Trimble Inc 10-Q for FY2023 Q3
Trimble Inc. (TRMB)
10-Q
2023-11-03
For: 2023-09-29
View Original
Added on
April 11, 2026
About this 10-Q
Trimble Inc filed this 10-Q on November 3, 2023, covering the quarter ended September 29, 2023 (FY2023 Q3).
Headline figures
Quarter ended September 29, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $957.3M
- up 8.2% from $884.9M a year earlier
- Net income
- $74.9M
- down 12.7% from net income of $85.8M a year earlier
- Diluted EPS
- $0.30
- down 11.8% from $0.34 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended | |||||
| or | |||||
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____ to _____ | |||||
Commission file number: 001-14845
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number) | |||||||
(Address of principal executive offices) (Zip Code)
(720 ) 887-6100
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ý No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definition of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
| ý | Accelerated Filer | ¨ | |||||||||
| Non-accelerated Filer | ¨ | Smaller Reporting Company | |||||||||
| Emerging Growth Company | |||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ý
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
As of October 30, 2023, there were 248,767,565 shares of Common Stock, par value $0.001 per share, outstanding.
SPECIAL NOTE ON FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, which are subject to the “safe harbor” created by those sections. These statements include, among other things:
•general U.S. and global macroeconomic outlook, including slowing growth, inflationary pressures, and increases in interest rates;
•economic disruptions caused by potential impact of volatility and conflict in the political and economic environment, including the conflicts in the Middle East and between Russian and Ukraine;
•our belief that inflationary cost pressures will diminish over time as supply chain conditions continue to normalize;
•fluctuations in foreign currency exchange rates;
•the cyclical nature of our hardware revenue and our expectation that our inventory levels will normalize over the first half of 2024;
•our expectations that we will experience less seasonality in the future;
•the portion of our revenue expected to come from sales to customers located in countries outside of the U.S.;
•our plans to continue to invest in research and development for the active development and introduction of new products and to deliver targeted solutions to the markets we serve;
•our shift towards a more significant mix of recurring revenue;
•our belief that increases in recurring revenue will provide us with enhanced business visibility over time;
•risks associated with our growth strategy, focusing on historically underserved large markets;
•any anticipated benefits or impact to our results of operations and financial conditions from our acquisitions and our ability to successfully integrate the acquired businesses;
•any anticipated benefits associated with the pending contribution of our precision agriculture business, excluding certain products and technologies, to a newly formed joint venture (the “JV”) and the sale of the majority interest in the JV to AGCO Corporation (“AGCO”);
•our belief that our cash and cash equivalents and borrowings, along with cash provided by operations, will be sufficient in the foreseeable future to meet our anticipated operating cash needs, debt service, expenditures related to our Connect and Scale strategy, and any acquisitions;
•tax payments or refunds related to research and development (“R&D”) costs;
•our belief that our gross unrecognized tax benefits will not materially change in the next twelve months; and
•our commitments to environmental, social, and governance matters.
The forward-looking statements regarding future events and the future results of Trimble Inc. (“the Company” or “we” or “our” or “us”) are based on current expectations, estimates, forecasts, and projections about the industries in which we operate, and the beliefs and assumptions of our management. Discussions containing such forward-looking statements may be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of this report. In some cases, forward-looking statements can be identified by terminology such as “may,” “will,” “should,” “could,” “predicts,” “potential,” “continue,” “expects,” “anticipates,” “future,” “intends,” “plans,” “believes,” “estimates,” and similar expressions. These forward-looking statements involve certain risks and uncertainties that could cause actual results, levels of activity, performance, achievements, and events to differ materially from those implied by such forward-looking statements, including but not limited to those discussed in this report under the section entitled “Risk Factors” and elsewhere, and in other reports we file with the Securities and Exchange Commission (“SEC”), specifically the most recent Form 10-K for 2022 (the “2022 Form 10-K”) and in other reports we file with the SEC, each as it may be amended from time to time. These forward-looking statements are made as of the date of this report. We reserve the right to update these forward-looking statements for any reason, including the occurrence of material events, but assume no duty to update these statements to reflect subsequent events.
TRIMBLE INC.
FORM 10-Q for the Quarter Ended September 29, 2023
TABLE OF CONTENTS
| Page | ||||||||
| PART I. | ||||||||
| ITEM 1. | ||||||||
| ITEM 2. | ||||||||
| ITEM 3. | ||||||||
| ITEM 4. | ||||||||
| PART II. | ||||||||
| ITEM 1. | ||||||||
| ITEM 1A. | ||||||||
| ITEM 2. | ||||||||
| ITEM 3. | ||||||||
| ITEM 4. | ||||||||
| ITEM 5. | ||||||||
| ITEM 6. | ||||||||
3
PART I – FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
| Index | |||||
| Page | |||||
4
TRIMBLE INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
| As of | As of | ||||||||||
| Third Quarter of | Year End | ||||||||||
| 2023 | 2022 | ||||||||||
| (In millions, except par value) | |||||||||||
| ASSETS | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Accounts receivable, net | |||||||||||
| Inventories | |||||||||||
| Other current assets | |||||||||||
| Assets held for sale | |||||||||||
| Total current assets | |||||||||||
| Property and equipment, net | |||||||||||
| Operating lease right-of-use assets | |||||||||||
| Goodwill | |||||||||||
| Other purchased intangible assets, net | |||||||||||
| Deferred income tax assets | |||||||||||
| Other non-current assets | |||||||||||
| Total assets | $ | $ | |||||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||||
| Current liabilities: | |||||||||||
| Short-term debt | $ | $ | |||||||||
| Accounts payable | |||||||||||
| Accrued compensation and benefits | |||||||||||
| Deferred revenue | |||||||||||
| Income taxes payable | |||||||||||
| Other current liabilities | |||||||||||
| Liabilities held for sale | |||||||||||
| Total current liabilities | |||||||||||
| Long-term debt | |||||||||||
| Deferred revenue, non-current | |||||||||||
| Deferred income tax liabilities | |||||||||||
| Operating lease liabilities | |||||||||||
| Other non-current liabilities | |||||||||||
| Total liabilities | |||||||||||
Commitments and contingencies (Note 13) | |||||||||||
| Stockholders' equity: | |||||||||||
Preferred stock, $ | |||||||||||
Common stock, $ | |||||||||||
| Additional paid-in-capital | |||||||||||
| Retained earnings | |||||||||||
| Accumulated other comprehensive loss | ( | ( | |||||||||
| Total stockholders' equity | |||||||||||
| Total liabilities and stockholders' equity | $ | $ | |||||||||
See accompanying Notes to the Condensed Consolidated Financial Statements.
5
TRIMBLE INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
| Third Quarter of | First Three Quarters of | ||||||||||||||||||||||
| (In millions, except per share amounts) | 2023 | 2022 | 2023 | 2022 | |||||||||||||||||||
| Revenue: | |||||||||||||||||||||||
| Product | $ | $ | $ | $ | |||||||||||||||||||
| Subscription and services | |||||||||||||||||||||||
| Total revenue | |||||||||||||||||||||||
| Cost of sales: | |||||||||||||||||||||||
| Product | |||||||||||||||||||||||
| Subscription and services | |||||||||||||||||||||||
| Amortization of purchased intangible assets | |||||||||||||||||||||||
| Total cost of sales | |||||||||||||||||||||||
| Gross margin | |||||||||||||||||||||||
| Operating expense: | |||||||||||||||||||||||
| Research and development | |||||||||||||||||||||||
| Sales and marketing | |||||||||||||||||||||||
| General and administrative | |||||||||||||||||||||||
| Restructuring | |||||||||||||||||||||||
| Amortization of purchased intangible assets | |||||||||||||||||||||||
| Total operating expense | |||||||||||||||||||||||
| Operating income | |||||||||||||||||||||||
| Non-operating income (expense), net: | |||||||||||||||||||||||
| Divestitures gain, net | |||||||||||||||||||||||
| Interest expense, net | ( | ( | ( | ( | |||||||||||||||||||
| Income from equity method investments, net | |||||||||||||||||||||||
| Other income (expense), net | ( | ( | ( | ||||||||||||||||||||
| Total non-operating income (expense), net | ( | ( | ( | ||||||||||||||||||||
| Income before taxes | |||||||||||||||||||||||
| Income tax provision | |||||||||||||||||||||||
| Net income | $ | $ | $ | $ | |||||||||||||||||||
| Earnings per share: | |||||||||||||||||||||||
| Basic | $ | $ | $ | $ | |||||||||||||||||||
| Diluted | $ | $ | $ | $ | |||||||||||||||||||
| Shares used in calculating earnings per share: | |||||||||||||||||||||||
| Basic | |||||||||||||||||||||||
| Diluted | |||||||||||||||||||||||
See accompanying Notes to the Condensed Consolidated Financial Statements.
6
TRIMBLE INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
| Third Quarter of | First Three Quarters of | ||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||
| Net income | $ | $ | $ | $ | |||||||||||||||||||
| Foreign currency translation adjustments, net of tax | ( | ( | ( | ( | |||||||||||||||||||
| Net change related to derivatives and other, net of tax | ( | ( | |||||||||||||||||||||
Comprehensive (loss) income | $ | ( | $ | ( | $ | $ | |||||||||||||||||
See accompanying Notes to the Condensed Consolidated Financial Statements.
7
TRIMBLE INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(UNAUDITED)
| Common stock | Retained Earnings | Accumulated Other Comprehensive Loss | Total Stockholders’ Equity | ||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Additional Paid-In Capital | |||||||||||||||||||||||||||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||||||||||||||||||||||||||
| Balance at the end of 2022 | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock under employee plans, net of tax withholdings | — | ( | — | ||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||
| Balance at the end of the first quarter of 2023 | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock under employee plans, net of tax withholdings | — | ( | ( | — | ( | ||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||
| Balance at the end of the second quarter of 2023 | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive loss | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock under employee plans, net of tax withholdings | — | ( | — | ||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||
| Balance at the end of the third quarter of 2023 | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||||||||||||||
| Common stock | Retained Earnings | Accumulated Other Comprehensive Loss | Total Stockholders’ Equity | ||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Additional Paid-In Capital | |||||||||||||||||||||||||||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||||||||||||||||||||||||||
| Balance at the end of 2021 | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive loss | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock under employee plans, net of tax withholdings | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||||
| Stock repurchases | ( | — | ( | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||
| Balance at the end of the first quarter of 2022 | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive loss | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock under employee plans, net of tax withholdings | — | ( | ( | — | ( | ||||||||||||||||||||||||||||||||||||||||||
| Stock repurchases | ( | ( | ( | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||
| Balance at the end of the second quarter of 2022 | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive loss | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock under employee plans, net of tax withholdings | — | ( | — | ||||||||||||||||||||||||||||||||||||||||||||
| Stock repurchases | ( | — | ( | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||
| Balance at the end of the third quarter of 2022 | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||||||||||||||
See accompanying Notes to the Condensed Consolidated Financial Statements.
8
TRIMBLE INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| First Three Quarters of | ||||||||||||||||||||
| (In millions) | 2023 | 2022 | ||||||||||||||||||
| Cash flow from operating activities: | ||||||||||||||||||||
| Net income | $ | $ | ||||||||||||||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||||||||||
| Depreciation expense | ||||||||||||||||||||
| Amortization expense | ||||||||||||||||||||
| Deferred income taxes | ( | ( | ||||||||||||||||||
| Stock-based compensation | ||||||||||||||||||||
| Divestitures gain, net | ( | ( | ||||||||||||||||||
| Other, net | ( | |||||||||||||||||||
| (Increase) decrease in assets: | ||||||||||||||||||||
| Accounts receivable, net | ||||||||||||||||||||
| Inventories | ( | |||||||||||||||||||
| Other current and non-current assets | ( | ( | ||||||||||||||||||
| Increase (decrease) in liabilities: | ||||||||||||||||||||
| Accounts payable | ( | |||||||||||||||||||
| Accrued compensation and benefits | ( | |||||||||||||||||||
| Deferred revenue | ( | |||||||||||||||||||
| Income taxes payable | ( | |||||||||||||||||||
| Other current and non-current liabilities | ( | ( | ||||||||||||||||||
| Net cash provided by operating activities | ||||||||||||||||||||
| Cash flow from investing activities: | ||||||||||||||||||||
| Acquisitions of businesses, net of cash acquired | ( | ( | ||||||||||||||||||
| Purchases of property and equipment | ( | ( | ||||||||||||||||||
| Net proceeds from divestitures | ||||||||||||||||||||
| Other, net | ( | |||||||||||||||||||
| Net cash used in investing activities | ( | ( | ||||||||||||||||||
| Cash flow from financing activities: | ||||||||||||||||||||
| Issuance of common stock, net of tax withholdings | ( | |||||||||||||||||||
| Repurchases of common stock | ( | |||||||||||||||||||
| Proceeds from debt and revolving credit lines | ||||||||||||||||||||
| Payments on debt and revolving credit lines | ( | ( | ||||||||||||||||||
| Other, net | ( | ( | ||||||||||||||||||
| Net cash provided by (used in) financing activities | ( | |||||||||||||||||||
| Effect of exchange rate changes on cash and cash equivalents | ( | ( | ||||||||||||||||||
| Net decrease in cash and cash equivalents | ( | ( | ||||||||||||||||||
| Cash and cash equivalents - beginning of period | ||||||||||||||||||||
Cash and cash equivalents - end of period (1) | $ | $ | ||||||||||||||||||
See accompanying Notes to the Condensed Consolidated Financial Statements.
9
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1. OVERVIEW AND ACCOUNTING POLICIES
Basis of Presentation
The Condensed Consolidated Financial Statements include our results of our consolidated subsidiaries. Intercompany accounts and transactions have been eliminated.
We use a 52- to 53-week year ending on the Friday nearest to December 31. Both 2023 and 2022 are 52-week years. The third quarter of 2023 and 2022 ended on September 29, 2023 and September 30, 2022. Unless otherwise stated, all dates refer to these periods.
Use of Estimates
We prepared our interim Condensed Consolidated Financial Statements that accompany these notes in conformity with U.S. GAAP, consistent in all material respects with those applied in our Form 10-K filed with the U.S. Securities and Exchange Commission on February 17, 2023 (the “2022 Form 10-K”).
The interim financial information is unaudited, and reflects all normal adjustments that are, in our opinion, necessary to provide a fair statement of results for the interim periods presented. This report should be read in conjunction with our 2022 Form 10-K that includes additional information about our significant accounting policies and the methods and assumptions used in our estimates.
