Conference Transcript - TRMB 2026-03-03

Brian Giswally, Analyst

Great. Good morning, everybody. I'm Brian Giswally, Senior Analyst here covering the industrial technology space. I'm really happy to have Trimble here to present in their story.

Phillip Sawarynski, CFO

It's one that's seen a lot of transition over the last several years and transformation that have been really constructive.

Brian Giswally, Analyst

The company continues to stack up mid-teen ARR growth and build a very credible software franchise across vast end markets with a lot of addressable opportunities here. We have the company's chief financial officer here to take us through the story. Phil, take it away. it's going to be a hybrid presentation so if you have some questions think about them will be about half presentation have Q&A be happy to get to some of your

Phillip Sawarynski, CFO

questions on the Q&A part all right thanks Brian I hopefully you can all hear me we're using the podium right now so so yeah Phil Serensky Trimble CFO take you through high level okay so who is Trimble so Trimble we transform the way the world works. Our software and technology has been used across large, global, underserved, underpenetrated industries with technology. So we look at large addressable markets, primarily the two platforms that I'll talk about a little bit are construction and transportation and logistics. We've identified about a $72 billion addressable market in the spaces that we cover, only about 25% of that is penetrated with technology. So we see a lot of availability for us to run as far as our growth going forward. Okay, so what are some high-level numbers for Trimble? So we exited 2025, just under $3.6 billion of revenue. We're an asset-light model, financial model, less than 0% networking capital. OUR ARR, AS BRIAN SAID, WE CONTINUE TO GROW 2.5 BILLION OF ARR, AND I'LL SHOW A LITTLE BIT THE TRANSFORMATION OF THE PORTFOLIO OF THE COMPANY. 1.1 TIMES NET LEVERAGE, OUR GOAL IS TO STAY UNDER 2.5 TIMES, THAT'S A NUMBER WE LIKE TO STAY INVESTMENT GRADE, AND ROUGHLY OUR CALCULATIONS WITH THE RADIES AGENCIES ABOUT 2.5 TIMES FOR OUR INTERNAL CALCULATIONS, SO THE BALANCE SHEET'S IN A REALLY GOOD SPOT AT 1.1 TIMES LEVERAGE, GIVES US A LOT OF FLEXIBILITY. SO THAT'S THE FINANCIALS. ON THE RIGHT HAND SIDE, YOU'LL SEE SOME OF THE OTHER QUANTS. SO WE HAVE TRILLIONS OF DOLLARS OF CONSTRUCTION SPEND THAT GO THROUGH OUR SYSTEMS. WE HAVE BILLIONS OF DOLLARS OF FREIGHT THAT GO THROUGH OUR SYSTEMS. WE HAVE MILLIONS OF USERS OF OUR SOFTWARE AND THOUSANDS OF INSTRUMENTS ON THE FIELD. SO WHAT WE DO THAT I believe is unique to Trimble as we connect the digital and the physical the back office to the field we have hardware in the in the field through our field systems segment it's where our data collectors and our information is gathered it's also where we can push digital models back to the field I think that's unique in what we do the millions user software we have large platforms WHERE WE CAN CONNECT USERS IN A COLLABORATIVE WAY. WE LOOK AT OUR PLATFORMS AND OUR ECOSYSTEMS. SO THINK ABOUT MULTIPLE STAKEHOLDERS BEING ABLE TO CONNECT, COLLABORATE, INCLUDING THIRD PARTIES. AND SO THAT DENSITY OF OUR PLATFORMS AND THAT COLLABORATION AND THAT CONNECTIVITY IS SOMETHING THAT'S VERY IMPORTANT TO US AS WE GO FORWARD. SO HERE ARE THREE SEGMENTS THAT WE REPORT ON. OUR AECO, ARCHITECTS, ENGINEERS, CONSTRUCTION OWNERS. THIS IS REALLY OUR CONSTRUCTION SOFTWARE PORTFOLIO. OUR FIELD SYSTEMS, THIS IS OUR GEOSPATIAL SOLUTIONS, OUR CIVIL CONSTRUCTION SOLUTIONS. SO ON THE HARDWARE SIDE, THINK ABOUT MACHINE CONTROL, HARDWARE THAT GOES INTO DOZERS, GRADERS, ET CETERA, TO BE ABLE TO AUTOMATICALLY CONTROL THE BLADES BASED ON THE DIGITAL MODEL THAT'S BEING USED. used. The business is now with the divestiture of the ag business. We is over 50% software services and recurring. As I look on the right, the transportation business. This is our where we connect our customers again as stakeholders within a platform. So think about a carrier and a shipper and being able to connect and collaborate to execute freight. Both North America and in Europe, we bought Transporion in Europe, which is a platform play and are bringing those businesses together. So within those, we think about two sort of industry platforms, one being construction, and that sort of overlaps the AECO and the field systems. Even though those are separate reporting segments, there's quite a bit of overlap in how the information and the data is connected and how our customers interact on those platforms. So why tremble? What are some key capabilities that we have? I think about our expertise in our, excuse