we then And we dealer the invest to software we people invest on other we starting

And about question earlier get increased good call are into that reason a I to levels think helps, we another Hope that got that the Chad. investments a asked dealers us This systems is the of and -- we precision visibility their was that on visibility. inventory. thing in asked for

Chad Dillard

That’s helpful. Thank you.

Operator

next go will We at to Kristen Owen Oppenheimer.

Kristen Owen

for Thank Great. question. you the

port strong of wondering the with speak just do those I the closes? you've quite Transporeon this on can some a views an And the in the environment? is I'm these obviously portfolio to about contingency. what's learned intend Viewpoint the basis, you the more well acquisition that working in expressed. And to doing wanted business to talked how about some just We've lessons macro, even once peers playbook pretty businesses This stark of e-Builder, you but growth ask space. just macro basis, the really and software over compared So to a from SketchUp ARR if contrast conservative to

Rob Painter

answer Kristen. the This is morning, Good Sure. question. will I Rob.

Viewpoint, software correct, than very project or offering the plumbing well from and is you're electrical Tekla contingent management it's even more So performing. SketchUp, a as e-Builder, businesses software, it's well Structures contingent whole our of mechanical is that doing really

signal I'll get through looking say the that you X get on predictability. is demand, and view so at on X-year thing is of see recurring can is of a in retail higher the the demand by degree wholesale not -- revenue that the CAGR clear certainly so is a a a trend we're hardware software the noise. the way, the and side, we between which the side There nice on back why, the clear the

with it, of of the terms market. value the In proposition it's what's digitization I would the say working meets

of -- my most month of adopt over digitization, they during with sustainability these and yesterday the need have construction the backlog very call So to strategies. here know the and top help top in them the contractors they solid companies technology customers, European these in at order their a of one the -- to they need are of secular meet a of agenda further data chance last to aspect of digitization had and largest the to companies of number work Most the travels many technology those it and -- done. was with Colorado. And in world get

that we see We perspective, with proposition had we that that early record say certainly its a form is. Construction a to the quarter. and infrastructure level the talking to, in strong ACV it we're evidence are and that, cross-sell From have customers One even value resonance integrated of and and hearing building bookings the seems Trimble fourth both of the resonance connected -- I'd as offerings in with

So actually that in turning tells me it's business. has not of terms resonance that resonance. into It just marketing there's --

proposition offering. So the it's around a connected value

to customers they data to the looking more that, need connected are So optimizing from and connected have to to do workflows. increasingly more tasks optimizing move system. And

one where even are the representative. the to to on having or ease from their They one is opposed this like multiple, want We they of vendors they multiple it to say, account the this overall company the customers one hearing let's company with together go, say own. stitch -- they dealing to want -- because as is buy

connectivity aspect safer, an business with ease of cheaper level doing meets resonating. a and it of us, trying is there's get to is they’re to better, faster, which do their work So ultimately [indiscernible], to

Kristen Owen

bleeding of for combining into offerings, those Rob. that see of has that business transportation with the And how see value you that, Thanks once how Transporeon, that acquisition lessons the some closed. maybe [indiscernible] you proposition some or

Rob Painter

Yes.

about I for the -- question. Sorry, to. forgot that great Thanks

integrations I'd and say year $XX and a definitively Transporeon of and had connect platform the the network. [indiscernible] scale. great is X,XXX the systems shippers About million already XXX,XXX that mode is already through --transactions Transporeon, So they It last system. through X,XXX of news really management of company in carriers. on in PRP run the the have and

capabilities. that. a a have within they net force. strong retention connected through retention. set it a There's sales There's So in play selling of They're dedicated growth land-and-expand strong There's business. the

additive into that many of take So the be know DNA were other at we've the as us it's to could because from take much best say, to where with as additive actually, I'm I Transporeon that it would will of Viewpoint in we're business, to Transporeon. e-Builder model Trimble like store we to done. I And I and Trimble it same I I as Trimble to excited take see to that see of X and we as reasons can by we -- transitions as and take aspects us think this, much the I thing that think the acquisitions Transporeon --

Kristen Owen

there. helpful. leave That’s will super you. it I Thank

Rob Painter

you. Thank

Operator

question will next We from Tami at to move Instructions] Zakaria JPMorgan. our [Operator

Tami Zakaria

Hi, good is everyone well. much. morning. Thank Hope you doing so

And the So to there much hardware tailwind? other points, how how question of mix expansion that year? is change? software XXX my leverage margin XXX is versus And is driving any are price grade that first factors basis of cost this this gross much

David Barnes

think Tami, all the the to business. of it's is that The way improvement essentially mix margin of is David. about evolving gross our

margins. lower driving and becoming at in What's to continuing we're are rate margins and real of take those up that's have driver. higher but hardware, gross margin business more a our the software is price mostly so not more a We

Tami Zakaria

it. Got

prices, So margin a of coming your up be could gross to prices source input down, keep that rate? site if

Rob Painter

and of already takes a gross -- It's a in margin. puts our benefit. hardware We've number seen there's

of point offset in cost where our So realization we the fourth 'XX, third than to and got price hardware improvements. the quarter our businesses, our more for

sort run the of now. baked that's rate into So

moderate continuing to hardware our a businesses. are take pricing level We in at

the So is side, story far just on by a bigger help little but our that hardware bit margins to ought the mix shift.

