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    Trimble Inc (TRMB)

    Business Description

    Trimble Inc. is a technology company that provides solutions to enhance work processes across various industries, including architecture, building construction, civil engineering, geospatial, survey and mapping, agriculture, natural resources, utilities, transportation, and government . The company focuses on connecting the digital and physical worlds through core technologies in positioning, modeling, connectivity, and data analytics to improve productivity, quality, safety, transparency, and sustainability . Trimble's business activities are organized into three primary segments: Architects, Engineers, Construction and Owners (AECO), Field Systems, and Transportation and Logistics (T&L) .

    1. Architects, Engineers, Construction and Owners (AECO) - Provides software solutions for the construction industry, significantly contributing to recurring revenue growth with bundled offerings like Trimble Construction One (TC1) .
    2. Field Systems - Includes hardware-centric businesses with revenue equally split between hardware and software, services, and recurring revenue .
    3. Transportation and Logistics (T&L) - Offers mobility, transportation management systems, and mapping solutions, focusing on transitioning from hardware to higher value-added data flows .

    Q3 2024 Summary

    Initial Price$51.90July 4, 2023
    Final Price$52.30October 4, 2023
    Price Change$0.40
    % Change+0.77%

    What went well

    • Strong ACV bookings and ARR growth across the company, driven by successful offerings like Trimble Construction One (TC1) and Transporeon, with TC1 bookings up more than the company average and Transporeon ACV bookings up over 30% year-over-year.
    • Strategic divestiture of the mobility business to Platform Science, allowing Trimble to focus on areas with the strongest right to win, improving growth and profitability metrics, and maintaining a commercial relationship with the ongoing business for continued value creation.
    • Renewed and extended joint venture with Caterpillar, along with partnerships with industry leaders like John Deere, to accelerate innovation and customer adoption of mixed fleet machine control solutions, enhancing Trimble's competitive position in the market.

    What went wrong

    • Trimble has experienced delays in completing its financial audit, with Ernst & Young performing incremental audit procedures that are taking longer than expected, potentially indicating underlying issues and causing uncertainty among investors.
    • Management expressed caution about the European freight market for 2025, anticipating only modest growth for their Transporeon business due to ongoing difficulties, which may impact the company's overall growth prospects.
    • The company admitted underestimating the breadth and depth of the audit process, stating they cannot control the audit timeline, which may suggest potential challenges in internal processes and possible future delays.

    Q&A Summary

    1. 2025 Outlook and Guidance
      Q: What's the 2025 revenue and growth outlook?
      A: Trimble expects AECO to grow above their target range in 2025, with Transportation in the range and Field Systems below it. They anticipate low single-digit growth in Field Systems due to anticipated declines in the Fed business and shifts in revenue from the Caterpillar joint venture. Overall, they project ARR growth in the low teens, driven by strong bookings and despite headwinds from the Mobility divestiture.

    2. AECO Growth and TC1 Expansion
      Q: How is AECO and TC1 driving growth?
      A: The AECO segment is experiencing robust growth, particularly from the TC1 bundles, which are seeing bookings up more than the company average. They are expanding TC1 geographically, with plans to roll out fully in Europe next year and begin in Asia Pacific. This expansion increases their addressable market and allows cross-sell and upsell opportunities within their existing customer base.

    3. Transportation Segment and Transporeon Performance
      Q: What's driving Transporeon's strong bookings?
      A: Transporeon achieved record bookings in the quarter, up over 30% year-to-date. This growth is primarily driven by new logos and cross-selling additional capabilities to existing customers. Despite a challenging European freight market, they expect modest growth for Transporeon into 2025, with significant upside when the market rebounds.

    4. Margin Expansion and Expectations
      Q: How will margins evolve with business changes?
      A: Trimble anticipates gross margin expansion as they grow their software business, expecting operating leverage at the high end of 30-35%. With the divestiture of the Mobility business, margins in Transportation will improve, and they expect additional growth and margin expansion from Maps and Transporeon. Over time, they foresee around 100 basis points of margin expansion at the EBITDA level.

    5. M&A Pipeline and Capital Allocation
      Q: What's the plan for M&A and capital deployment?
      A: Trimble is prioritizing software acquisitions, primarily within the AECO segment, focusing on tuck-in deals that offer high returns on investment. With a net debt to EBITDA ratio of 0.8x, they have significant capacity but do not anticipate large acquisitions, balancing M&A with their commitment to share buybacks.

    6. Caterpillar and Deere Partnerships
      Q: How does the Deere partnership affect the CAT relationship?
      A: The partnership with Deere allows Trimble to enable 3D upgrades on Deere's machine platforms, sold through both Deere and Trimble dealers. They view both the Deere and Caterpillar agreements as complementary, helping grow technology adoption in the industry without causing channel conflict.