The preparation of financial statements in accordance with U.S. generally accepted accounting principles (“GAAP”) requires us to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Estimates and assumptions are used for revenue recognition, including determining the nature and timing of satisfaction of performance obligations and determining standalone selling price (“SSP”) of performance obligations, provision for credit losses, sales returns reserve, inventory valuation, warranty costs, investments, acquired intangibles, goodwill and intangible asset impairment analysis, other long-lived asset impairment analysis, stock-based compensation, and income taxes. We base our estimates on historical experience and various other assumptions we believe to be reasonable. Actual results that we experience may differ materially from our estimates.
Change in Presentation
During the first quarter of 2023, we changed the presentation of revenue and cost of sales in the Condensed Consolidated Statements of Income. This change was made to better reflect our Connect and Scale strategy and business model evolution with a continued shift toward a more significant mix of recurring revenue, which includes subscription, maintenance and support, recurring transactions, and term licenses. As such, we revised our presentation, including (a) the combination of subscription and services into one line item, and (b) moving term licenses from product to subscription and services. The subscription and services line item is more aligned with our performance measures, how we manage our business, and is helpful to investors and others to better understand our results.
Previously, we presented revenue and cost of sales on three lines as follows:
•product, which included hardware and software licenses (both perpetual and term licenses);
•service, which included hardware and software maintenance and support and professional services;
•subscription, which included Software as a Service (“SaaS”), data, and hosting services.
The revised categories are as follows:
•product, which includes hardware and perpetual software licenses;
•subscription and services, which includes SaaS, data, and hosting services, as well as term licenses, hardware and software maintenance and support, and professional services.
Prior period amounts have been revised to conform to the current period presentation. This change in presentation did not affect the total revenue or total cost of sales. The effect of the changes on the Condensed Consolidated Statements of Income for the third quarter and first three quarters of 2022 were as follows:
10
| Third Quarter of 2022 | First Three Quarters of 2022 | ||||||||||||||||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||||||||||||||
| As Previously Reported | Effect of Change in Presentation | As Reported Herein | As Previously Reported | Effect of Change in Presentation | As Reported Herein | ||||||||||||||||||||||||||||||
| Revenue: | |||||||||||||||||||||||||||||||||||
| Product | $ | $ | ( | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||
| Subscription and services | — | — | |||||||||||||||||||||||||||||||||
| Service | ( | — | ( | — | |||||||||||||||||||||||||||||||
| Subscription | ( | — | ( | — | |||||||||||||||||||||||||||||||
| Total revenue | $ | $ | — | $ | $ | $ | — | $ | |||||||||||||||||||||||||||
| Cost of sales: | |||||||||||||||||||||||||||||||||||
| Product | $ | $ | ( | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||
| Subscription and services | — | — | |||||||||||||||||||||||||||||||||
| Service | ( | — | ( | — | |||||||||||||||||||||||||||||||
| Subscription | ( | — | ( | — | |||||||||||||||||||||||||||||||
| Amortization of purchased intangible assets | — | — | |||||||||||||||||||||||||||||||||
| Total cost of sales | $ | $ | — | $ | $ | $ | — | $ | |||||||||||||||||||||||||||
Recently issued Accounting Pronouncements not yet Adopted
There are no recently issued accounting pronouncements applicable to us not yet adopted.
Recently Adopted Accounting Pronouncements
NOTE 2. COMMON STOCK REPURCHASE
In August 2021, our Board of Directors approved a new stock repurchase program (“2021 Stock Repurchase Program”), authorizing up to $750.0 million in repurchases of our common stock. The 2021 Stock Repurchase Program’s authorization does not have an expiration date.
Under the 2021 Stock Repurchase Program, we may repurchase stock from time to time through open market transactions, privately-negotiated transactions, accelerated stock repurchase plans, or by other means. The timing and actual number of any stock repurchased will depend on a variety of factors, including market conditions, our stock price, other available uses of capital, applicable legal requirements, and other factors. The 2021 Stock Repurchase Program may be suspended, modified, or discontinued at any time at the Company’s discretion without notice. At the end of the third quarter of 2023, the 2021 Stock Repurchase Program had remaining authorized funds of $215.3 million.
In the fourth quarter of 2023, we plan to reinstate share repurchases, which were temporarily discontinued in the fourth quarter of 2022.
During the third quarter and first three quarters of 2022, we repurchased approximately 1.4 million and 6.0 million shares of common stock in open market purchases at an average price of $64.23 and $65.90 per share for a total of $90.0 million and $394.7 million under the 2021 Stock Repurchase Program.
NOTE 3. ACQUISITION
On April 3, 2023, we acquired all of the issued and outstanding shares of TP Group Holding GmbH and Sixfold GmbH, which owned Transporeon, in an all-cash transaction. Transporeon is a Germany-based company and leading cloud-based transportation management software platform that connects key stakeholders across the industry lifecycle to positively impact the optimization of global supply chains, which aligns with our Connect and Scale strategy. Transporeon is reported as part of our Transportation segment.
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The total purchase consideration was €1.9 billion or $2.1 billion, which included the repayment of outstanding Transporeon debt of $339.6 million. The acquisition was funded through a combination of cash on hand and debt. See Note 8 “Debt” of this report for more information.
Purchase Price Allocation
The fair value of identifiable assets acquired and liabilities assumed was determined under the acquisition method of accounting for business combinations. The excess of purchase consideration over the fair value of net tangible and identifiable intangible assets acquired was recorded as goodwill. The fair value of intangible assets acquired is generally determined based on a discounted cash flow analysis.
The following table summarizes the consideration transferred to acquire Transporeon and the preliminary allocation of the purchase price among the assets acquired and liabilities assumed, as well as the estimated useful lives of the identifiable intangible assets as of the date of the acquisition. The allocation of the purchase price is still preliminary as we finalize deferred income taxes, certain tangible assets and liabilities acquired, and valuations of intangible assets. Preliminary estimates will be finalized within one year of the acquisition date.
| Fair Value as of the Acquisition Date | Estimated Useful Life | |||||||
| (In millions) | ||||||||
| Total purchase consideration | $ | |||||||
| Net tangible assets acquired: | ||||||||
| Cash and cash equivalents | ||||||||
| Accounts receivable, net | ||||||||
| Other current assets | ||||||||
| Non-current assets | ||||||||
| Accounts payable | ( | |||||||
| Accrued compensation and benefits | ( | |||||||
| Deferred revenue | ( | |||||||
| Other current liabilities | ( | |||||||
| Non-current liabilities | ( | |||||||
| Total net tangible assets acquired | ||||||||
| Intangible assets acquired: | ||||||||
| Customer relationships | ||||||||
| Developed product technology | ||||||||
| Trade name | ||||||||
| Total intangible assets acquired | ||||||||
| Deferred tax liability | ( | |||||||
| Fair value of all assets/liabilities acquired | ||||||||
| Goodwill | $ | |||||||
Goodwill consists of growth potential, synergies, and economies of scale expected from combining Transporeon’s operations with ours, together with the highly skilled and valuable assembled workforce. We do not expect the goodwill to be deductible for income tax purposes.
Financial Information
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| Third Quarter of | First Three Quarters of | ||||||||||
| 2023 | 2023 | ||||||||||
| (In millions) | |||||||||||
| Total revenue | $ | $ | |||||||||
Net loss | ( | ( | |||||||||
Pro Forma Financial Information
The pro forma financial information presented in the following table was computed by combining the historical financial information of Trimble and Transporeon along with the effects from business combination accounting and the associated debt resulting from this acquisition as if the companies were combined on January 1, 2022. This information is presented for informational purposes only, and is not necessarily indicative of the operating results that would have occurred if the acquisition had been consummated as of that date. This information should not be used as a predictive measure of our future financial position, results of operations, or liquidity.
| Third Quarter of | First Three Quarters of | ||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||
| Total revenue | $ | $ | $ | $ | |||||||||||||||||||
| Net income | |||||||||||||||||||||||
NOTE 4. ASSETS HELD FOR SALE
On September 28, 2023, we executed a definitive agreement with AGCO that provides for the formation of a JV with AGCO in the mixed fleet precision agriculture market (the “Trimble Ag JV Transaction”). Under the terms of the agreement, we will contribute our precision agriculture business (“Trimble Ag”), excluding certain Global Navigation Satellite System (“GNSS”) and guidance technologies, and AGCO will contribute its JCA Technologies business to the JV. We will sell an interest in the JV to AGCO for $2.0 billion in pre-tax cash proceeds, subject to working capital adjustments. Immediately following the closing of the Trimble Ag JV Transaction, we will own 15 % of the JV and AGCO will own 85 % of the JV.
Additionally, we plan to enter into the following agreements with AGCO as part of the overall transaction:
•a Supply Agreement through which we will provide key GNSS and guidance technologies to the JV for use in professional agriculture machines sold by AGCO, on an exclusive basis with limited exceptions;
•a Technology Transfer and License Agreement to govern the licensing of certain non-divested intellectual property and technology for use by the JV in the agriculture field and, upon expiration of the Supply Agreement, to govern fixed and variable royalty payments made to us by the JV;
•a Trademark License Agreement to govern the licensing of certain Trimble trademarks for use by the JV in the agriculture field;
•a Positioning Services Agreement through which the JV will serve as our channel partner for the positioning services in the agriculture market; and
•a Transition Services Agreement to provide contract manufacturing services for the divested products for two years following the closing of the transaction.
The transaction is expected to close in the first half of 2024 and is subject to customary closing conditions, including regulatory approvals. Trimble Ag is reported as a part of our Resources and Utilities segment.
Following the closing of the Trimble Ag JV Transaction, our 15 % ownership interest in the JV is expected to be reported as an equity method investment.
The assets and liabilities of Trimble Ag that are subject to the transaction were classified as held for sale in the third quarter of 2023. The following table presents the carrying values of the major classes of assets and liabilities classified as held for sale in our Condensed Consolidated Balance Sheets at the end of the third quarter of 2023:
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| As of | |||||
| Third Quarter of | |||||
| (In millions) | 2023 | ||||
| Cash and cash equivalents | $ | ||||
| Accounts receivable, net | |||||
Inventories, net | |||||
| Other current assets | |||||
| Property and equipment, net | |||||
| Other purchased intangible assets, net | |||||
Goodwill | |||||
| Other non-current assets | |||||
Total Assets Held for Sale | $ | ||||
| Accounts payable | $ | ||||
Deferred revenue, current | |||||
| Other current liabilities | |||||
| Deferred revenue, non-current | |||||
Long-term liabilities | |||||
Total Liabilities Held for Sale | $ | ||||
NOTE 5. INTANGIBLE ASSETS AND GOODWILL
Intangible Assets
The following table presents a summary of our intangible assets:
| Third Quarter of 2023 | Year End 2022 | ||||||||||||||||||||||||||||||||||
| Gross | Gross | ||||||||||||||||||||||||||||||||||
| Carrying | Accumulated | Net Carrying | Carrying | Accumulated | Net Carrying | ||||||||||||||||||||||||||||||
| (In millions) | Amount | Amortization | Amount | Amount | Amortization | Amount | |||||||||||||||||||||||||||||
| Developed product technology | $ | $ | ( | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||
| Customer relationships | ( | ( | |||||||||||||||||||||||||||||||||
| Trade names and trademarks | ( | ( | |||||||||||||||||||||||||||||||||
| Distribution rights and other intellectual property | ( | ( | |||||||||||||||||||||||||||||||||
| $ | $ | ( | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||
The estimated future amortization expense of intangible assets at the end of the third quarter of 2023 was as follows:
| (In millions) | |||||
| 2023 (Remaining) | $ | ||||
| 2024 | |||||
| 2025 | |||||
| 2026 | |||||
| 2027 | |||||
| Thereafter | |||||
| Total | $ | ||||
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Goodwill
The changes in the carrying amount of goodwill by segment for the first three quarters of 2023 were as follows:
| Buildings and Infrastructure | Geospatial | Resources and Utilities | Transportation | Total | |||||||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||||||||
| Balance as of year end 2022 | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Additions due to acquisitions | |||||||||||||||||||||||||||||
Assets held for sale | ( | ( | ( | ||||||||||||||||||||||||||
| Foreign currency translation and other adjustments | ( | ( | ( | ( | |||||||||||||||||||||||||
| Balance as of the end of the third quarter of 2023 | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
NOTE 6. INVENTORIES
The components of inventory, net were as follows:
| Third Quarter of | Year End | ||||||||||
| As of | 2023 | 2022 | |||||||||
| (In millions) | |||||||||||
| Raw materials | $ | $ | |||||||||
| Work-in-process | |||||||||||
| Finished goods | |||||||||||
| Total inventories | $ | $ | |||||||||
NOTE 7. SEGMENT INFORMATION
We determined our operating segments based on how our Chief Operating Decision Maker (“CODM”) views and evaluates operations. Our reportable segments are described below:
•Buildings and Infrastructure. This segment primarily serves customers working in architecture, engineering, construction, and operations and maintenance.
•Geospatial. This segment primarily serves customers working in surveying, engineering, and government.
•Resources and Utilities. This segment primarily serves customers working in agriculture, forestry, and utilities.
•Transportation. This segment primarily serves customers working in long haul trucking and freight shipper markets.
The following Reporting Segment tables reflect the results of our reportable operating segments under our management reporting system. These results are not necessarily in conformity with U.S. GAAP. This is consistent with the way the CODM evaluates each of the segment's performance and allocates resources.