Tami Zakaria

Got it.

One back versus the date you against what fourth sales to end to So is fourth overall one dealer users end look to quick users talk third comment. to destocking quarter in to quarter quarter? is destocking about the and the like the Can one. moderate, sales

Rob Painter

Yes.

I this negative would So organic say basis look let XXX it we our point on me our approximately destocking, revenue frame If impact had way. up trends. a it at dealer

So we reported flat. We would dealer have been roughly the up X% destocking. without

XX. hardware, look organically down you our hardware at if revenues specifically So were

Geospatial So you is we partly was temporal. in market I that particularly Tami, which think in can think softness, some there market QX, surveying infer,

new through. products we you We clean many products, year as had those and have businesses, when you in spike a in to of last lot had get deliver and a a new chain orders, supply

a So a that we've of pullback bit got reason. for

maybe much retail Fundamentally, up up. say market they were the -- as end not direction feel the XXXX, I but in earlier would trends to sales secular up is as general

directly we're earlier demand There's pullback tied what's clearly But 'XX, the soft destocking a residential anything But secular the areas, contracted. including seeing ordering for reasons. the direction construction on balance is in patterns is those we some and dealer the infrastructure, with happening in to think that with up. of customer

Tami Zakaria

you. Thank helpful. Very it. Got

Operator

Markets. next at will go Celino We to KeyBanc Capital Jason

Jason Celino

Hi, guys. Good morning.

of ones. quick couple a Just

half impacting customers So segment first come ARR in you think these what you what of the growth, the seeing from? or are I type mentioned churn

David Barnes

David and it's of to handful do principally platforms implementing made customers David. they're its These come customers, hey a off many in our them. Jason, quarters Transportation that Jason, are We churn segment. Yes, ago, our expect now decision just from a

retention that first expect on is in signal So I customer We number transportation not the noise, and just off. a to of a trend. see these secular our probably in as pull satisfaction quarter positive see

growth bit QX lower that what the year. So little ARR expect rate full see for our in reduce will from a we to

Jason Celino

portfolio your well. construction destocking drivers than executing completely different -- Okay. be the to And then hardware maybe if I quite it's were seems But software to simplify element. it,

So impact software portfolio? are construction on macro seeing Thanks. you any this

Rob Painter

is an not software short The answer impact on no, seeing the

Portfolio.

David Barnes

Excellent. Thanks.

David Barnes

Welcome.

Operator

from Goldman Our Sachs. question comes next Jerry Revich at

Jerry Revich

morning, proportion wondering And does talk when has were tripled-AASP the One, versus everyone. continued? I'm orders I'm caught if progress base what last orders up, you it account just for on before. about we good Rob, trend new seeing now? construction. Trimble if that Yes, wondering you could of

Rob Painter

One, One the progress on so, the TCX, that It morning. was I an is of evidence good the Construction and level the in Trimble record Jerry, give best you the reality And of Trimble all in quarter of Construction that the comes Hey, on perspective. the not bookings upsell form can on that portfolio. is had ACV we branded cross-sell the from is

the Infrastructure we say, and some I'd portfolio, software TCX. sell aspects can XX%. are subset nearly is a total which a That of & ACV there So was bookings really percent cross-sell Buildings the of just where across

we we're the it's why as We're sales the record when the win less for is business when We're at it's look bookings TCX go offering to cycles than So win buying go seeing selling reviews, reduce. the we we're or us, well. TCX whether the ratios at seeing level. seeing ratios. size up. up seeing the almost that's offerings, competitive of bundled percentage as the the And and buying full what go record dollars, we're a look What account it every looking they're and through at they're

looks be aggregate, in And game us. Jerry, it the I that, relatively to to early formula. that a it's so in still winning add And for would

that weeks, kickoff meetings sales we've really big having is to team. last it in the emphasis with the so And the a been

the that geographically So well sales which actually the underneath sector covers, is aligning contractors person after public the to owners that critical the then to and and general to and get architecture their next the is then doing behind as help engineering sellers that team the the work offering effectiveness. sales out with then and in and enablement out rolling

happening think lots we'll in lots I in every things quarter. this Jerry, some, you say, or keep updating here aggregate of I'd on So front, and good

Operator

will next We at go to Mason Baird. Rob

Rob Mason

Yes, good morning.