    7. Field Systems Growth Drivers
      Q: What's driving growth in Field Systems?
      A: Field Systems growth is driven by new product introductions in geospatial, machine control, and positioning services. They are launching several new products, and the ARR in the segment is growing due to offerings like machine control as a service and positioning services subscriptions.

    8. Audit Review Status
      Q: When will the audit review be completed?
      A: The audit review is the company's top priority, and while they cannot control the exact timeline, they anticipate completing it before their Investor Day. Throughout the process, they have found no indications that would require a restatement of financial statements.

    9. Macro Environment Impact
      Q: How are rate cuts affecting customer activity?
      A: Anecdotally, customers are showing increased confidence, which could lead to capital commitments. Trimble notes that more than half of their business is outside the U.S., so they monitor global interest rate environments. They also highlight that only about 25% of funds from the U.S. bipartisan infrastructure law have been deployed, indicating ongoing funding availability.

    Key Metrics

    View all financials →
    Revenue by Segment - in Millions of USDFY 2013Q1 2014Q2 2014Q3 2014Q4 2014FY 2014Q1 2015Q2 2015Q3 2015Q4 2015FY 2015Q1 2016Q2 2016Q3 2016Q4 2016FY 2016Q1 2017Q2 2017Q3 2017Q4 2017FY 2017Q1 2018Q2 2018Q3 2018Q4 2018FY 2018Q1 2019Q2 2019Q3 2019Q4 2019FY 2019Q1 2020Q2 2020Q3 2020Q4 2020FY 2020Q1 2021Q2 2021Q3 2021Q4 2021FY 2021Q1 2022Q2 2022Q3 2022Q4 2022FY 2022Q1 2023Q2 2023Q3 2023Q4 2023FY 2023Q1 2024Q2 2024Q3 2024
    Engineering and Construction--------
    Field Solutions--------
    Mobile Solutions--------
    Advanced Devices--------
    Buildings and Infrastructure399.5410.0395.1388.51,593.1---
    Geospatial152.4192.9180.7169.5695.5---
    Resources and Utilities208.6196.0184.9179.6769.1---
    Transportation154.9194.7196.6194.8741.0---
    Product434.4490.5444.0402.81,771.7---
    Subscription and Services481.0503.1513.3529.62,027.0---
    Service--------
    Subscription--------
    Total Revenue915.4993.6957.3932.43,798.7---
    Revenue by Geography - in Millions of USDFY 2013Q1 2014Q2 2014Q3 2014Q4 2014FY 2014Q1 2015Q2 2015Q3 2015Q4 2015FY 2015Q1 2016Q2 2016Q3 2016Q4 2016FY 2016Q1 2017Q2 2017Q3 2017Q4 2017FY 2017Q1 2018Q2 2018Q3 2018Q4 2018FY 2018Q1 2019Q2 2019Q3 2019Q4 2019FY 2019Q1 2020Q2 2020Q3 2020Q4 2020FY 2020Q1 2021Q2 2021Q3 2021Q4 2021FY 2021Q1 2022Q2 2022Q3 2022Q4 2022FY 2022Q1 2023Q2 2023Q3 2023Q4 2023FY 2023Q1 2024Q2 2024Q3 2024
    North America481.8525.6518.4492.72,018.5---
    - United States437.5485.1478.64541,855.2---
    Europe267.8282.7260.72651,076.2---
    Asia Pacific103.1110.6105.9109.3428.9---
    Rest of World62.774.772.365.4275.1---
    Other non-US countries--------
    Total Revenue915.4993.6957.3932.43,798.7---
    KPIs - Metric (Unit)FY 2013Q1 2014Q2 2014Q3 2014Q4 2014FY 2014Q1 2015Q2 2015Q3 2015Q4 2015FY 2015Q1 2016Q2 2016Q3 2016Q4 2016FY 2016Q1 2017Q2 2017Q3 2017Q4 2017FY 2017Q1 2018Q2 2018Q3 2018Q4 2018FY 2018Q1 2019Q2 2019Q3 2019Q4 2019FY 2019Q1 2020Q2 2020Q3 2020Q4 2020FY 2020Q1 2021Q2 2021Q3 2021Q4 2021FY 2021Q1 2022Q2 2022Q3 2022Q4 2022FY 2022Q1 2023Q2 2023Q3 2023Q4 2023FY 2023Q1 2024Q2 2024Q3 2024
    ARR ($ Billion)$1.65$1.88$1.94$1.98-$2.03$2.11$2.19