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| Reporting Segments | |||||||||||||||||||||||||||||
| Buildings and Infrastructure | Geospatial | Resources and Utilities | Transportation | Total | |||||||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||||||||
| Third Quarter of 2023 | |||||||||||||||||||||||||||||
| Segment revenue | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Segment operating income | |||||||||||||||||||||||||||||
| Third Quarter of 2022 | |||||||||||||||||||||||||||||
| Segment revenue | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Segment operating income | |||||||||||||||||||||||||||||
| First Three Quarters of 2023 | |||||||||||||||||||||||||||||
| Segment revenue | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Segment operating income | |||||||||||||||||||||||||||||
| First Three Quarters of 2022 | |||||||||||||||||||||||||||||
| Segment revenue | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Segment operating income | |||||||||||||||||||||||||||||
| Reporting Segments | |||||||||||||||||||||||||||||
| Buildings and Infrastructure | Geospatial | Resources and Utilities | Transportation | Total | |||||||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||||||||
As of the end of the Third Quarter of 2023 | |||||||||||||||||||||||||||||
| Accounts receivable, net | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Inventories | |||||||||||||||||||||||||||||
| Goodwill | |||||||||||||||||||||||||||||
| As of Year End 2022 | |||||||||||||||||||||||||||||
| Accounts receivable, net | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Inventories | |||||||||||||||||||||||||||||
| Goodwill | |||||||||||||||||||||||||||||
A reconciliation of our condensed consolidated segment operating income to condensed consolidated income before income taxes was as follows:
| Third Quarter of | First Three Quarters of | ||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||
| Consolidated segment operating income | $ | $ | $ | $ | |||||||||||||||||||
| Unallocated general corporate expenses | ( | ( | ( | ( | |||||||||||||||||||
| Amortization of purchased intangible assets | ( | ( | ( | ( | |||||||||||||||||||
| Acquisition / divestiture items | ( | ( | ( | ( | |||||||||||||||||||
| Stock-based compensation / deferred compensation | ( | ( | ( | ( | |||||||||||||||||||
| Restructuring and other costs | ( | ( | ( | ( | |||||||||||||||||||
| Consolidated operating income | |||||||||||||||||||||||
| Total non-operating income (expense), net | ( | ( | ( | ||||||||||||||||||||
| Consolidated income before taxes | $ | $ | $ | $ | |||||||||||||||||||
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The disaggregation of revenue by geography is summarized in the tables below. Revenue is defined as revenue from external customers attributed to countries based on the location of the customer and is consistent with the Reporting Segment tables above.
| Reporting Segments | |||||||||||||||||||||||||||||
| Buildings and Infrastructure | Geospatial | Resources and Utilities | Transportation | Total | |||||||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||||||||
| Third Quarter of 2023 | |||||||||||||||||||||||||||||
| North America | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Europe | |||||||||||||||||||||||||||||
| Asia Pacific | |||||||||||||||||||||||||||||
| Rest of World | |||||||||||||||||||||||||||||
| Total segment revenue | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Third Quarter of 2022 | |||||||||||||||||||||||||||||
| North America | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Europe | |||||||||||||||||||||||||||||
| Asia Pacific | |||||||||||||||||||||||||||||
| Rest of World | |||||||||||||||||||||||||||||
| Total segment revenue | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| First Three Quarters of 2023 | |||||||||||||||||||||||||||||
| North America | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Europe | |||||||||||||||||||||||||||||
| Asia Pacific | |||||||||||||||||||||||||||||
| Rest of World | |||||||||||||||||||||||||||||
| Total segment revenue | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| First Three Quarters of 2022 | |||||||||||||||||||||||||||||
| North America | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Europe | |||||||||||||||||||||||||||||
| Asia Pacific | |||||||||||||||||||||||||||||
| Rest of World | |||||||||||||||||||||||||||||
| Total segment revenue | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
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NOTE 8. DEBT
Debt consisted of the following:
| Third Quarter of | Year End | ||||||||||||||||||||||||||||
| Instrument | Date of Issuance | 2023 | 2022 | ||||||||||||||||||||||||||
| (In millions) | Effective interest rate | ||||||||||||||||||||||||||||
| Senior Notes: | |||||||||||||||||||||||||||||
Senior Notes, | June 2018 | $ | $ | ||||||||||||||||||||||||||
Senior Notes, | November 2014 | ||||||||||||||||||||||||||||
Senior Notes, | June 2018 | ||||||||||||||||||||||||||||
Senior Notes, | March 2023 | ||||||||||||||||||||||||||||
| Credit Facilities: | |||||||||||||||||||||||||||||
| 2022 Revolving Credit Facility, due March 2027 | September 2022 | ||||||||||||||||||||||||||||
| Term Loan, due April 2026 | April 2023 | ||||||||||||||||||||||||||||
| Term Loan, due April 2028 | April 2023 | ||||||||||||||||||||||||||||
| Uncommitted Credit Facilities, floating rate | |||||||||||||||||||||||||||||
| Unamortized discount and issuance costs | ( | ( | |||||||||||||||||||||||||||
| Total debt | $ | $ | |||||||||||||||||||||||||||
| Less: Short-term debt | |||||||||||||||||||||||||||||
| Long-term debt | $ | $ | |||||||||||||||||||||||||||
Debt Maturities
At the end of the third quarter of 2023, our debt maturities based on outstanding principal were as follows (in millions):
| Year Payable | |||||
| 2023 (Remaining) | $ | ||||
| 2024 | |||||
| 2025 | |||||
| 2026 | |||||
| 2027 | |||||
| Thereafter | |||||
| Total | $ | ||||
Senior Notes
All of our senior notes are unsecured obligations. Interest on the senior notes is payable semi-annually in June and December of each year, except for the interest on the 2033 senior notes payable in March and September. Additional details are unchanged from the information disclosed in Note 7 “Debt” of the 2022 Form 10-K.
During the second quarter of 2023, the $300 million senior notes due June 2023 matured and were repaid in full.
2033 Senior Notes
In March 2023, we issued an aggregate principal amount of $800.0 million in senior notes that will mature in March 2033. The proceeds were partly used to finance our acquisition of Transporeon. The interest is payable semi-annually in March and September of each year, commencing in September 2023.
Credit Facilities
2022 Term Loan Credit Agreement
On December 27, 2022, we entered into a $1.0 billion unsecured, delayed draw term loan credit agreement comprised of commitments for a 3-year tranche of $500.0 million and a 5-year tranche of $500.0 million. On April 3, 2023, both variable-rate term loans were drawn to fund the acquisition of Transporeon.
Prepayments are allowed without penalty and cannot be reborrowed.
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2022 Credit Facility and Amendment
In March 2022, we entered into a credit agreement maturing in March 2027. The 2022 credit facility provides for a five-year , unsecured revolving credit facility in an aggregate principal amount of $1.25 billion, and permits us, subject to the satisfaction of certain conditions, to increase the commitments for revolving loans by an aggregate principal amount of up to $500.0 million. The variable interest rate and commitment fees are based on our current long-term, senior unsecured debt ratings, our leverage ratio, and certain specified sustainability targets.
On December 27, 2022, we entered into an amendment to the 2022 credit facility that made available up to $600.0 million of the existing commitments for the acquisition of Transporeon and increased our maximum permitted leverage ratio following the closing of the acquisition. On April 3, 2023, we borrowed $225.0 million as part of the proceeds to finance the acquisition. For additional information related to the Transporeon acquisition, see Note 3 “Acquisition” of this report.
Uncommitted Facilities
At the end of the third quarter of 2023, we had two $75.0 million, one €100.0 million, and one £55.0 million revolving credit facilities, which are uncommitted. Generally, these variable-rate uncommitted facilities may be redeemed upon demand. Borrowings under the uncommitted facilities are classified as short-term debt in the Condensed Consolidated Balance Sheet.
Covenants
The 2022 term loan credit agreement and 2022 credit facility, as amended, contain customary covenants including, among other requirements, limitations that restrict the Company’s and its subsidiaries’ ability to create liens and enter into sale and leaseback transactions, and restrictions on the ability of the subsidiaries to incur indebtedness. Further, both debt agreements contain financial covenants that require the maintenance of maximum leverage and minimum interest coverage ratios. At the end of the third quarter of 2023, we were in compliance with the covenants for each of our debt agreements.
NOTE 9. FAIR VALUE MEASUREMENTS
The following table summarizes the fair values of financial instruments at fair value on a recurring basis for the periods indicated and determined using the following inputs:
Fair Values at the end of the third quarter of 2023 | Fair Values at the end of 2022 | ||||||||||||||||||||||||||||||||||||||||||||||
| Quoted prices in Active Markets for Identical Assets | Significant Other Observable Inputs | Significant Unobservable Inputs | Quoted prices in Active Markets for Identical Assets | Significant Other Observable Inputs | Significant Unobservable Inputs | ||||||||||||||||||||||||||||||||||||||||||
| (In millions) | (Level I) | (Level II) | (Level III) | Total | (Level I) | (Level II) | (Level III) | Total | |||||||||||||||||||||||||||||||||||||||
| Assets | |||||||||||||||||||||||||||||||||||||||||||||||
Deferred compensation plan (1) | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
Derivatives (2) | |||||||||||||||||||||||||||||||||||||||||||||||
Contingent consideration (3) | |||||||||||||||||||||||||||||||||||||||||||||||
| Total assets measured at fair value | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
| Liabilities | |||||||||||||||||||||||||||||||||||||||||||||||
Deferred compensation plan (1) | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
Derivatives (2) | |||||||||||||||||||||||||||||||||||||||||||||||
| Total liabilities measured at fair value | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
(1)Represents a self-directed, non-qualified deferred compensation plan for certain executives and other highly compensated employees included in Other non-current assets and Other non-current liabilities on our Condensed Consolidated Balance Sheets. The plan is invested in actively traded mutual funds and individual stocks valued using observable quoted prices in active markets.
(2)Represents forward currency exchange contracts, and for 2022, a treasury rate lock contract, all that are included in Other current assets and Other current liabilities on our Condensed Consolidated Balance Sheets.
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At the end of 2022, derivative assets included foreign currency exchange contracts and a treasury rate lock contract, both related to the acquisition of Transporeon and associated debt and were settled in the first two quarters of 2023. See Note 10 “Fair Value Measurements” of the 2022 Form 10-K for additional details.
Additional Fair Value Information
The total estimated fair value of all outstanding financial instruments that are not recorded at fair value on a recurring basis (debt) was approximately $3.0 billion and $1.5 billion at the end of the third quarter of 2023 and the end of 2022.
The fair value of the senior notes was determined based on observable market prices in less active markets and is categorized accordingly as Level II. The fair values do not indicate the amount we would currently have to pay to extinguish the debt.
NOTE 10. DEFERRED REVENUE AND REMAINING PERFORMANCE OBLIGATIONS
Deferred Revenue
Changes in our deferred revenue during the third quarter of 2023 and 2022 were as follows:
| Third Quarter of | First Three Quarters of | ||||||||||||||||||||||
| (In millions) | 2023 | 2022 | 2023 | 2022 | |||||||||||||||||||
| Beginning balance of the period | $ | $ | $ | $ | |||||||||||||||||||
| Revenue recognized from prior year-end | ( | ( | ( | ( | |||||||||||||||||||
Billings net of revenue recognized from current year and other | |||||||||||||||||||||||
| Ending balance of the period | $ | $ | $ | $ | |||||||||||||||||||
Remaining Performance Obligations
At the end of the third quarter of 2023, approximately $1.5 billion of revenue is expected to be recognized from remaining performance obligations for which goods or services have not been delivered, primarily subscription, software, and software maintenance, and to a lesser extent, hardware and professional services contracts. We expect to recognize $1.1 billion or 70 % of our remaining performance obligations as revenue during the next 12 months and the remainder thereafter. The remaining performance obligations exclude $43.5 million related to the pending Trimble Ag JV Transaction.
NOTE 11. EARNINGS PER SHARE
Basic earnings per share is computed based on the weighted-average number of shares of common stock outstanding during the period. Diluted earnings per share is computed based on the weighted-average number of shares of common stock outstanding during the period plus additional shares of common stock that would have been outstanding if potentially dilutive securities had been issued. Potentially dilutive securities include outstanding stock options, restricted stock units, contingently issuable stock, and stock to be purchased under our employee stock purchase plan.
The following table shows the computation of basic and diluted earnings per share:
| Third Quarter of | First Three Quarters of | ||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| (In millions, except per share amounts) | |||||||||||||||||||||||
| Numerator: | |||||||||||||||||||||||
| Net income | $ | $ | $ | $ | |||||||||||||||||||
| Denominator: | |||||||||||||||||||||||
| Weighted-average number of common shares used in basic earnings per share | |||||||||||||||||||||||
| Effect of dilutive securities | |||||||||||||||||||||||
| Weighted-average number of common shares and dilutive potential common shares used in diluted earnings per share | |||||||||||||||||||||||
| Basic earnings per share | $ | $ | $ | $ | |||||||||||||||||||
| Diluted earnings per share | $ | $ | $ | $ | |||||||||||||||||||
Antidilutive weighted-average shares (1) | |||||||||||||||||||||||
(1) Antidilutive stock-based awards are excluded from the calculation of diluted shares and diluted earnings per share because their impact would increase diluted earnings per share.
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NOTE 12. INCOME TAXES
For the third quarter, our effective income tax rate was 5.7 %, as compared to 27.2 % in the corresponding period in 2022. The decrease was primarily due to increases in tax benefit from U.S. federal R&D credit and foreign-derived intangible income in 2023, favorable geographic mix of earnings, and a tax charge associated with prior year divestiture gains. For the first three quarters, our effective income tax rate was 16.5 %, as compared to 23.8 % in the prior year. The decrease was primarily due to the same factors in the third quarter, partially offset by lower stock-based compensation deductions in the current year.
NOTE 13. COMMITMENTS AND CONTINGENCIES
Commitments
At the end of the third quarter of 2023, we had unconditional purchase obligations of approximately $683.1 million. These unconditional purchase obligations primarily represent (i) open non-cancellable purchase orders for material purchases with our inventory vendors, and (ii) various non-cancelable agreements with certain service providers with minimum or fixed commitments.
Litigation
From time to time, we are involved in litigation arising in the ordinary course of our business. There are no material legal proceedings, other than ordinary routine litigation incidental to the business, that we or any of our subsidiaries is a party, or that any of our or our subsidiaries’ property is subject.
21
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
There have been no material changes to our critical accounting policies and estimates during the first three quarters of 2023. For a complete discussion of our critical accounting policies and estimates, refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of the 2022 Form 10-K.
RECENT ACCOUNTING PRONOUNCEMENTS
For a summary of recent accounting pronouncements applicable to our Condensed Consolidated Financial Statements, refer to Note 1 “Overview and Accounting Policies” of this report.
EXECUTIVE LEVEL OVERVIEW
We are a leading provider of technology solutions that enable professionals and field mobile workers to improve or transform their work processes. Our comprehensive work process solutions are used across a range of industries including architecture, building construction, civil engineering, geospatial, survey and mapping, agriculture, natural resources, utilities, transportation, and government. Our representative customers include construction owners, contractors, engineering and construction firms, surveying companies, farmers and agricultural companies, energy and utility companies, trucking companies, and state, federal, and municipal governments.
Our growth strategy is centered on multiple elements:
•Executing on our Connect and Scale strategy;
•Increasing focus on software and services;
•Focus on attractive markets with significant growth and profitability potential;
•Domain knowledge and technological innovation that benefits a diverse customer base;
•Geographic expansion with a localization strategy;
•Optimized go-to-market strategies to best access our markets;
•Strategic acquisitions, joint ventures, and investments; and
•Sustainability.
Our focus on these growth drivers has led over time to growth in revenue and profitability and an increasingly diversified business model. We continue to experience a shift toward a more significant mix of recurring revenue as demonstrated by our success in driving annualized recurring revenue (“ARR”) of $1,935.1 million, which represents growth of 25% year-over-year at the end of the third quarter of 2023. Excluding the impact of foreign currency, acquisitions, and divestitures, ARR organic growth was 13%. This shift toward recurring revenue has positively impacted our revenue mix, growth, and profitability over time and is leading to improved visibility in our businesses. Additionally, we continue to maintain focus on new product introductions and transitions to recurring revenue as evidenced by the Transporeon acquisition.