earlier. a comment I First just clarify from wanted to question,

mention to cost the the question, that the those transitioning now as an XXX just model on where just are that to about talk conversions. on Is points. for -- the around the Or extension guidance? I implement hardware-software maybe 'XX built into that you've bundles you're was cost what settled maybe -- planning of a -- the think 'XX? and Scale, for basis Connect the And that that was then there is

-- I X were curious, like economics what those. several options speak year at presented X, maybe will think Investor you I'm Day. the can there the just year on to look

David Barnes

try Rob. Yes. Barnes. both. Hey, It's David I'll

discrete for on is and about investments guidance Embedded in that growth. XXXX a 'XXversus of 'XX around Scale Connect in our points was the basis On $XX rate spending million. deceleration the XXX

the somewhere still options say believe rollout transformation, million. $XX in we spend we'll there. that somewhat the We $Xmillion options, considering. that, With menu of Investor our ability is million ahead than $XX bulk is we million sell more model our So we're or investors us -- bundles priority we doing to dependent still but little it in the this options have regard This basis now, together would is software digital tied on out high that topic to we do recurring a the transformation. I the the are more the with hardware of [indiscernible] all and digital investment. the of presented still and is $XX in of way above heavily that Day showed at We're at order opportunity incremental, and to a a another is

Rob Painter

just want to context add a the of on Scale capital it's call. top Connect bit investments and I allocation because of too, Rob, And a

fund help so to part down parts of And doing we've in what here. taken spend other in we're the company,

model. headcount a thought frame. margin Total that, years, the cost If XX%. over our we we've X%. than has that double-digit look lot management The has X about revenue organically, mix time shifts our more total grown the grown ARR grown aspect dollars last gross And over grownX% over of software-centric. have the faster organically as So has

third a ARR [indiscernible] So the of total growth. revenue growth, of

of thinking where allocating about we're work. at in to we're putting context Trimble and much very it capital it's so And how

Rob Mason

much you like, giving follow-on yourself how on a you I or those side or to as Connect lines, deleverage guess, of are that, supplement and following Scale? transaction maybe a somewhat capital of allocation able completion Rob. in guess, something to Transporeon mode, be be but that flexibility that, I along do Well, rivet to to the will a a

Rob Painter

flexibility to sheet, the of the commitment -- flexibility and to a XX deployment XX because here lot from deleverage. say, our talking if acquisition in Let's not next I balance primary a months, we're of is would say

at sheet. flexibility say anything the I would certainly, we've So of balance some limited scale,

relatively Now acquisition aspect, at In stay Ventures, that conservative a our sheet. where caution some and size and we it's close say retain to or scale, I that not view so it's Trimble flexibility -- it's we're a whether work. millions we to with understand taking it's rivet single-digit model put if of would sure to if the do making balance we

next Now that now in of billion to will XX% the again double-digit recurring. $X.X P&L, our revenue year. in believe let's forget XXXX, that's total grow not grown, we

So our has and got has model it's more therefore P&L ever more had than the visibility business resilience.

-- so And the and we maintain grade. investment

not the So sized size lot I'd couple on [indiscernible] for deals a flexibility of deployment, on years. of I there's altogether, flexibility transformative at smaller those next say look capital and factors of a

Rob Mason

Sure.

Thank Okay. you.

David Barnes

go next to at Research. We'll Wolfe [indiscernible]

Unidentified Analyst

[indiscernible] is for my on taking Thanks for question. This Gal. Hi.

revenue revenues your FY follow-up. of follow-up transact for the a At for X for prior had Investor revenue out still regarding And I versus How the as do tracking the stands progress exceeded to target digital portion wanted 'XX. platform or portion And on projections or in platform X% transacted through had future? so Thanks. brief base believe been expected where of to then Just through show the being as as and did that be transformation. to that communicated a just revenue met digital your is investor the the expected that shake digital the question expectations? the of Day, connected

Rob Painter

is with there. further business to The that's next the working, the Europe, with forward. North and roll moving Yes, about American live and But North from and principally we're out and software to phased our short X% in yes. businesses answer our to American we're just rollouts

Unidentified Analyst

Has follow-up. acquisition the changed EBITDA the Transporeon was from That's would time that you. maybe expectations helpful. and the at everything so. it. good announcement of there revenue Got then all alter or initially the announced communicated one And Thank for just anything

David Barnes

have outlook, point outlook the communicated business. in first at no own we'll once that and half update transaction the of year. talking the still this to we've but update we Yes. Look, the our financial we're parameters don't some Obviously, to them, closes We there.

Rob Painter

you guys. Thank

David Barnes

Sure.

And that closing for the Michael does conclude Leyba like conference our back question-and-answer to I'd to session. remarks. turn

Michael Leyba

on look Thank everyone, call. for to next you the to forward us talking you, joining quarter. We

Operator

concludes And call. this conference today's

disconnect. may You now

Trimble (TRMB) 8 Feb 232022 Q4 Earnings call transcript