    Executive Team

    NamePositionStart DateShort Bio
    Robert G. PainterPresident and Chief Executive OfficerJanuary 2020Robert G. Painter became Trimble's President and CEO in January 2020. He joined the company in 2006 and served as CFO from 2016 to 2019. Before Trimble, he held positions at Cenveo, Rapt Inc., Bain & Company, Whole Foods Market, and Kraft Foods. He holds a bachelor's degree in finance from West Virginia University and an MBA from Harvard University .
    David G. BarnesChief Financial Officer (retiring May 2024)January 2020David G. Barnes joined Trimble as CFO in January 2020. He has over 35 years of financial experience, including roles at MWH Global Inc., Stantec Inc., Western Union, Coors, and YUM Brands. He holds a Bachelor of Science in Applied Mathematics from Yale University and an MBA in Finance and Marketing from the University of Chicago .
    Phillip SawarynskiVice President, Treasurer (upcoming CFO)May 2024 (expected)Phillip Sawarynski is currently VP and Treasurer at Trimble. He joined in 2009 and became Treasurer in 2018. He will assume the role of CFO in May 2024, succeeding David Barnes .
    Jennifer AllisonVice President, General Counsel and SecretaryApril 2023Jennifer Allison became VP, General Counsel, and Secretary in April 2023. She was previously general counsel for Trimble’s Construction Sector and Viewpoint. Her earlier roles include general counsel at Tripwire and EthicsPoint. She holds a Bachelor’s degree in English Literature from Portland State University and a JD from Lewis & Clark Law School .
    Ronald J. BisioSenior Vice PresidentJuly 2022Ronald J. Bisio joined Trimble in 1996 and has held various roles. He was appointed Senior VP responsible for Trimble's transportation businesses in July 2022. He previously led the surveying and geospatial businesses and served as General Manager for Trimble's rail division .
    Peter LargeSenior Vice PresidentNovember 2023Peter Large is Senior VP responsible for strategy, corporate development, and technology innovation since November 2023. He rejoined Trimble in December 2020, having previously served in leadership roles from 1996 to 2014. He holds an Ed.D. from Oklahoma State University and other degrees from Stanford, Oxford, and Newcastle .
    Mark SchwartzSenior Vice PresidentNovember 2023Mark Schwartz is Senior VP responsible for construction enterprise solutions and other sectors since November 2023. He joined Trimble in 2010 and has held several executive roles. He holds a Bachelor of Science from Bryant University .
    Julie A. ShepardChief Accounting OfficerMay 2007Julie A. Shepard joined Trimble in December 2006 as VP of Finance and became Chief Accounting Officer in May 2007. She has over 30 years of finance experience and began her career at Price Waterhouse. She holds a Bachelor of Science in Accounting from California State University and is a Certified Public Accountant .

    Questions to Ask Management

    1. Can you provide more specific reasons for the continued delays in completing the audit review, and what concrete steps are you taking to ensure it is finalized before the upcoming Investor Day?

    2. While you've reported strong ACV bookings in TC1 within AECO, can you elaborate on the challenges you're facing in rolling out TC1 to the owner segment and international markets, and how might this impact your growth projections?

    3. With the divestiture of the mobility business, how do you plan to address potential gaps in your Connect & Scale strategy, and what specific initiatives are you implementing to sustain growth in the Transportation and Logistics segment, particularly in a challenging freight market?

    4. Given the divestiture of hardware-centric low-margin businesses, can you provide more detailed guidance on how you plan to achieve the anticipated 100 basis points of margin expansion over the next few years, and what risks could prevent you from reaching these targets?

    5. Considering your capital allocation priorities between potential M&A opportunities within the AECO segment and your commitment to share buybacks, how do you intend to balance these competing interests, and could this impact your ability to invest in strategic acquisitions?

    Past Guidance

    Q3 2024 Earnings Call

    • Issued Period: Q3 2024
    • Guided Period: Q4 2024 and FY 2025
    • Guidance:
      1. Annual Recurring Revenue (ARR) Growth: 11% to 13% organically, with a bias towards the higher end.
      2. Full Year Revenue Guidance: Increased to $3.645 billion.
      3. Full Year EPS: Midpoint increased to $2.83.
      4. As-Adjusted EBITDA Margin for the Year: 27.5% to 27.8%.
      5. Fourth Quarter Revenue: $925 million to $965 million.
      6. Fourth Quarter Non-GAAP Operating Margin: 28.5% to 30%.
      7. Fourth Quarter Adjusted EBITDA Margin: 30% to 31.5%.
      8. Fourth Quarter EPS Forecast: $0.83 to $0.91.
      9. 2025 Revenue Growth: Biased above the midpoint of 5% to 8% organic growth.
      10. 2025 ARR Growth: Continued double-digit organic growth .