As our solutions have expanded, our go-to-market model has also evolved with a balanced mix between direct, distribution, and OEM customers as well as enterprise-level customer relationships.
Throughout this “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, we refer to organic revenue growth, which is a non-GAAP measure. For a full definition of ARR, organic ARR, and organic revenue growth as used in this discussion and analysis, refer to the “Supplemental Disclosure of Non-GAAP Financial Measures and Annualized Recurring Revenue” found later in this Item 2.
Impact of Recent Events on Our Business
Acquisitions and Divestitures
We acquire businesses that align with our long-term growth strategies including our strategic product roadmap and, conversely, we divest certain business that no longer fit those strategies.
On September 28, 2023, we executed a definitive agreement with AGCO that provides for the formation of a JV with AGCO in the mixed fleet precision agriculture market (the “Trimble Ag JV Transaction”). Under the terms of the agreement, we will contribute our precision agriculture business (“Trimble Ag”), excluding certain Global Navigation Satellite System (“GNSS”) and guidance technologies, and AGCO will contribute its JCA Technologies business to the JV. We will sell an interest in the JV to AGCO for $2.0 billion in pre-tax cash proceeds, subject to working capital adjustments. Immediately following the closing of the Trimble Ag JV Transaction, we will own 15% of the JV and AGCO will own 85% of the JV.
22
Additionally, we plan to enter into the following agreements with AGCO as part of the overall transaction:
•a seven-year, renewable Supply Agreement through which we will provide key GNSS and guidance technologies to the JV for use in professional agriculture machines sold by AGCO, on an exclusive basis with limited exceptions;
•a Technology Transfer and License Agreement to govern the licensing of certain non-divested intellectual property and technology for use by the JV in the agriculture field and, upon expiration of the Supply Agreement, to govern fixed and variable royalty payments made to us by the JV;
•a Trademark License Agreement to govern the licensing of certain Trimble trademarks for use by the JV in the agriculture field;
•a Positioning Services Agreement through which the JV will serve as our channel partner for the positioning services in the agriculture market; and
•a Transition Services Agreement to provide contract manufacturing services for the divested products for two years following closing of the Transaction.
The formation of the JV is expected to better serve farmers with factory fit and aftermarket applications in the mixed fleet precision agriculture market to help farmers drive productivity, efficiency, and sustainability. Additionally, the transaction is expected to (i) simplify our Connect and Scale strategy, (ii) reduce risk of channel transition in the agriculture market, and (iii) enhance our financial profile and flexibility with a resulting higher mix of software, services, and recurring revenue, as well as repaying $1.1 billion of our debt and repurchasing our shares through use of the net proceeds.
The transaction is expected to close in the first half of 2024 and is subject to customary closing conditions, including regulatory approvals. Trimble Ag is reported as a part of our Resources and Utilities segment.
The assets and liabilities of Trimble Ag that are subject to the transaction were classified as held for sale at the end of the third quarter of 2023. See Note 4 “Assets Held for Sale” of this report.
On April 3, 2023, we acquired all of the outstanding shares of Transporeon in an all-cash transaction valued at €1.9 billion or $2.1 billion. Transporeon is a Germany-based company and leading cloud-based transportation management software platform that connects key stakeholders across the industry lifecycle to positively impact the optimization of global supply chains, which aligns with our Connect and Scale strategy. By combining Transporeon’s operations with ours, we expect economies of scale and meaningful synergies such as acceleration of recurring revenue, expansion of the addressable market, cross-sell opportunities, and enhanced productivity and sustainability solutions for our customers. Transporeon is reported in our Transportation segment. We have included the financial results of Transporeon in our Condensed Consolidated Financial Statements starting in the second quarter of 2023.
Macroeconomic Conditions
Macroeconomic conditions, including geopolitical tensions, such as the ongoing military conflicts in the Middle East and between Russia and Ukraine and related sanctions, exchange rate and interest rate volatility, and inflationary pressures, will continue to evolve globally.
In the first three quarters of 2023, as compared to the prior year, our organic hardware sales declined and bookings moderated as dealers moved toward lower levels of inventories due to improved product lead times and macroeconomic concerns. Geospatial, Buildings and Infrastructure, and Resources and Utilities all had strong hardware sales in the prior year. Due to previously extended component lead times, we made binding commitments over a longer horizon for certain components. We expect that our inventory levels will normalize over the first half of 2024. However, as our inventory levels continue to normalize, macroeconomic conditions, including rising interest rates and inflation, could negatively impact the timing of inventory normalization.
Global inflation has risen sharply, and interest rates are rising in an effort to curb inflation. These macroeconomic conditions have had and are expected to have a negative impact on our results of operations. Additionally, we may experience higher borrowing costs on variable-rate debt. At the end of the third quarter of 2023, our outstanding balance of variable-rate debt was $1.3 billion.
23
RESULTS OF OPERATIONS
Overview
The following table shows revenue by category, gross margin and gross margin as a percentage of revenue, operating income and operating income as a percentage of revenue, diluted earnings per share, and annualized recurring revenue compared for the periods indicated:
| Third Quarter of | First Three Quarters of | ||||||||||||||||||||||||||||||||||||||||||||||
| 2023 | 2022 | Dollar Change | % Change | 2023 | 2022 | Dollar Change | % Change | ||||||||||||||||||||||||||||||||||||||||
| (In millions, except per share amounts) | |||||||||||||||||||||||||||||||||||||||||||||||
| Revenue: | |||||||||||||||||||||||||||||||||||||||||||||||
| Product | $ | 444.0 | $ | 472.5 | $ | (28.5) | (6)% | $ | 1,368.9 | $ | 1,570.3 | $ | (201.4) | (13)% | |||||||||||||||||||||||||||||||||
| Subscription and services | 513.3 | 412.4 | 100.9 | 24% | 1,497.4 | 1,249.5 | 247.9 | 20% | |||||||||||||||||||||||||||||||||||||||
| Total revenue | $ | 957.3 | $ | 884.9 | $ | 72.4 | 8% | $ | 2,866.3 | $ | 2,819.8 | $ | 46.5 | 2% | |||||||||||||||||||||||||||||||||
| Gross margin | $ | 590.2 | $ | 515.4 | $ | 74.8 | 15% | $ | 1,755.5 | $ | 1,602.5 | $ | 153.0 | 10% | |||||||||||||||||||||||||||||||||
| Gross margin as a % of revenue | 61.7 | % | 58.2 | % | 61.2 | % | 56.8 | % | |||||||||||||||||||||||||||||||||||||||
| Operating income | $ | 121.3 | $ | 122.4 | $ | (1.1) | (1)% | $ | 351.9 | $ | 414.2 | $ | (62.3) | (15)% | |||||||||||||||||||||||||||||||||
| Operating income as a % of revenue | 12.7 | % | 13.8 | % | 12.3 | % | 14.7 | % | |||||||||||||||||||||||||||||||||||||||
| Diluted earnings per share | $ | 0.30 | $ | 0.34 | $ | (0.04) | (12)% | $ | 1.00 | $ | 1.45 | $ | (0.45) | (31)% | |||||||||||||||||||||||||||||||||
Non-GAAP operating income (1) | $ | 251.0 | $ | 209.9 | $ | 41.1 | 20% | $ | 708.1 | $ | 653.7 | $ | 54.4 | 8% | |||||||||||||||||||||||||||||||||
Non-GAAP operating income as a % of revenue(1) | 26.2 | % | 23.7 | % | 24.7 | % | 23.2 | % | |||||||||||||||||||||||||||||||||||||||
Non-GAAP diluted earnings per share (1) | $ | 0.68 | $ | 0.66 | $ | 0.02 | 3% | $ | 2.04 | $ | 2.04 | $ | — | NM | |||||||||||||||||||||||||||||||||
Annualized Recurring Revenue (“ARR”) (1) | $ | 1,935.1 | $ | 1,546.8 | $ | 388.3 | 25% | N/A | N/A | N/A | N/A | ||||||||||||||||||||||||||||||||||||
(1) Refer to “Supplemental Disclosure of Non-GAAP Financial Measures and Annualized Recurring Revenue” of this report for definitions.
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Third Quarter and First Three Quarters of 2023 as Compared to 2022
Revenue
Change versus the corresponding period in 2022 | Third Quarter of 2023 | First Three Quarters of 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| % Change | % Change | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Product | Subscription and Services | Total Revenue | Product | Subscription and Services | Total Revenue | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Change in Revenue | (6) | % | 24 | % | 8 | % | (13) | % | 20 | % | 2 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Acquisitions | 1 | % | 11 | % | 6 | % | 1 | % | 9 | % | 4 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Divestitures | — | % | (1) | % | (1) | % | (4) | % | (1) | % | (3) | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Foreign currency exchange | 1 | % | 1 | % | 1 | % | — | % | (1) | % | — | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Organic growth | (8) | % | 13 | % | 2 | % | (10) | % | 13 | % | 1 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Organic total revenue increased for the third quarter and first three quarters, with strong growth coming from recurring revenue.
Organic product revenue decreased for the third quarter due to weakening end-user demand for our hardware products reflecting lower demand across markets, amid macroeconomic concerns. The first three quarters’ decline was also impacted by changes in dealer inventory levels due to improved product lead times. The decreases were in Buildings and Infrastructure, Resources and Utilities, and Geospatial.
Organic subscription and services revenue for the third quarter and first three quarters was up primarily due to strong growth across all segments, particularly for Buildings and Infrastructure. The recurring growth was driven by increased subscription and term license sales to new and existing customers, as evidenced by overall organic ARR growth of 13%.
Gross Margin
Gross margin and gross margin as a percentage of revenue increased for the third quarter and first three quarters due to strong growth of software and subscription revenue, favorable pricing and costs, as well as a higher margin mix within our product offerings.
Operating Income
Operating income and operating income as a percentage of revenue decreased for the third quarter and first three quarters primarily due to increased operating expense, partially offset by gross margin expansion. Operating expense increased primarily associated with the Transporeon acquisition, including higher amortization of purchased intangible assets and acquisition costs. In addition, we incurred higher research and development and general and administrative costs, including investments related to our Connect and Scale strategy.
Research and Development, Sales and Marketing, and General and Administrative Expense
The following table shows research and development (“R&D”), sales and marketing (“S&M”), and general and administrative (“G&A”) expense along with these expenses as a percentage of revenue for the periods indicated:
| Third Quarter of | First Three Quarters of | ||||||||||||||||||||||||||||||||||||||||||||||
| 2023 | 2022 | Dollar Change | % Change | 2023 | 2022 | Dollar Change | % Change | ||||||||||||||||||||||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||||||||||||||||||||||||||
| Research and development | $ | 162.5 | $ | 127.0 | $ | 35.5 | 28% | $ | 496.6 | $ | 407.4 | $ | 89.2 | 22% | |||||||||||||||||||||||||||||||||
| Percentage of revenue | 17.0 | % | 14.4 | % | 17.3 | % | 14.4 | % | |||||||||||||||||||||||||||||||||||||||
| Sales and marketing | $ | 146.2 | $ | 137.1 | $ | 9.1 | 7% | $ | 436.9 | $ | 407.9 | $ | 29.0 | 7% | |||||||||||||||||||||||||||||||||
| Percentage of revenue | 15.3 | % | 15.5 | % | 15.2 | % | 14.5 | % | |||||||||||||||||||||||||||||||||||||||
| General and administrative | $ | 117.2 | $ | 109.6 | $ | 7.6 | 7% | $ | 369.2 | $ | 318.0 | $ | 51.2 | 16% | |||||||||||||||||||||||||||||||||
| Percentage of revenue | 12.2 | % | 12.4 | % | 12.9 | % | 11.3 | % | |||||||||||||||||||||||||||||||||||||||
| Total | $ | 425.9 | $ | 373.7 | $ | 52.2 | 14% | $ | 1,302.7 | $ | 1,133.3 | $ | 169.4 | 15% | |||||||||||||||||||||||||||||||||
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R&D expense increased for the third quarter and first three quarters primarily due to higher compensation expense and the impact of the Transporeon acquisition. For the first three quarters, the increase was partially offset by divestitures. We believe that the development and introduction of new solutions are critical to our future success, and we expect to continue the active development of new products.
S&M expense increased for the third quarter and first three quarters primarily due to the impact of the Transporeon acquisition. For the first three quarters, the increase also was driven by higher consulting, advertising, and trade show costs, partially offset by divestitures.
G&A expense increased for the third quarter and first three quarters primarily due to the impact of the Transporeon acquisition and higher compensation expense.
Amortization of Purchased Intangible Assets
| Third Quarter of | First Three Quarters of | ||||||||||||||||||||||||||||||||||||||||||||||
| 2023 | 2022 | Dollar Change | % Change | 2023 | 2022 | Dollar Change | % Change | ||||||||||||||||||||||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||||||||||||||||||||||||||
| Cost of sales | $ | 27.7 | $ | 19.9 | $ | 7.8 | 39% | $ | 80.9 | $ | 63.4 | $ | 17.5 | 28% | |||||||||||||||||||||||||||||||||
| Operating expenses | 31.2 | 11.1 | 20.1 | 181% | 74.8 | 34.5 | 40.3 | 117% | |||||||||||||||||||||||||||||||||||||||
| Total amortization expense of purchased intangibles | $ | 58.9 | $ | 31.0 | $ | 27.9 | 90% | $ | 155.7 | $ | 97.9 | $ | 57.8 | 59% | |||||||||||||||||||||||||||||||||
| Total amortization expense of purchased intangibles as a percentage of revenue | 6 | % | 4 | % | 5 | % | 3 | % | |||||||||||||||||||||||||||||||||||||||
Total amortization expense of purchased intangibles increased for the third quarter and first three quarters primarily due to amortization of intangibles acquired from the Transporeon acquisition, which were not applicable in the prior year.
Non-operating Income (Expense), Net
The components of non-operating income (expense), net, were as follows:
| Third Quarter of | First Three Quarters of | ||||||||||||||||||||||||||||||||||||||||||||||
| 2023 | 2022 | Dollar Change | % Change | 2023 | 2022 | Dollar Change | % Change | ||||||||||||||||||||||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||||||||||||||||||||||||||
| Divestitures gain, net | $ | 5.5 | $ | 6.0 | $ | (0.5) | (8)% | $ | 10.6 | $ | 103.1 | $ | (92.5) | (90)% | |||||||||||||||||||||||||||||||||
| Interest expense, net | (46.8) | (15.6) | (31.2) | 200% | (113.2) | (46.9) | (66.3) | 141% | |||||||||||||||||||||||||||||||||||||||
| Income from equity method investments, net | 5.2 | 6.8 | (1.6) | (24)% | 24.6 | 22.3 | 2.3 | 10% | |||||||||||||||||||||||||||||||||||||||
| Other income (expense), net | (5.8) | (1.7) | (4.1) | 241% | 23.6 | (14.7) | 38.3 | (261)% | |||||||||||||||||||||||||||||||||||||||
| Total non-operating income (expense), net | $ | (41.9) | $ | (4.5) | $ | (37.4) | 831% | $ | (54.4) | $ | 63.8 | $ | (118.2) | (185)% | |||||||||||||||||||||||||||||||||
Non-operating expense, net increased for the third quarter and first three quarters primarily due to lower net gains from divestitures and higher interest expense from the new debt associated with the Transporeon acquisition. For the first three quarters, the increase was partially offset by a $27.6 million foreign currency exchange contract gain related to the Transporeon acquisition as well as fluctuations in the deferred compensation plan assets included in Other income (expense), net.