me, the industries that we serve. So construction and transportation, as I mentioned, these are large global industries. They're complex that require experts to be able to solve complex problems. I mentioned before, we solve ROI through efficiency. So think about making our customers being able to move faster, more efficiently, run their operations in a safer and greener way. So within these platforms and within our domain knowledge, we have substantial amounts of data and information. Think about calculations on critical projects or structural problems to solve. ON THE INNOVATION SIDE, WE REINVEST IN OUR R&D, OVER 17.5%, IT WAS OVER 600 MILLION LAST YEAR THAT WE REINVEST, OVER 1000 ACTIVE PATENTS THAT WE OWN, AND I MENTIONED THE HARDWARE AND SOFTWARE THAT CONNECTS THE FIELD IN THE OFFICE WITH THE DATA PIPE THAT CAN GO BACK FROM THE DIGITAL PHYSICAL AND THE DIGITAL TWIN INTO THE PHYSICAL ASSETS THAT are being built or maintained so taking a step back on our history we've been a very acquisitive company over the years uh and i mentioned the the reinvestment in r d a lot of organic and inorganic investments so developed a lot of capabilities over the years a few years ago we started our connect and scale strategy and i'll put that in a couple different uh buckets one is we take the best point solutions and the best workflows and we combine those into bundles and what does that do that allows our customers to buy products that resonate with them and we look at individual personas within our customer base in a lot of cases those bundles are unique to trimble so when i think about where our competitive advantage is we can create again these bundles that are unique that others can't necessarily replicate but from those bundles we create connected workflows and this is solving higher order problems so not just a single workflow within an organization or within a a job but higher order how do we make businesses more efficient how do we make the ecosystem and the stakeholders more efficient as we think about the collaboration so that's where the platform comes into play and we talk about these environments, again, with the stakeholders to be able to collaborate. So if you think about a construction project, for example, where the architect, the engineer, the contractor, the owner, they can all have a source of truth and that manifests in a digital environment. But that digital model can be created from the physical, from a 3D scanner that can create a scan of the room, 3D model that then you if you're looking to, for example, for refurbishment or renovation of a building, you have a source of truth that everybody can collaborate on. So putting that all together, we look at this as Trimble as both an application strategy and our connected scale, sorry, as our application strategy and a platform strategy. So we have the individual workflows. We connect those into the greater ecosystem for that greater level collaboration and problem solving. And I think we can talk a little bit more, but this is actually, as we think about AI within the context of this strategy, I see AI as a tool and a complementary tool to Trimble. Our strategy isn't changing, but what AI does, it allows us to provide more tools, more capabilities faster to our customers. It also allows our customers to work faster and more efficient within the platforms by leveraging the tools that we can provide. So we talked a little bit about the transformation. So I started 16, a little over 16 years ago, and at the time we were primarily hardware and perpetual licenses. Over time, we've transformed the company into more recurring revenue. We've divested several of our businesses, our ag business, our mobility business, and a series of other assets over time. So if we look at the transformation between 2020 and 2025, you can see the AR from $1.3 billion to $2.4 billion. Revenue is up despite over a billion dollars of divestiture revenue. You can see the recurring revenue. It's almost two-thirds now of the total. We have the most visibility we've ever had as a company into our forward-looking revenue. software services are occurring closing in on 80 percent gross margin improvement close to 72 percent from 59 percent and the margin expansion the EBITDA margin expansion almost 400 basis points over that same time period so really a transformational journey as Brian mentioned earlier and then the last I mentioned this earlier the networking capital is a percent of revenue so asset light model so really like where the financial model has progressed and how it sets us up as as we go forward so i think i'll stop there as a quick overview of the company that sounds