    Q2 2024 Earnings Call

    • Issued Period: Q2 2024
    • Guided Period: Q3 2024 and FY 2024
    • Guidance:
      1. EBITDA Margin: 26.7% to 27.2% for the year.
      2. Free Cash Flow Conversion: Approximately 0.75x net income.
      3. Third Quarter Revenue: $840 million to $880 million.
      4. Non-GAAP Operating Margin: 22.5% to 23.5% for Q3.
      5. Adjusted EBITDA Margin: 24% to 25% for Q3.
      6. EPS Forecast: $0.58 to $0.64 for Q3.
      7. Full Year Revenue Guidance: Increased to $3.63 billion.
      8. Full Year EPS: Midpoint increased to $2.74.
      9. ARR Growth: 11% to 13%.
      10. 53rd Week Impact: Adds approximately $85 million of revenue and $50 million of operating income .

    Q1 2024 Earnings Call

    • Issued Period: Q1 2024
    • Guided Period: FY 2024
    • Guidance:
      1. Revenue: Q2 revenue between $845 million and $875 million.
      2. ARR Growth: 11% to 13% for the year.
      3. Full Year Organic Revenue Growth: 4% to 7%.
      4. Non-GAAP Operating Margin: 24% to 25% for the year.
      5. Adjusted EBITDA Margin: 26.5% to 27.5%.
      6. Free Cash Flow: Approximately 0.85x non-GAAP net income.
      7. EPS: $2.60 to $2.80 for the year.
      8. 53rd Week Impact: Increases revenue by approximately $85 million.
      9. AECO Segment: Margins up approximately 300 basis points.
      10. Field Systems Segment: Margins down approximately 100 basis points.
      11. Transportation Segment: Margins up approximately 100 basis points .

    Q4 2023 Earnings Call

    • Issued Period: Q4 2023
    • Guided Period: FY 2024 and Q1 2024
    • Guidance:
      1. Organic Revenue Growth: 11% to 13% for the year.
      2. ARR Growth: Strong momentum in AECO software businesses.
      3. 53rd Week Impact: Increases revenue by approximately $85 million.
      4. EBITDA Margins: 26.5% to 27.5%.
      5. Cash Flow: Approximately 0.85x non-GAAP net income.
      6. EPS: $2.60 to $2.80 for the year.
      7. Buildings and Infrastructure: Organic revenue growth of 11% to 13%.
      8. Geospatial: Revenue expected to be down slightly.
      9. Resources and Utilities: High single-digit growth.
      10. Transportation: Mid-single-digit revenue growth.
      11. Operating Margin Improvement: Growth in Buildings & Infrastructure and Resources and Utilities segments.
      12. Impact of Potential Tax Legislation: Could improve cash outlook by approximately $130 million .

    Latest news

    Recent developments and announcements about TRMB.

    Legal & Compliance

      Legal Proceedings

      ·
      Dec 11, 2024, 12:37 PM

      Summary of the Legal Matter Involving Trimble Inc.:

      Key Parties Involved:

      • Trimble Inc.: The company requesting the extension.
      • Bank of America, N.A.: Acting as the Administrative Agent.
      • Lenders: Various financial institutions party to the Credit Agreement, including Bank of America, TD Bank, Nordea Bank, KBC Bank, HSBC Bank, PNC Bank, JPMorgan Chase Bank, The Bank of Nova Scotia, Goldman Sachs Bank, and Wells Fargo Bank .

      Nature of the Proceedings:

      • Trimble Inc. has entered into a Consent and Waiver Agreement dated December 9, 2024, with its lenders and Bank of America, N.A., as the Administrative Agent. This agreement is related to a Credit Agreement initially dated March 24, 2022, and subsequently amended multiple times .
      • The company requested an extension of the Financial Reporting Deadline for the fiscal quarters ending March 29, 2024, June 28, 2024, and September 27, 2024, to January 10, 2025. This extension is to allow more time to deliver the required financial statements and compliance certificates .
      • The agreement also includes a waiver of any Default or Event of Default that might have occurred due to the non-delivery of these financial documents by the original deadlines .

      Potential Financial or Operational Consequences:

      • The extension and waiver prevent any immediate financial penalties or operational disruptions that could arise from a default under the Credit Agreement due to late financial reporting .
      • The company is nearing completion of an assessment of its internal controls over financial reporting, which is expected to be finalized soon, allowing for the filing of the delayed quarterly reports .

      This legal matter primarily revolves around ensuring compliance with financial reporting requirements and maintaining good standing with lenders by obtaining necessary extensions and waivers to avoid defaults under existing credit agreements.