Income Tax Provision
For the third quarter, our effective income tax rate was 5.7%, as compared to 27.2% in the corresponding period in 2022. The decrease was primarily due to increases in tax benefit from U.S. federal R&D credit and foreign-derived intangible income in 2023, favorable geographic mix of earnings, and a tax charge associated with prior year divestiture gains. For the first three quarters, our effective income tax rate was 16.5%, as compared to 23.8% in the prior year. The decrease was primarily due to the same factors in the third quarter, partially offset by lower stock-based compensation deductions in the current year.
Results by Segment
We report our financial performance, including revenue and operating income, based on four reportable segments: Buildings and Infrastructure, Geospatial, Resources and Utilities, and Transportation.
Our Chief Executive Officer (chief operating decision maker) views and evaluates operations based on the results of our reportable operating segments under our management reporting system. For additional discussion of our segments, refer to Note 7 “Segment Information” of this report.
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The following table is a summary of revenue and operating income by segment compared for the periods indicated:
| Third Quarter of | First Three Quarters of | ||||||||||||||||||||||||||||||||||||||||||||||
| 2023 | 2022 | Dollar Change | % Change | 2023 | 2022 | Dollar Change | % Change | ||||||||||||||||||||||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||||||||||||||||||||||||||
| Buildings and Infrastructure | |||||||||||||||||||||||||||||||||||||||||||||||
| Segment revenue | $ | 395.1 | $ | 363.6 | $ | 31.5 | 9% | $ | 1,204.6 | $ | 1,143.8 | $ | 60.8 | 5% | |||||||||||||||||||||||||||||||||
| Segment revenue as a % of total revenue | 41 | % | 41 | % | 42 | % | 41 | % | |||||||||||||||||||||||||||||||||||||||
| Segment operating income | $ | 113.5 | $ | 96.7 | 16.8 | 17% | $ | 332.6 | $ | 318.8 | 13.8 | 4% | |||||||||||||||||||||||||||||||||||
| Segment operating income as a % of segment revenue | 28.7 | % | 26.6 | % | 27.6 | % | 27.9 | % | |||||||||||||||||||||||||||||||||||||||
| Geospatial | |||||||||||||||||||||||||||||||||||||||||||||||
| Segment revenue | $ | 180.7 | $ | 184.2 | (3.5) | (2)% | $ | 526.0 | $ | 585.4 | (59.4) | (10)% | |||||||||||||||||||||||||||||||||||
| Segment revenue as a % of total revenue | 19 | % | 21 | % | 18 | % | 21 | % | |||||||||||||||||||||||||||||||||||||||
| Segment operating income | $ | 57.9 | $ | 61.5 | (3.6) | (6)% | $ | 162.3 | $ | 177.2 | (14.9) | (8)% | |||||||||||||||||||||||||||||||||||
| Segment operating income as a % of segment revenue | 32.0 | % | 33.4 | % | 30.9 | % | 30.3 | % | |||||||||||||||||||||||||||||||||||||||
| Resources and Utilities | |||||||||||||||||||||||||||||||||||||||||||||||
| Segment revenue | $ | 184.9 | $ | 191.7 | (6.8) | (4)% | $ | 589.5 | $ | 636.4 | (46.9) | (7)% | |||||||||||||||||||||||||||||||||||
| Segment revenue as a % of total revenue | 19 | % | 22 | % | 21 | % | 22 | % | |||||||||||||||||||||||||||||||||||||||
| Segment operating income | $ | 69.2 | $ | 64.2 | 5.0 | 8% | $ | 209.6 | $ | 212.3 | (2.7) | (1)% | |||||||||||||||||||||||||||||||||||
| Segment operating income as a % of segment revenue | 37.4 | % | 33.5 | % | 35.6 | % | 33.4 | % | |||||||||||||||||||||||||||||||||||||||
| Transportation | |||||||||||||||||||||||||||||||||||||||||||||||
| Segment revenue | $ | 196.6 | $ | 145.4 | 51.2 | 35% | $ | 546.2 | $ | 454.2 | 92.0 | 20% | |||||||||||||||||||||||||||||||||||
| Segment revenue as a % of total revenue | 21 | % | 16 | % | 19 | % | 16 | % | |||||||||||||||||||||||||||||||||||||||
| Segment operating income | $ | 35.8 | $ | 16.0 | 19.8 | 124% | $ | 90.0 | $ | 37.0 | 53.0 | 143% | |||||||||||||||||||||||||||||||||||
| Segment operating income as a % of segment revenue | 18.2 | % | 11.0 | % | 16.5 | % | 8.1 | % | |||||||||||||||||||||||||||||||||||||||
The following table is a reconciliation of our consolidated segment operating income to consolidated income before taxes:
| Third Quarter of | First Three Quarters of | ||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||
| Consolidated segment operating income | $ | 276.4 | $ | 238.4 | $ | 794.5 | $ | 745.3 | |||||||||||||||
| Unallocated general corporate expenses | (25.4) | (28.5) | (86.4) | (91.6) | |||||||||||||||||||
| Amortization of purchased intangible assets | (58.9) | (31.0) | (155.7) | (97.9) | |||||||||||||||||||
| Acquisition / divestiture items | (22.0) | (9.1) | (55.5) | (20.3) | |||||||||||||||||||
| Stock-based compensation / deferred compensation | (37.9) | (31.7) | (115.4) | (82.9) | |||||||||||||||||||
| Restructuring and other costs | (10.9) | (15.7) | (29.6) | (38.4) | |||||||||||||||||||
| Consolidated operating income | 121.3 | 122.4 | 351.9 | 414.2 | |||||||||||||||||||
| Total non-operating income (expense), net | (41.9) | (4.5) | (54.4) | 63.8 | |||||||||||||||||||
| Consolidated income before taxes | $ | 79.4 | $ | 117.9 | $ | 297.5 | $ | 478.0 | |||||||||||||||
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Buildings and Infrastructure
| Third Quarter of 2023 | First Three Quarters of 2023 | |||||||||||||||||||||||||
| Change versus the corresponding period in 2022 | % Change | % Change | ||||||||||||||||||||||||
Change in Revenue - Buildings and Infrastructure | 9 | % | 5 | % | ||||||||||||||||||||||
| Acquisitions | 2 | % | 3 | % | ||||||||||||||||||||||
| Divestitures | — | % | (3) | % | ||||||||||||||||||||||
| Foreign currency exchange | 1 | % | (1) | % | ||||||||||||||||||||||
Organic growth | 6 | % | 6 | % | ||||||||||||||||||||||
Organic revenue increased for the third quarter and first three quarters due to strong demand for our subscription and term license software and good net retention. The increases resulted from higher sales to new and existing customers as well as conversions to recurring offerings. Perpetual software revenue increased due to civil construction software application sales. In the third quarter, the increase in organic revenue was offset by lower civil construction hardware sales due to weakening end-user demand. For the first three quarters, organic revenue was also negatively impacted by changes in dealer inventory levels.
Operating income increased for the third quarter and first three quarters primarily due to higher revenue and gross margin expansion, offset by increased operating expense associated with revenue growth as well as investments, including our Connect and Scale strategy. Operating income as a percentage of revenue increased for the third quarter due to the same factors. Operating income as a percentage of revenue was relatively flat for the first three quarters.
Geospatial
| Third Quarter of 2023 | First Three Quarters of 2023 | |||||||||||||||||||||||||
| Change versus the corresponding period in 2022 | % Change | % Change | ||||||||||||||||||||||||
| Change in Revenue - Geospatial | (2) | % | (10) | % | ||||||||||||||||||||||
| Divestitures | (1) | % | (5) | % | ||||||||||||||||||||||
| Foreign currency exchange | 1 | % | — | % | ||||||||||||||||||||||
| Organic growth | (2) | % | (5) | % | ||||||||||||||||||||||
Organic revenue decreased for the third quarter due to weakening end-user demand, partially offset by higher U.S. Federal government sales. For the first three quarters, hardware and related perpetual software sales were also negatively impacted by changes in dealer inventory levels.
Operating income decreased for the third quarter and first three quarters primarily due to reduced revenue, partially offset by gross margin expansion and operating expense control. Operating income as a percentage of revenue decreased for the third quarter due to the same factors. Operating income as a percentage of revenue was relatively flat for the first three quarters.
Resources and Utilities
| Third Quarter of 2023 | First Three Quarters of 2023 | |||||||||||||||||||||||||
| Change versus the corresponding period in 2022 | % Change | % Change | ||||||||||||||||||||||||
Change in Revenue - Resources and Utilities | (4) | % | (7) | % | ||||||||||||||||||||||
| Acquisitions | — | % | 1 | % | ||||||||||||||||||||||
| Divestitures | (1) | % | (1) | % | ||||||||||||||||||||||
| Foreign currency exchange | 1 | % | — | % | ||||||||||||||||||||||
| Organic growth | (4) | % | (7) | % | ||||||||||||||||||||||
Organic revenue decreased for the third quarter and first three quarters from weaker dealer aftermarket sales due to robust market strength in the prior year and impacts related to changes in our distribution network. The declines were partially offset by an increase in subscription and services revenue, mainly from positioning services, forestry, and utilities businesses.
Operating income and operating income as a percentage of revenue increased for the third quarter primarily due to gross margin expansion, partially offset by higher operating expense. Operating income for the first three quarters was relatively flat, and operating income as a percentage of revenue was slightly up due to gross margin expansion.
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Transportation
| Third Quarter of 2023 | First Three Quarters of 2023 | |||||||||||||||||||||||||
| Change versus the corresponding period in 2022 | % Change | % Change | ||||||||||||||||||||||||
Change in Revenue - Transportation | 35 | % | 20 | % | ||||||||||||||||||||||
| Acquisitions | 28 | % | 18 | % | ||||||||||||||||||||||
| Divestitures | (1) | % | (3) | % | ||||||||||||||||||||||
| Foreign currency exchange | 1 | % | — | % | ||||||||||||||||||||||
| Organic growth | 7 | % | 5 | % | ||||||||||||||||||||||
Organic revenue increased for the third quarter and first three quarters primarily driven by enterprise and MAPS subscription revenue growth. Additionally, North American Mobility hardware sales increased in the third quarter.
Operating income and operating income as a percentage of revenue increased for the third quarter and first three quarters primarily due to the impact of the Transporeon acquisition, as well as organic revenue growth, gross margin expansion, and targeted cost reductions.
LIQUIDITY AND CAPITAL RESOURCES
| Third Quarter of | Year End | ||||||||||||||||||||||
| As of | 2023 | 2022 | Dollar Change | % Change | |||||||||||||||||||
| (In millions, except percentages) | |||||||||||||||||||||||
Cash and cash equivalents (1) | $ | 222.9 | $ | 271.0 | $ | (48.1) | (18) | % | |||||||||||||||
| As a percentage of total assets | 2.4 | % | 3.7 | % | |||||||||||||||||||
| Principal balance of outstanding debt | $ | 3,068.3 | $ | 1,525.0 | $ | 1,543.3 | 101 | % | |||||||||||||||
| First Three Quarters of | |||||||||||||||||||||||
| 2023 | 2022 | Dollar Change | % Change | ||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||
| Net cash provided by operating activities | $ | 498.2 | $ | 285.1 | $ | 213.1 | 75 | % | |||||||||||||||
| Net cash used in investing activities | (2,064.4) | (152.2) | (1,912.2) | 1256 | % | ||||||||||||||||||
| Net cash provided by (used in) financing activities | 1,520.7 | (115.0) | 1,635.7 | (1422) | % | ||||||||||||||||||
| Effect of exchange rate changes on cash and cash equivalents | (2.6) | (34.9) | 32.3 | (93) | % | ||||||||||||||||||
| Net decrease in cash and cash equivalents | $ | (48.1) | $ | (17.0) | |||||||||||||||||||
(1) Includes $6.1 million of cash and cash equivalents classified as held for sale as of September 29, 2023.
Operating Activities
The increase in cash provided by operating activities was primarily driven by a reduction in inventory purchases in the current year, and incentive compensation payouts and tax payments in the prior year. The increase was partially offset by a decrease in deferred revenue due to the timing of billings and higher interest payments.
Investing Activities
The increase in cash used in investing activities was primarily due to the Transporeon acquisition and higher divestiture proceeds in the prior year.
Financing Activities
The increase in cash provided by financing activities was driven by proceeds from our $800.0 million issuance of the 2033 senior notes, borrowings of $1.0 billion in term loans in the current year, and common stock repurchases occurring in the prior year. The increase was partially offset by the repayment of the 2023 senior notes.
Cash and Cash Equivalents
We believe that our cash and cash equivalents and borrowings, along with cash provided by operations will be sufficient in the foreseeable future to meet our anticipated operating cash needs, debt service, expenditures related to our Connect and Scale strategy, and any acquisitions.
Our 2022 credit facility allows us to borrow up to $1.25 billion, with an option to increase the borrowings up to $1.75 billion with lender approval. As of September 29, 2023, $210.0 million was outstanding under the 2022 credit facility.
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Our 2023 senior notes totaling $300.0 million matured and were paid in June 2023.
In the second quarter of 2023, we acquired Transporeon, which was funded through a combination of $1.0 billion of term loans, $225.0 million drawn on the 2022 credit facility, as amended, and the 2033 senior notes, see Note 3 “Acquisition” of this report.
In the third quarter of 2023, we executed a definitive agreement to contribute our Trimble Ag business to a newly formed JV with AGCO and sell 85% of the stake in the JV to AGCO for $2.0 billion in pre-tax cash proceeds, subject to certain adjustments. See Note 4 “Assets Held for Sale” of this report. Although we will continue to evaluate the optimal capital structure for our business following the completion of the pending sale, we expect to use the $1.5 billion of estimated proceeds after tax to repay approximately $1.1 billion in debt and repurchase shares.