Brian Giswally, Analyst

great thanks phil um i'm going to ask some some questions if there's any in the audience uh please feel free to raise your hand and we'll take your questions as well hey you can sit down could we get another mic while he's bringing that up i'll ask the the first question here um as a software company it's inescapable to to not bring ai into the conversation can you talk maybe about why you think it'll be difficult for ai to disrupt trimble some of the opportunities ai brings trimble and where you're at in terms of adopting these processes yeah great question it's obviously

Phillip Sawarynski, CFO

a topical so think about a few things i mentioned the decades of experience that trimble has IN THE DECADES OF DATA THAT WE'VE COLLECTED, DATA ABOUT OUR CUSTOMERS AND DATA FROM OUR CUSTOMERS. SO WHEN I THINK ABOUT US BEING WELL-POSITIONED IN THE WORLD OF AI, THINK ABOUT TRAINING AN AGENT, FOR EXAMPLE, AND TRAINING IT ON INFORMATION THAT'S NOT NECESSARILY PUBLICLY AVAILABLE. WE BELIEVE THAT THAT CAN ACTUALLY RESULT IN BETTER AGENTS THAT WE CAN PROVIDE WITHIN OUR PLATFORMS, platforms within our ecosystems for our customers to actually leverage versus developing their own or buying an off the shelf because ours will be more capable i think about the trust a lot of the things we do are mission critical their systems of record their systems of action and again triple has earned this trust over decades of working with our customers and so when we think about uh you know whether it's steel fabrication or concrete fab or structural design you know we've got the history experience we've got the calculations we have the knowledge we have the trust of that the customer to be able to do it a lot of our customers have professional designations right they are putting their names and their stamps on on things and they want to make sure that they're right right and I think Trimble's earned that over the years to be well positioned for that I think about the think about where we're at today within the AI world and if you look across our products we're already there within our transportation offerings we have what's called our autonomous procurement or autonomous quotation these are AI forward products that we are already seeing strong bookings on and this is to allow our customers to if you're a shipper to procure freight leveraging an ai tool if you're a carrier you can quote freight and allows for dynamic marketing conditions so again we're already there within our sketchup product which is our architecture and our design we've already deployed ai agents within that it's early we recently came OUT WITH NOW A BIT OF A BLEND OF NAMED USER LICENSES AND CONSUMPTION. SO WITHIN THE TEKLA OFFERINGS, YOU CAN BUY GOOD, BETTER, BEST OFFERINGS. WITHIN THAT ARE A CERTAIN AMOUNT OF CREDITS THAT YOU CAN NOW UTILIZE THESE CREDITS FOR THE USE OF AGENTS. AND BECAUSE THERE ARE ALREADY A CERTAIN AMOUNT IS ALREADY EMBEDDED IN THE LICENSING, THIS IS REALLY WHAT WE WANT TO GET CUSTOMERS TO BE ABLE TO START TO USE THE AGENTS THAT ARE ALREADY OFF THE SHELF AND EMBEDDED IN THE PRODUCTS THAT WE'RE OFFERING. SO WE'RE ALREADY THERE. IF I THINK ABOUT INTERNAL USE, VIRTUALLY I THINK OVER 90% OR PROBABLY MORE BY NOW OF OUR CODERS ARE LEVERAGING AI TOOLS TO ACTUALLY DEVELOP CODE. SO I SEE US MOVING FASTER. I SEE US REINVESTING THAT THOUGH BECAUSE I BELIEVE THAT THIS IS ABOUT PACE AND ABOUT bringing more features about bringing more capabilities to the market faster and so that's where i see see a lot of the usage as well internally is around how we can get efficiency but we're redeploying that capital to shorten cycle times in our product development

Brian Giswally, Analyst

makes a lot of sense maybe talk a little bit about competitive intensity your addressable market in each segments many investors might know an autodesk or a pro core how much overlap is there actually when you go to market and really how should investors think about the broader market

Phillip Sawarynski, CFO

scale yeah I'd start with I believe Trimble has the most breadth and depth of offerings in the industries that we serve I think that you know within that and I talked about sort of point solutions in any one of those you can see there's potential competitors within that where I see Trimble's advantage is creating unique bundles and creating and integrating workflows and so when we go to market we think about a persona what we look to do is to create bundles that are natural to you within the business and the way you operate and by creating these bundles that in a lot of ways are unique to Trimble it's hard to find a natural competitor that can offer the THE EXACT SAME BUNDLES AND THE CAPABILITIES AND THE CONNECTED WORKFLOWS THAT TRIMBLE DOES AND THAT'S WHERE I SEE OUR ADVANTAGE AND PART OF OUR CONNECT AND SCALE STRATEGY AS WE THINK TO GO TO MARKET WAS WE CREATED WHAT WAS CALLED OUR TCU ONE TRIMBLE CONSTRUCTION ONE AND THIS IS A FRAMEWORK CONTRACT WITH OUR CUSTOMERS AND SO IN THE PAST WHERE TRIMBLE MAY HAVE HAD MULTIPLE PRODUCTS WITH MULTIPLE TERMS AND CONDITIONS AND DIFFERENT SALES PEOPLE WORKING WITH CUSTOMERS NOW WE'VE MOVED TO ACCOUNT BASED SELLING WHERE THE SELLERS HAVE ACCESS TO ALL THE PRODUCTS NOW WHERE WE LOWER THE FRICTION IS WITH A TC1 FRAMEWORK CONTRACT AND SO THIS IS ONE SET OF TERMS AND CONDITIONS THAT OUR CUSTOMERS CAN NOW ADD PRODUCTS TO AND THIS UNLOCKS SO WE TALK ABOUT CROSS SELL AND UP SELL opportunity we identified at the company level as of investor day over a billion four of cross sell and upsell opportunity to the customers we already have and so the unlock on the go to market is create these singular framework contracts and as we to in order to land and expand customers and so that could be starting with a single product we tend to lead with bundles because we think that's the right answer for the customer but even if they take a single product and start using that that allows our sales folks in the future to go and sell and cross sell and upsell other products to those those customers as well and we really lower the friction point because there isn't a new contract you can just add it to the existing contract great let's uh let's double

Brian Giswally, Analyst

double click on that help us maybe visualize some of these cross sales where you're having particular success and the bundles that customers are adopting maybe think about that regionally within the segments and help help maybe the audience conceptualize what you're talking about

Phillip Sawarynski, CFO

on the cross cells sure uh let's use an example like in in north america one of our products is it's under the viewpoint it's an it's an erp for construction and so we sell that and as you can imagine an erp tends to be a very sticky product product and it is for us as well it's a system of record it's it's right or wrong effectively and so again this is what's core to actually running a business and so what we can do is add other capabilities on top of that and so within that bundle we can add for example financial modules we can uh are an a we did some time card which was a inorganic purchase we bought a um uh it's called track sparrow which is uh managing time cards out in the field that connects directly into the erp uh where there's trimble materials which is another inorganic so talk can talk a little bit about the tuck in play but we develop either develop internally or inorganically these capabilities we connect them back into for example the erp and as we add these new capabilities we can go right back to the erp customer that we already have show them the roi and demonstrate how those connected workflows can work and that creates that selling motion as we think about going to other geographies you know erps tend to be more localized and so when we look at Europe it's a similar play but it could start in a different place so for example our project site which is our project management software we've been rolling that out to other locations that's more of a generic software generic in the sense that it doesn't need to be localized it can be scalable across regional boundaries and so that could be a place where we then start with that the sale of the project management software and then can add the other capabilities on that land and expand motion we also have products like our tekla which is out of finland which has a good european base some of our mechanical electrical plumbing products out of there so the start point can be a little bit different as we think about geographies but the playbook is the same thing is we want to start with the bundles that are relevant to the customers and then to the extent we land those customers is continue to add other capabilities and products and go back to them for more cross-sell and upsell capabilities