As a result of R&D cost capitalization for tax purposes, our tax cash costs in 2022 were approximately $88.0 million higher than they would have been had R&D costs continued to be expensed upfront for tax purposes. In 2023, we are expecting to pay approximately $60.0 million relating to this provision. The majority relates to Federal tax liability and will be paid during the fourth quarter of 2023, as we qualified for payment postponement under the IRS relief initiative for California disaster area taxpayers.
Our cash requirements have not otherwise materially changed since the 2022 Form 10-K.
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SUPPLEMENTAL DISCLOSURE OF NON-GAAP FINANCIAL MEASURES AND ANNUALIZED RECURRING REVENUE
To supplement our consolidated financial information, we included non-GAAP financial measures, which are not meant to be considered in isolation or as a substitute for comparable GAAP. We believe non-GAAP financial measures provide useful information to investors and others in understanding our “core operating performance”, which excludes (i) the effect of non-cash items and certain variable charges not expected to recur; and (ii) transactions that are not meaningful in comparison to our past operating performance or not reflective of ongoing financial results. Lastly, we believe that our core operating performance offers a supplemental measure for period-to-period comparisons and can be used to evaluate our historical and prospective financial performance, as well as our performance relative to competitors.
Organic revenue growth is a non-GAAP measure that refers to revenue excluding the impacts of (i) foreign currency translation, and (ii) acquisitions and divestitures. We believe organic revenue growth provides useful information in evaluating the results of our business because it excludes items that are not indicative of ongoing performance or impact comparability with the prior year. We provide a reconciliation table showing the change in revenue growth to organic revenue growth in the “Results of Operations” section found earlier in this Item 2.
In addition to providing non-GAAP financial measures, we disclose Annualized Recurring Revenue (“ARR”) to give the investors supplementary indicators of the value of our current recurring revenue contracts. ARR represents the estimated annualized value of recurring revenue. ARR is calculated by taking our subscription, maintenance and support, and recurring transaction revenue for the current quarter and adding the portion of the contract value of all of our term licenses attributable to the current quarter, and dividing that sum by the number of days in the quarter and then multiplying that quotient by 365. Organic ARR refers to annualized recurring revenue excluding the impacts of (i) foreign currency translation, and (ii) acquisitions and divestitures. ARR and organic ARR should be viewed independently of revenue and deferred revenue as they are performance measures and are not intended to be combined with or to replace either of those items.
The non-GAAP financial measures, definitions, and explanations to the adjustments to comparable GAAP measures are included below:
| Third Quarter of | First Three Quarters of | ||||||||||||||||||||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||||||||||||||||||||
| Dollar | % of | Dollar | % of | Dollar | % of | Dollar | % of | ||||||||||||||||||||||||||||||||||
| (In millions, except per share amounts) | Amount | Revenue | Amount | Revenue | Amount | Revenue | Amount | Revenue | |||||||||||||||||||||||||||||||||
| REVENUE: | |||||||||||||||||||||||||||||||||||||||||
| GAAP revenue: | $ | 957.3 | $ | 884.9 | $ | 2,866.3 | $ | 2,819.8 | |||||||||||||||||||||||||||||||||
| GROSS MARGIN: | |||||||||||||||||||||||||||||||||||||||||
| GAAP gross margin: | $ | 590.2 | 61.7 | % | $ | 515.4 | 58.2 | % | $ | 1,755.5 | 61.2 | % | $ | 1,602.5 | 56.8 | % | |||||||||||||||||||||||||
| Amortization of purchased intangible assets | (A) | 27.7 | 19.9 | 80.9 | 63.4 | ||||||||||||||||||||||||||||||||||||
| Acquisition / divestiture items | (B) | — | — | 0.4 | — | ||||||||||||||||||||||||||||||||||||
| Stock-based compensation / deferred compensation | (C) | 3.8 | 3.4 | 11.4 | 8.7 | ||||||||||||||||||||||||||||||||||||
| Restructuring and other costs | (D) | 0.1 | (0.1) | (0.6) | 1.0 | ||||||||||||||||||||||||||||||||||||
| Non-GAAP gross margin: | $ | 621.8 | 65.0 | % | $ | 538.6 | 60.9 | % | $ | 1,847.6 | 64.5 | % | $ | 1,675.6 | 59.4 | % | |||||||||||||||||||||||||
| OPERATING EXPENSES: | |||||||||||||||||||||||||||||||||||||||||
| GAAP operating expenses: | $ | 468.9 | 49.0 | % | $ | 393.0 | 44.4 | % | $ | 1,403.6 | 49.0 | % | $ | 1,188.3 | 42.1 | % | |||||||||||||||||||||||||
| Amortization of purchased intangible assets | (A) | (31.2) | (11.1) | (74.8) | (34.5) | ||||||||||||||||||||||||||||||||||||
| Acquisition / divestiture items | (B) | (22.0) | (9.1) | (55.1) | (20.3) | ||||||||||||||||||||||||||||||||||||
| Stock-based compensation / deferred compensation | (C) | (34.1) | (28.3) | (104.0) | (74.2) | ||||||||||||||||||||||||||||||||||||
| Restructuring and other costs | (D) | (10.8) | (15.8) | (30.2) | (37.4) | ||||||||||||||||||||||||||||||||||||
| Non-GAAP operating expenses: | $ | 370.8 | 38.7 | % | $ | 328.7 | 37.1 | % | $ | 1,139.5 | 39.8 | % | $ | 1,021.9 | 36.2 | % | |||||||||||||||||||||||||
| OPERATING INCOME: | |||||||||||||||||||||||||||||||||||||||||
| GAAP operating income: | $ | 121.3 | 12.7 | % | $ | 122.4 | 13.8 | % | $ | 351.9 | 12.3 | % | $ | 414.2 | 14.7 | % | |||||||||||||||||||||||||
| Amortization of purchased intangible assets | (A) | 58.9 | 31.0 | 155.7 | 97.9 | ||||||||||||||||||||||||||||||||||||
| Acquisition / divestiture items | (B) | 22.0 | 9.1 | 55.5 | 20.3 | ||||||||||||||||||||||||||||||||||||
| Stock-based compensation / deferred compensation | (C) | 37.9 | 31.7 | 115.4 | 82.9 | ||||||||||||||||||||||||||||||||||||
| Restructuring and other costs | (D) | 10.9 | 15.7 | 29.6 | 38.4 | ||||||||||||||||||||||||||||||||||||
| Non-GAAP operating income: | $ | 251.0 | 26.2 | % | $ | 209.9 | 23.7 | % | $ | 708.1 | 24.7 | % | $ | 653.7 | 23.2 | % | |||||||||||||||||||||||||
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| Third Quarter of | First Three Quarters of | ||||||||||||||||||||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||||||||||||||||||||
| NON-OPERATING INCOME (EXPENSE), NET: | |||||||||||||||||||||||||||||||||||||||||
| GAAP non-operating income (expense), net: | $ | (41.9) | $ | (4.5) | $ | (54.4) | $ | 63.8 | |||||||||||||||||||||||||||||||||
| Acquisition / divestiture items | (B) | (5.1) | (5.6) | (37.6) | (103.0) | ||||||||||||||||||||||||||||||||||||
| Deferred compensation | (C) | 0.8 | 0.2 | (2.9) | 10.5 | ||||||||||||||||||||||||||||||||||||
| Restructuring and other costs | (D) | 0.1 | — | 1.4 | 0.1 | ||||||||||||||||||||||||||||||||||||
| Non-GAAP non-operating expense, net: | $ | (46.1) | $ | (9.9) | $ | (93.5) | $ | (28.6) | |||||||||||||||||||||||||||||||||
| GAAP and Non-GAAP Tax Rate % | GAAP and Non-GAAP Tax Rate % | GAAP and Non-GAAP Tax Rate % | GAAP and Non-GAAP Tax Rate % | ||||||||||||||||||||||||||||||||||||||
| (G) | (G) | (G) | (G) | ||||||||||||||||||||||||||||||||||||||
| INCOME TAX PROVISION: | |||||||||||||||||||||||||||||||||||||||||
| GAAP income tax provision: | $ | 4.5 | 5.7 | % | $ | 32.1 | 27.2 | % | $ | 49.2 | 16.5 | % | $ | 113.9 | 23.8 | % | |||||||||||||||||||||||||
| Non-GAAP items tax effected | (E) | 7.2 | 22.3 | 48.6 | 34.7 | ||||||||||||||||||||||||||||||||||||
| Difference in GAAP and Non-GAAP tax rate | (F) | 23.0 | (18.4) | 9.7 | (33.9) | ||||||||||||||||||||||||||||||||||||
| Non-GAAP income tax provision: | $ | 34.7 | 16.9 | % | $ | 36.0 | 18.0 | % | $ | 107.5 | 17.5 | % | $ | 114.7 | 18.3 | % | |||||||||||||||||||||||||
| NET INCOME: | |||||||||||||||||||||||||||||||||||||||||
| GAAP net income: | $ | 74.9 | $ | 85.8 | $ | 248.3 | $ | 364.1 | |||||||||||||||||||||||||||||||||
| Amortization of purchased intangible assets | (A) | 58.9 | 31.0 | 155.7 | 97.9 | ||||||||||||||||||||||||||||||||||||
| Acquisition / divestiture items | (B) | 16.9 | 3.5 | 17.9 | (82.7) | ||||||||||||||||||||||||||||||||||||
| Stock-based compensation / deferred compensation | (C) | 38.7 | 31.9 | 112.5 | 93.4 | ||||||||||||||||||||||||||||||||||||
| Restructuring and other costs | (D) | 11.0 | 15.7 | 31.0 | 38.5 | ||||||||||||||||||||||||||||||||||||
| Non-GAAP tax adjustments | (E) - (F) | (30.2) | (3.9) | (58.3) | (0.8) | ||||||||||||||||||||||||||||||||||||
| Non-GAAP net income: | $ | 170.2 | $ | 164.0 | $ | 507.1 | $ | 510.4 | |||||||||||||||||||||||||||||||||
| DILUTED NET INCOME PER SHARE: | |||||||||||||||||||||||||||||||||||||||||
| GAAP diluted net income per share: | $ | 0.30 | $ | 0.34 | $ | 1.00 | $ | 1.45 | |||||||||||||||||||||||||||||||||
| Amortization of purchased intangible assets | (A) | 0.24 | 0.13 | 0.63 | 0.39 | ||||||||||||||||||||||||||||||||||||
| Acquisition / divestiture items | (B) | 0.07 | 0.01 | 0.07 | (0.33) | ||||||||||||||||||||||||||||||||||||
| Stock-based compensation / deferred compensation | (C) | 0.15 | 0.13 | 0.45 | 0.38 | ||||||||||||||||||||||||||||||||||||
| Restructuring and other costs | (D) | 0.04 | 0.06 | 0.12 | 0.15 | ||||||||||||||||||||||||||||||||||||
| Non-GAAP tax adjustments | (E) - (F) | (0.12) | (0.01) | (0.23) | — | ||||||||||||||||||||||||||||||||||||
| Non-GAAP diluted net income per share: | $ | 0.68 | $ | 0.66 | $ | 2.04 | $ | 2.04 | |||||||||||||||||||||||||||||||||
| ADJUSTED EBITDA: | |||||||||||||||||||||||||||||||||||||||||
| GAAP net income: | $ | 74.9 | $ | 85.8 | $ | 248.3 | $ | 364.1 | |||||||||||||||||||||||||||||||||
| Non-operating income (expense), net and income tax provision | 46.4 | 36.6 | 103.6 | 50.1 | |||||||||||||||||||||||||||||||||||||
| GAAP operating income: | 121.3 | 122.4 | 351.9 | 414.2 | |||||||||||||||||||||||||||||||||||||
| Amortization of purchased intangible assets | (A) | 58.9 | 31.0 | 155.7 | 97.9 | ||||||||||||||||||||||||||||||||||||
| Acquisition / divestiture items | (B) | 22.0 | 9.1 | 55.5 | 20.3 | ||||||||||||||||||||||||||||||||||||
| Stock-based compensation / deferred compensation | (C) | 37.9 | 31.7 | 115.4 | 82.9 | ||||||||||||||||||||||||||||||||||||
| Restructuring and other costs | (D) | 10.9 | 15.7 | 29.6 | 38.4 | ||||||||||||||||||||||||||||||||||||
| Non-GAAP operating income: | 251.0 | 209.9 | 708.1 | 653.7 | |||||||||||||||||||||||||||||||||||||
| Depreciation expense and cloud computing amortization | 12.0 | 11.4 | 35.8 | 32.9 | |||||||||||||||||||||||||||||||||||||
| Income from equity method investments, net | 5.2 | 6.8 | 24.6 | 22.3 | |||||||||||||||||||||||||||||||||||||
| Adjusted EBITDA | $ | 268.2 | 28.0 | % | $ | 228.1 | 25.8 | % | $ | 768.5 | 26.8 | % | $ | 708.9 | 25.1 | % | |||||||||||||||||||||||||
Non-GAAP Definitions
Non-GAAP gross margin
We define Non-GAAP gross margin as GAAP gross margin, excluding the effects of amortization of purchased intangible assets, acquisition/divestiture items, stock-based compensation, deferred compensation, and restructuring and other costs. We believe our investors benefit by understanding our non-GAAP gross margin as a way of understanding how product mix, pricing decisions, and manufacturing costs influence our business.
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Non-GAAP operating expenses
We define Non-GAAP operating expenses as GAAP operating expenses, excluding the effects of amortization of purchased intangible assets, acquisition/divestiture items, stock-based compensation, deferred compensation, and restructuring and other costs. We believe this measure is important to investors evaluating our non-GAAP spending in relation to revenue.
Non-GAAP operating income
We define Non-GAAP operating income as GAAP operating income, excluding the effects of amortization of purchased intangible assets, acquisition/divestiture items, stock-based compensation, deferred compensation, and restructuring and other costs. We believe our investors benefit by understanding our non-GAAP operating income trends, which are driven by revenue, gross margin, and spending.
Non-GAAP non-operating expense, net
We define Non-GAAP non-operating expense, net as GAAP non-operating income (expense), net, excluding acquisition/divestiture items, deferred compensation, and restructuring and other costs. We believe this measure helps investors evaluate our non-operating expense trends.
Non-GAAP income tax provision
We define Non-GAAP income tax provision as GAAP income tax provision, excluding charges and benefits such as net deferred tax impacts resulting from the non-U.S. intercompany transfer of intellectual property, tax law changes, and significant one-time reserve releases upon the statute of limitations expirations. We believe this measure helps investors because it provides for consistent treatment of excluded items in our non-GAAP presentation and a difference in the GAAP and non-GAAP tax rates.
Non-GAAP net income
We define Non-GAAP net income as GAAP net income, excluding the effects of amortization of purchased intangible assets, acquisition/divestiture items, stock-based compensation, restructuring and other costs, and non-GAAP tax adjustments. This measure provides a supplemental view of net income trends, which are driven by non-GAAP income before taxes and our non-GAAP tax rate.