Brian Giswally, Analyst

let's maybe pivot to some of the financials would you help us understand how you think about through cycle growth rates uh for trimble you know how much of that is is volume penetration pricing maybe lay out the algorithm for how people should think about that yeah it's a great question i

Phillip Sawarynski, CFO

I always start with the up leveling of the addressable market. And I mentioned this earlier, but 72 billion at the company level, that's only 25% penetrated. So that tells me, one, we have room to go, and that's where we talk about the geographic expansion, where we talk about looking at different segments of the market that we may not be in that are adjacent. So that's a lot of room to run, as I think about the long-term growth opportunities. Then if I double click on that, The next is this cross sell and upsell opportunities, the billion four at the company level, a billion in our AECO business, 400 million in our transportation logistics business. And this is where, again, we can use the sales motions I just described to go and cross sell and upsell into the customer base we already have, right? And so then we talked about a little bit our bookings. So right now, from a booking standpoint within AECO or I guess more in general, is about two-thirds to our existing logos and about one-third new. So it's not just about the cross-sell and the upsell, that tends to be the places where we focus and where the easier opportunities are, but we also want to continue to build the base, and so this is where that other one-third of the new logo bookings come into play. So we're really focused on that as well. As we go forward, you mentioned volume versus price. I look at the, you know, we probably have, you know, let's call it low to mid single digit pricing every year. And that's sort of on average, different products can be at different levels. Within that we look at churn and reducing churn, as I think about our net retention rates going forward. And so you put all that together into the growth algorithm. And that's how I think about it. that's what we've done within AECO if I look across the rest of the business is transportation logistics it's going to be the same playbook so we brought together those some of the businesses under or all of the transportation businesses under a single leadership and so that AECO playbook around you know getting to low friction cross-sell and upsell with our customers when we When we look at that $400 million of opportunities and bringing the sales teams together and incentivizing that cross sell and the upsell, it's gonna be a similar motion, transportation's a little more behind with ACO. That was intentional. We wanted to build a lot of the systems behind the scenes and do it and work that out and get a little more consistent with that before rolling it out to the rest of the company. But that's the playbook, that's Connect and Scale. And that's where you'll see this again, extend into the other businesses.

Brian Giswally, Analyst

How do you think about you obviously the majority of your business is recurring and reoccurring in nature, how do you think about those macro variables that you know affect the business at the edge, maybe talk about them by segment, maybe an update on on where you're seeing freight, given some of the global events, just just all of those sorts of factors that we should look for.