Non-GAAP diluted net income per share
We define Non-GAAP diluted net income per share as GAAP diluted net income per share, excluding the effects of amortization of purchased intangible assets, acquisition/divestiture items, stock-based compensation, restructuring and other costs, and non-GAAP tax adjustments. We believe our investors benefit by understanding our non-GAAP operating performance as reflected in a per share calculation as a way of measuring non-GAAP operating performance by ownership in the company.
Adjusted EBITDA
We define Adjusted EBITDA as non-GAAP operating income plus depreciation expense, cloud computing amortization, and income from equity method investments, net. Other companies may define Adjusted EBITDA differently. Adjusted EBITDA is not intended to purport to be an alternative to net income or operating income as a measure of operating performance or cash flow from operating activities as a measure of liquidity. Adjusted EBITDA is a performance measure that we believe offers a useful view of the overall operations of our business because it facilitates operating performance comparisons by removing potential differences caused by variations unrelated to operating performance, such as capital structures (interest expense), income taxes, depreciation, and amortization of purchased intangibles and cloud computing costs.
Explanations of Non-GAAP adjustments
(A).Amortization of purchased intangible assets. Non-GAAP gross margin and operating expenses exclude the amortization of purchased intangible assets, which primarily represents technology and/or customer relationships already developed.
(B).Acquisition / divestiture items. Non-GAAP gross margin and operating expenses exclude costs consisting of external and incremental costs resulting directly from acquisitions, divestitures, and strategic investment activities such as legal, due diligence, integration, and other closing costs, including the acceleration of acquisition stock options and adjustments to the fair value of earn-out liabilities. Non-GAAP non-operating expense, net, excludes unusual one-time acquisition/divestiture charges, including foreign currency exchange rate gains/losses related to an acquisition, divestiture gains/losses, and strategic investment impairments. These are one-time costs that vary significantly in amount and timing and are not indicative of our core operating performance.
(C).Stock-based compensation / deferred compensation. Non-GAAP gross margin and operating expenses exclude stock-based compensation and income or expense associated with movement in our non-qualified deferred compensation plan
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liabilities. Changes in non-qualified deferred compensation plan assets, included in non-operating expense, net, offset the income or expense in the plan liabilities.
(D).Restructuring and other costs. Non-GAAP gross margin and operating expenses exclude restructuring and other costs comprised of termination benefits related to reductions in employee headcount and closure or exit of facilities, executive severance agreements, business exit costs, as well as a $20 million commitment to donate to the Trimble Foundation that was paid over four quarters ending in the first quarter of 2023.
(E).Non-GAAP items tax effected. This amount adjusts the provision for income taxes to reflect the effect of the non-GAAP items (A) - (D) on non-GAAP net income.
(F).Difference in GAAP and Non-GAAP tax rate. This amount represents the difference between the GAAP and non-GAAP tax rates applied to the non-GAAP operating income plus the non-GAAP non-operating expense, net. The non-GAAP tax rate excludes charges and benefits such as net deferred tax impacts resulting from a non-U.S. intercompany transfer of intellectual property and significant one-time reserve releases upon statute of limitations expirations.
(G).GAAP and non-GAAP tax rate percentages. These percentages are defined as GAAP income tax provision as a percentage of GAAP income before taxes and non-GAAP income tax provision as a percentage of non-GAAP income before taxes.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to market risk related to changes in interest rates and foreign currency exchange rates. We use certain derivative financial instruments to manage these risks. We do not use derivative financial instruments for speculative purposes. All financial instruments are used in accordance with policies approved by our board of directors.
Market Interest Rate Risk
Our cash equivalents consisted primarily of interest and non-interest bearing bank deposits as well as bank time deposits. The main objective of these instruments is safety of principal and liquidity while maximizing return, without significantly increasing risk. Due to the nature of our cash equivalents that are readily convertible to cash, we do not anticipate any material effect on our portfolio due to fluctuations in interest rates.
In the second quarter of 2023, we borrowed $1.2 billion of variable-rate debt in conjunction with the Transporeon acquisition. At the end of the third quarter of 2023, our outstanding balance of variable-rate debt was $1.3 billion. We are exposed to market risk due to the possibility of changing interest rates. While not predictive, a hypothetical 50 basis point increase in interest rates on our variable-rate debt would result in an increase of approximately $6.4 million in annual interest expense.
Foreign Currency Exchange Rate Risk
We operate in international markets, which expose us to market risk associated with foreign currency exchange rate fluctuations between the U.S. Dollar and various foreign currencies, the most significant of which is the Euro. In addition, volatile market conditions could result in changes in exchange rates.
Historically, the majority of our revenue contracts are denominated in U.S. Dollars, with the most significant exception being Europe, where we invoice primarily in Euro. Additionally, a portion of our expenses, primarily the cost to manufacture, cost of personnel to deliver technical support on our products and professional services, sales and sales support, and research and development are denominated in foreign currencies, primarily the Euro.
Revenue resulting from selling in local currencies and costs incurred in local currencies are exposed to foreign currency exchange rate fluctuations, which can affect our operating income. As exchange rates vary, operating income may differ from expectations. In the third quarter, favorable impacts from foreign currency exchange rates were $9.6 million on revenue and $0.5 million on operating income. In the first three quarters of 2023, unfavorable impacts from foreign currency exchange rates were $8.8 million on revenue and $5.8 million on operating income.
We enter into foreign currency forward contracts to minimize the short-term impact of foreign currency exchange rate fluctuations on cash, debt, and certain trade and intercompany receivables and payables, primarily denominated in Euro, Canadian Dollars, New Zealand Dollars, British Pound, and Brazilian Real. These contracts reduce the exposure to fluctuations in foreign currency exchange rate movements, as the gains and losses associated with foreign currency balances are generally offset with the gains and losses on the forward contracts. We occasionally enter into foreign currency exchange contracts to hedge the purchase price of some of our larger business acquisitions.
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Our foreign currency contracts are marked-to-market through earnings every period and generally range in maturity from one to two months, or from four to six months for acquisitions. We do not enter into foreign currency contracts for trading purposes. Foreign currency forward contracts outstanding at the end of the third quarter of 2023 and at the end of 2022 are summarized as follows (in millions):
| Third Quarter of 2023 | Year End 2022 | ||||||||||||||||||||||
| Nominal Amount | Fair Value | Nominal Amount | Fair Value | ||||||||||||||||||||
| Forward contracts: | |||||||||||||||||||||||
| Purchased | $ | (159.5) | $ | (0.4) | $ | (77.9) | $ | — | |||||||||||||||
| Sold | 61.8 | 0.1 | 130.6 | 0.2 | |||||||||||||||||||
| Foreign currency exchange contract related to acquisition | — | — | 1,999.4 | 10.4 | |||||||||||||||||||
ITEM 4. CONTROLS AND PROCEDURES
(a) Disclosure Controls and Procedures.
The management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, our disclosure controls and procedures are effective.
(b) Internal Control Over Financial Reporting.
There have not been any changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time, we are involved in litigation arising out of the ordinary course of our business. There are no material legal proceedings, other than ordinary routine litigation incidental to the business, to which we or any of our subsidiaries is a party or of which any of our or our subsidiaries' property is subject.
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ITEM 1A. RISK FACTORS
There have been no material changes to our risk factor disclosures since our 2022 Form 10-K except for the one listed below. The risk factors described in the 2022 Form 10-K are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially and adversely affect our business, financial condition, or operating results.
The announced contribution of Trimble Ag to a newly formed JV and the sale of a majority interest in the JV are subject to various risks and uncertainties.
In September 2023, we signed a definitive agreement to contribute our Trimble Ag business, excluding certain GNSS and guidance technologies, to a joint venture (“JV”) with AGCO, of which we will retain a 15% stake. The transaction is expected to close in the first half of 2024. The pending transaction may not be completed in accordance with announced plans, on the currently expected timeline, or at all, and the pending sale may be disruptive to our business operations and adversely affect our profitability. In addition, the risks and uncertainties associated with the new JV include that (i) we may fail to realize the anticipated benefits of the formation of the JV, (ii) the closing of the transaction is subject to conditions that may not be satisfied or may take longer to be satisfied than expected, (iii) the benefits from the long-term Supply Agreement, the Technology Transfer and License Agreement, the Trademark License Agreement, and the Transition Services Agreement with the JV will be dependent upon the JV’s ability to successfully develop and market products, (iv) we may fail to realize the benefits of our noncontrolling stake in the JV, (v) unanticipated difficulties may arise in separating the precision agriculture business, (vi) unanticipated factors may arise affecting the cost of operating the JV as a standalone business, (vii) we may be unable to successfully integrate AGCO's JCA Technologies business into the JV, (viii) the use of proceeds may be affected by market conditions and alternative uses that become more attractive over time, (ix) the development of technology synergies will depend on the level of research and development spending and the success of future innovation, and (x) we may fail to obtain governmental or regulatory approval that may be required for the proposed transaction, or that, if such approval is obtained, the approval may be obtained subject to unexpected conditions.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
(a) None.
(b) None.
(c) None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
None.
36
ITEM 5. OTHER INFORMATION
During the third quarter of 2023, none of our directors or executive officers (as defined in Rule 16a-1(f) under the Exchange Act) adopted or terminated a Rule 10b5-1 trading arrangements or a non-Rule 10b5-1 trading arrangement (each as defined in Item 408(a) of Regulation S-K under the Exchange Act).
ITEM 6. EXHIBITS
We have filed, or incorporated into the Report by reference, the exhibits listed on the accompanying Index to Exhibits immediately preceding the signature page of this report.
EXHIBIT INDEX
| Exh. No. | Description of Exhibit | Filed or furnished herewith or incorporated by reference to: | ||||||
| 2.1 | Exhibit 2.1 to Form 8-K/A filed Dec. 21, 2022 | |||||||
| 2.2 | Exhibit 10.1 to Form 8-K/A filed Sep. 29, 2023 | |||||||
| 3.1 | Exhibit 3.1 to Form 8-K filed Oct. 3, 2016 | |||||||
| 3.2 | Exhibit 3.1 to Form 8-K filed Jun. 6, 2023 | |||||||
| 10.1 | Filed herewith | |||||||
| 31.1 | Filed herewith | |||||||
| 31.2 | Filed herewith | |||||||
| 32.1 | Furnished herewith | |||||||
| 32.2 | Furnished herewith | |||||||
| 101 | The following financial statements from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 29, 2023, formatted in Inline XBRL, tagged as blocks of text and including detailed tags: (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Income, (iii) Condensed Consolidated Statements of Comprehensive Income (Loss), (iv) Condensed Consolidated Statements of Stockholders’ Equity, (v) Condensed Consolidated Statements of Cash Flows, and (vi) Notes to Condensed Consolidated Financial Statements. | |||||||
| 104 | The cover page from this Report on Form 10-Q, formatted in Inline XBRL | |||||||
37
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
TRIMBLE INC. (Registrant) | |||||
| By: | /s/ DAVID G. BARNES | ||||
| David G. Barnes Chief Financial Officer (Authorized Officer and Principal Financial Officer) | |||||
DATE: November 3, 2023
38
TRIMBLE INC.
INCENTIVE COMPENSATION RECOUPMENT POLICY
as amended September 24, 2023
The Board of Directors (the “Board”) of Trimble Inc. (the “Company”) first adopted this Incentive Compensation Recoupment Policy (the “Policy”) effective as of May 2, 2017 (the “Effective Date”). The Board believes that it is appropriate to amend and restate the Policy effective as of September 24, 2023 (the “Amendment Date”). In connection with amending the Policy, the Board designated the People and Compensation Committee of the Board (the “P&CC”) to administer the Policy (the Board, the P&CC to the extent so designated by the Board, or both, as the case may be, are referred to herein as the “Administrator”).
The Policy provides for the recoupment of certain executive compensation in the event of (i) an Accounting Restatement, in which case certain incentive compensation that is based on the attainment of a financial reporting measure must be forfeited or reimbursed, or (ii) Misconduct, in which case certain additional compensation may be subject to forfeiture or reimbursement.
1.Definitions. For purposes of this Policy, the following capitalized terms shall have their respective meanings set forth below:
(a)“Accounting Restatement” means a required accounting restatement of any Company financial statement due to the material noncompliance of the Company with any financial reporting requirement under the securities laws, including (i) to correct an error in previously issued financial statements that is material to the previously issued financial statements (commonly referred to as a “Big R” restatement) or (ii) to correct an error in previously issued financial statements that is not material to the previously issued financial statements but that would result in a material misstatement if the error was corrected in the current period or left uncorrected in the current period (commonly referred to as a “little r” restatement). For the avoidance of doubt, changes to the Company’s financial statements that do not represent error corrections under the then-current relevant accounting standards will not constitute Accounting Restatements, including as a result of: (i) retrospective application of a change in accounting principles; (ii) retrospective revision to reportable segment information due to a change in the structure of the Company’s internal organization; (iii) retrospective reclassification due to a discontinued operation; (iv) retrospective application of a change in reporting entity, such as from a reorganization of entities under common control; or (v) retrospective revision for stock splits. Recovery of any Recoverable Compensation under the Policy is not dependent on fraud or misconduct by any person in connection with the Accounting Restatement.
(b)“Additional Compensation” means compensation, other than Recoverable Compensation, that is received by a Covered Executive, whether cash- or equity-based, which may be discretionary or performance-based, but not including salary or employee retirement, welfare benefits.
(c)“Company Group” means the Company and each of its Subsidiaries, as applicable.
(d)“Covered Compensation” means any Incentive Compensation that was granted, vested or paid to a person who served as a Covered Executive at any time during the performance period for the Incentive Compensation, and that was Received after the person became a Covered Executive; provided that Covered Compensation shall not include any Incentive Compensation that is Received (i) before the effective date of the applicable Nasdaq
listing standards adopted under Rule 10D-1 of the Exchange Act, or (ii) at a time that the Company does not have a class of securities listed on a national securities exchange or a national securities association.
(e)“Covered Executive” means each current and former “officer” of the Company as defined under Rule 16a-1(f) under Section 16 of the Exchange Act, which shall be deemed to include any individuals identified by the Company as executive officers pursuant to Item 401(b) of Regulation S-K under the Exchange Act.
(f)“Exchange Act” means the Securities Exchange Act of 1934.
(g)“Home Country” means the Company’s jurisdiction of incorporation.