Phillip Sawarynski, CFO

Yes, it's a great question. I'd say the first thing we would tend to look at as I think about construction is project backlog, which characterizes healthy for our customers. And, you know, certainly there's a lot of, you know, the data storage and the facilities that are being built. What goes along with that is infrastructure that needs to support that as well. I think about our civil construction business. Last year performed really well. That's within our field systems group. It actually crosses over civil construction is both within our ACO that's why I mentioned we have a a single platform for both but we see the the civil construction projects I think about some of the funding whether it be at IIJA or some of the European funds that have been passed recently as opportunities as we go forward on the other side of the coin there's certainly a lot of macroeconomic noise whether it be tariffs whether it be interest rates geopolitical risk. So that's some things that I want to stay on top of and keep an eye on. As I look at transportation logistics, that market, the freight market's been, I'd characterize it, it's been in a recession, it's been down, but stable. In our financial modeling, we haven't, we haven't been bullish on that. I think we've modeled out roughly GDP growth. But what's really interesting about our transportation logistics business, in particular, Transporion, which is the acquisition in Europe that we did is about two thirds of that business is, I would characterize as consumption or transactional. And what that is, is each of the, anytime freight is procured via our platform, we monetize that. Now within that business, there's different tiering and there's a mix element to that. And so if a freight is procured via contract price, it's a small amount, it's high volume, low dollar, low Euro amount, but where the capacity gets actually filled in excess of the contracted rates is through the spot market. And that gets monetized at a higher level, so that has a mix effect for us, that's a positive mix effect. And then we actually, I mentioned our autonomous procurement, our autonomous quotation tools, which are AI tools, which actually sit on top of that and actually provide even a higher ROI for our customers. And so what does all this mean? Well, when the market does come back within freight, that just means one, more transactions tend to flow through the system. Two, the mix tends to improve with a higher mix of the spot pricing. And then three, on top of that, we're trying to continue to push our AI tools. And so the incremental margins on that business when the market comes back is extremely high, closing in on 100%. And so that's where I really see that business being able to inflect over time. Now, what are we doing in the meantime? Well, we can control what we can't control, and that's not the number of, or the amount of freight across the market, but what we have been doing is continuing to add to the density of our network. So we talked about over 180,000 carriers and logistics service providers that are now on the platform. That's about 10,000 more than what we said at Investor Day. Our shippers, think about big multinationals. We grew that by a little over 100. So we had 1,400 investor day, now we're over 1,500. So the more density we can add to that platform, as the market come back, should add more transactions and add to that flywheel and the exponential growth and margin expansion within that business.

Brian Giswally, Analyst

Great, last one, the company you've mentioned is consummated a lot of divestitures, 23, I believe, over the last several years, 13 acquisitions as well. do you sit now from a capital deployment standpoint are there bolt-ons that you're interested in are there platform deals uh you want to return all the capital to shareholders

Phillip Sawarynski, CFO

help us help us think about your priorities yeah sure so high level as i think about capital allocation first is obviously putting the cash back into the business and growth and so after that we look at our debt profile i mentioned we're at 1.1 times leverage ratio that's below our targeted rate so really not looking to repay any sort of debt at this time and so it really comes down to then okay what's left and it's really around the share repurchases and m a and so as i think about m a i mentioned some of the tuck ins i think we want to be able to quite frankly accelerate our pace with the tuck ins we see that as a high roi and a short time to roi this is where we're going to we buy capabilities and i mentioned the example of tremble materials and Trexpera which is again buying a capability and being able to quickly integrate that and then put that in the hands of our sellers to be able to now cross sell those products into our existing customer base we like that motion and seen really good demonstrated success and I think the team's done a really good job developing a muscle on the quick integrations and being able to deploy those capabilities quickly to our customers as I think about larger M&A that would probably be TO BE MORE FOCUSED ON CONSTRUCTION SOFTWARE AND WHERE I WOULD THINK ABOUT THAT IS AGAIN I MENTIONED SOME OF THE GEOGRAPHIC EXPANSION IS WHERE COULD WE FIND A PLATFORM OR CAPABILITY THAT IS A LAND AND EXPAND AS I THINK ABOUT WHETHER IT'S EUROPE OR A DIFFERENT GEOGRAPHY AND WE FIND SOMETHING THAT'S A SCALABLE PRODUCT CAPABILITY PLATFORM ASSET IF YOU WILL THAT AGAIN WE CAN RUN THAT CROSS SELL AND UP SELL INTO A CUSTOMER BASE THAT MAYBE WE'RE NOT accessing today. And so that's how I think about that. Think about similar, as I mentioned, the viewpoint as sort of that land and expand, something similar to that, not necessarily an ERP, but something that has the scale and the stickiness with those customers that, again,

Brian Giswally, Analyst

we can run that cross-sell and up-sell play off of. Great. That takes us right to time here. Phil, thanks so much for joining us. And thank you and the audience for joining as well.