(h)“Incentive Compensation” means any compensation that is granted, earned or vested based wholly or in part upon the attainment of any financial reporting measure. Financial reporting measures are measures that are determined and presented in accordance with the accounting principles used in preparing the Company’s financial statements, any measures that are derived wholly or in part from such measures, and stock price and total shareholder return measures. Financial reporting measures may consist of GAAP or non-GAAP financial measures (as defined under Regulation G of the Exchange Act and Item 10 of Regulation S-K under the Exchange Act). For the avoidance of doubt, Incentive Compensation does not include any of the following: (i) annual base salary, (ii) compensation that is awarded based solely on service (e.g., a time-vesting equity award that is not granted in connection with the attainment of any financial reporting measure), (iii) bonuses paid solely in the discretion of the P&CC, or (iv) compensation that is awarded solely based on subjective standards, strategic measures (e.g., completion of a merger) or operational measures (e.g., attainment of a certain market share).
(i)“Look-back Period” means the three completed fiscal years (plus any transition period of less than nine months that is within or immediately following the three completed fiscal years and that results from a change in the Company’s fiscal year) immediately preceding the date on which the Company is required to prepare an Accounting Restatement for a given reporting period, with such date being the earlier of: (i) the date the Board, a committee of the Board, or the officer or officers of the Company authorized to take such action if Board action is not required, concludes, or reasonably should have concluded, that the Company is required to prepare an Accounting Restatement; or (ii) the date a court, regulator or other legally authorized body directs the Company to prepare an Accounting Restatement. Recovery of any Recoverable Compensation under the Policy is not dependent on if or when the Accounting Restatement is actually filed.
(j)“Misconduct” means a Covered Executive’s material act of dishonesty or fraud or willful violation of a material Company policy or law, in each case, that directly caused or materially contributed to the need for the applicable Accounting Restatement. The determination of whether any Misconduct occurred shall be made by the Administrator in its discretion.
(k)“Nasdaq” means the Nasdaq Stock Market.
(l)“Received”: Incentive Compensation is deemed “Received” in the Company’s fiscal period during which the applicable financial reporting measure, as specified in or otherwise relating to the Incentive Compensation award, is attained, even if the grant, vesting or payment of the Incentive Compensation occurs after the end of that period.
(m)“Recoverable Compensation” means the amount of (i) Covered Compensation actually granted, vested or paid to a person during the fiscal period when the applicable financial reporting measure relating to such Covered Compensation was attained, that exceeds (ii) the
amount of Covered Compensation that otherwise would have been granted, vested or paid to the person had such amount been determined based on the applicable Accounting Restatement; computed without regard to any taxes paid (i.e., on a pre-tax basis). For Covered Compensation based on stock price or total shareholder return, where the amount of Recoverable Compensation is not subject to mathematical recalculation directly from the information in an Accounting Restatement, the Administrator will determine the amount of such Covered Compensation that constitutes Recoverable Compensation, if any, based on a reasonable estimate of the effect of the Accounting Restatement on the stock price or total shareholder return upon which the Covered Compensation was granted, vested or paid and the Administrator shall maintain documentation of such determination and provide such documentation to the Nasdaq.
(n)“SEC” means the United States Securities and Exchange Commission.
(o)“Subsidiary” means any domestic or foreign corporation, partnership, association, joint stock company, joint venture, trust or unincorporated organization “affiliated” with the Company, that is, directly or indirectly, through one or more intermediaries, “controlling”, “controlled by” or “under common control with”, the Company. “Control” for this purpose means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of such person, whether through the ownership of voting securities, contract or otherwise.
2.Forfeiture and Reimbursement of Recoverable Compensation.
In the event of an Accounting Restatement, any Recoverable Compensation that was Received during the Look-back Period prior to the Accounting Restatement (a) that is then-outstanding but has not yet been paid, shall be automatically and immediately forfeited and (b) that has been paid to any person, shall be subject to reasonably prompt repayment to the applicable member of the Company Group in accordance with Section 4 of this Policy. The Administrator must pursue (and shall not have the discretion to waive) the forfeiture and/or repayment of such Recoverable Compensation in accordance with Section 4 of this Policy, except as provided below.
Notwithstanding the foregoing, the Administrator may determine not to pursue the forfeiture and/or recovery of Recoverable Compensation from any person if it determines that such forfeiture and/or recovery would be impracticable due to any of the following circumstances: (i) the direct expense paid to a third party (for example, reasonable legal expenses and consulting fees) to assist in enforcing the Policy would exceed the amount to be recovered (following reasonable attempts by one or more members of the Company Group to recover such Recoverable Compensation, the documentation of such attempts, and the provision of such documentation to the Nasdaq), (ii) pursuing such recovery would violate the Company’s Home Country laws adopted prior to November 28, 2022 (provided that the Company obtains an opinion of Home Country counsel acceptable to the Nasdaq that recovery would result in such a violation and provides such opinion to the Nasdaq), or (iii) recovery would likely cause any otherwise tax-qualified retirement plan, under which benefits are broadly available to employees of the Company, to fail to meet the requirements of 26 U.S.C. 401(a)(13) or 26 U.S.C. 411(a) and regulations thereunder.
3.Forfeiture and Reimbursement of Additional Compensation in Connection with Misconduct.
If the Administrator determines that any Covered Executive committed Misconduct, the Administrator may seek reimbursement of all or a portion of any Additional Compensation awarded to the Covered Executive in, for, or in respect of the fiscal year or performance period in which the violation occurred for up to three years following vesting or, if later, payment or
settlement of the Additional Compensation. In addition, the Administrator may provide that any unpaid or unvested Additional Compensation is forfeited in connection with any Misconduct. The Administrator may seek recovery of Additional Compensation for Misconduct even if a Covered Executive’s Misconduct did not result in an award or payment greater than would have been awarded absent the violation.
In determining whether to require reimbursement or forfeiture of Additional Compensation and, if so, the amount of such reimbursement or forfeiture, the Administrator has the sole discretion to take into account such factors as it deems appropriate, including, but not limited to: (1) whether any Incentive Compensation would have been reduced had the Accounting Restatement been reported at the time such compensation was determined; (2) the Covered Executive’s involvement in and accountability for the Misconduct that directly or indirectly resulted in the need to prepare the Accounting Restatement; (3) the likelihood of success in seeking reimbursement or forfeiture under governing law relative to the effort involved; (4) whether the assertion of a reimbursement or forfeiture claim may prejudice the interests of the Company Group in any related proceeding or investigation, or otherwise; (5) whether the use of corporate resources and the expense of seeking reimbursement or forfeiture is reasonable in relation to the amount sought or likely to be recovered; (6) the passage of time since the occurrence of the act in respect of the applicable Misconduct; (7) any pending or threatened legal proceeding relating to the applicable Misconduct, and any actual or anticipated resolution (including any settlement) relating thereto; (8) the tax consequences to the affected Covered Executive; (9) any applicable interpretations and clarifications of the SEC and any applicable securities exchange rules; and/or (10) such other factors as the Administrator may deem appropriate under the circumstances.
4.Means of Repayment.
In the event that the Administrator determines that any person shall repay any Recoverable Compensation or Additional Compensation, the Administrator shall provide written notice to such person by email or certified mail to the physical address on file with the Company Group for such person, and the person shall satisfy such repayment in a manner and on such terms as required by the Administrator, and any member of the Company Group shall be entitled to set off the repayment amount against any amount owed to the person by the applicable member of the Company Group, to require the forfeiture of any award granted by any member of the Company Group to the person, or to take any and all necessary actions to reasonably promptly recoup the repayment amount from the person, in each case, to the fullest extent permitted under applicable law, including without limitation, Section 409A of the U.S. Internal Revenue Code of 1986, as amended, and the regulations and guidance thereunder. If the Administrator does not specify a repayment timing in the written notice described above, the applicable person shall be required to repay the Recoverable Compensation and any other Additional Compensation, as applicable, to the Company by wire, cash or cashier’s check no later than sixty (60) days after receipt of such notice.
For the avoidance of doubt, the Administrator will determine, in its sole discretion, the method for reimbursement or forfeiture of Recoverable Compensation and Additional Compensation which may include, without limitation: (1) requiring reimbursement of cash Incentive Compensation that was previously paid; (2) seeking recovery of any gain realized on the vesting, exercise, settlement, sale, transfer or other disposition of any equity-based awards; (3) offsetting the recouped amount from any compensation otherwise owed by any member of the Company Group to the Covered Executive; (4) cancelling outstanding vested or unvested equity awards; and/or (5) taking any other remedial and recovery action, in each case, to the extent permitted under applicable law. To the extent that a Covered Executive does not make reimbursement to the Company Group under this Policy within a reasonable time following demand by the Administrator, or any shares of Recoverable Compensation or Additional
Compensation have been sold by the Covered Executive, the Company Group shall have the right to reduce, cancel or withhold against outstanding, unvested, vested or future cash or equity-based compensation, or require a substitute form of reimbursement, in each case to the maximum extent permitted under applicable law.
5.Administration. This Policy shall be administered and interpreted by the Administrator. Any determinations made by the Administrator shall be final, conclusive and binding on the Company, the applicable Covered Executive and any other affected individuals and other interested parties. Any discretionary determinations of the Administrator under this Policy, if any, need not be uniform with respect to all persons, and may be made selectively amongst persons, whether or not such persons are similarly situated.
6.General.
(a)Acknowledgement by Covered Executives. The Company has or shall provide notice and seek written acknowledgement of this Policy from each Covered Executive as soon as practicable after the later of (i) the Effective Date and (ii) the date on which the employee of the Company is designated as a Covered Executive, provided, that any failure to obtain such acknowledgement shall not impact the enforceability of this Policy by the Company. For the avoidance of doubt, any written acknowledgement that the Company obtained prior to the Amendment Date remains effective.
(b)Other Recoupment Rights. The rights of the members of the Company Group under this Policy to seek forfeiture or reimbursement are not exclusive remedies and do not preclude any other recourse by any member of the Company Group, including, but not limited to, termination of employment or institution of civil or criminal proceedings. For the avoidance of doubt, the rights of the members of the Company Group under this Policy to seek forfeiture or reimbursement are not in lieu of any rights of recoupment, or remedies or rights other than recoupment, that may be available to any member of the Company Group pursuant to the terms of any law, government regulation or stock exchange listing requirement or any other policy, code of conduct, employee handbook, employment agreement, offer letter, equity award agreement, or other plan or agreement of any member of the Company Group.
(c)No Indemnification. Notwithstanding the terms of the Company’s bylaws or charter or any indemnification agreement between any member of the Company Group and any current or former Covered Executive, no person shall be indemnified, insured or reimbursed by any member of the Company Group in respect of any loss of compensation by such person in accordance with this Policy, nor shall any person receive any advancement of expenses for disputes related to any loss of compensation by such person in accordance with this Policy, and no person shall be paid or reimbursed by any member of the Company Group for any premiums paid by such person for any third-party insurance policy covering potential recovery obligations under this Policy. For this purpose, “indemnification” includes any modification to current compensation arrangements or other means that would amount to de facto indemnification (for example, providing the person a new cash award which would be cancelled to effect the recovery of any Recoverable Compensation). In no event shall any member of the Company Group be required to award any person an additional payment if any Accounting Restatement would result in a higher incentive compensation payment.
(d)Dodd Frank Act. This Policy is intended to comply with and shall be interpreted to comply with Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, as it may be amended from time to time, and any related rules or regulations promulgated by the SEC or the Nasdaq, including any additional or new requirements that become effective after the Amendment Date which upon effectiveness shall be deemed to
automatically amend this Policy to the extent necessary to comply with such additional or new requirements.
(e)Compliance with Law. The provisions in this Policy are intended to be applied to the fullest extent of the law. To the extent that any provision of this Policy is found to be unenforceable or invalid under any applicable law, such provision will be applied to the maximum extent permitted, and shall automatically be deemed amended in a manner consistent with its objectives to the extent necessary to conform to applicable law. The invalidity or unenforceability of any provision of this Policy shall not affect the validity or enforceability of any other provision of this Policy. Recoupment of Recoverable Compensation and Additional Compensation under this Policy is not dependent upon the Company Group satisfying any conditions in this Policy, including any requirements to provide applicable documentation to the Nasdaq.
(f)Amendment and Termination. To the extent permitted by, and in a manner consistent with applicable law, including applicable SEC and Nasdaq rules and regulations, the Administrator reserves the power to terminate, suspend, revise or amend this Policy at any time in its discretion.
(g)Successors. This Policy shall be binding and enforceable against all persons and their respective beneficiaries, heirs, executors, administrators or other legal representatives with respect to any Covered Compensation and Additional Compensation granted, vested or paid to or administered by such persons or entities.
TRIMBLE INC.
INCENTIVE COMPENSATION RECOUPMENT POLICY
ACKNOWLEDGMENT, CONSENT AND AGREEMENT
I acknowledge that I have received and reviewed a copy of the Trimble Inc. Incentive Compensation Recoupment Policy (as may be amended from time to time, the “Policy”) and I have been given an opportunity to ask questions about the Policy and review it with my counsel. I knowingly, voluntarily and irrevocably consent to and agree to be bound by and subject to the Policy’s terms and conditions for so long as I am a Covered Executive under the Policy, including that I will return any Recoverable Compensation and Additional Compensation that is required to be repaid in accordance with the Policy. I further acknowledge, understand and agree that (i) the compensation that I receive, have received or may become entitled to receive from the Company Group is subject to the Policy, and the Policy may affect such compensation and (ii) I have no right to indemnification, insurance payments or other reimbursement by or from any member of the Company Group for any compensation that is subject to recoupment and/or forfeiture under the Policy. Capitalized terms not defined herein have the meanings set forth in the Policy.
Signed:
Print Name:
Date:
Exhibit 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Robert G. Painter, certify that:
1.I have reviewed this quarterly report on Form 10-Q of Trimble Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| Date: | November 3, 2023 | /s/ Robert G. Painter | ||||||
| Robert G.Painter | ||||||||
| Chief Executive Officer | ||||||||
Exhibit 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, David G. Barnes, certify that:
1.I have reviewed this quarterly report on Form 10-Q of Trimble Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| Date: | November 3, 2023 | /s/ David G. Barnes | ||||||
David G. Barnes | ||||||||
| Chief Financial Officer | ||||||||
Exhibit 32.1
CERTIFICATION OF CEO PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of Trimble Inc. (the “Company”) for the period ended September 29, 2023 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Robert G.Painter, as Chief Executive Officer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of his knowledge, that:
(1)the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and
(2)the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
| /s/ Robert G.Painter | ||
| Robert G.Painter | ||
| Chief Executive Officer | ||
November 3, 2023 | ||
Exhibit 32.2
CERTIFICATION OF CFO PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of Trimble Inc. (the “Company”) for the period ended September 29, 2023 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), David G. Barnes, as Chief Financial Officer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of his knowledge, that:
(1)the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and
(2)the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
| /s/ David G. Barnes | ||
David G. Barnes | ||
| Chief Financial Officer | ||
November 3, 2023 | ||