Trimble Inc 10-Q for FY2024 Q2
Trimble Inc. (TRMB)
10-Q
2025-01-16
For: 2024-06-28
View Original
Added on
April 11, 2026
About this 10-Q
Trimble Inc filed this 10-Q on January 16, 2025, covering the quarter ended June 28, 2024 (FY2024 Q2).
Headline figures
Quarter ended June 28, 2024, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $870.8M
- down 12.4% from $993.6M a year earlier
- Net income
- $1.32B
- up 2851.6% from net income of $44.6M a year earlier
- Diluted EPS
- $5.34
- up 2866.7% from $0.18 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 January 9, 2025, there were 245,792,054 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, as amended (the “Exchange Act”), which are subject to the “safe harbor” created by those sections. These statements include, among other things:
•general 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 Russia and Ukraine;
•fluctuations in foreign currency exchange rates;
•our ability to convert backlog to revenue;
•the cyclical nature of our hardware revenue;
•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 contribution of our precision agriculture business (“Ag”), excluding Global Navigation Satellite System (“GNSS”) and guidance technologies, to a newly formed joint venture, PTx Trimble, and the sale of the majority interest in PTx Trimble 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, including expenditures related to our Connect and Scale strategy, debt service, stock repurchases, and any acquisitions;
•our expectation to use a majority of the remaining proceeds from the Ag divestiture, after tax and repayment of debt, to repurchase stock;
•our ability to conduct, suspend, or discontinue our stock repurchase program subject to the discretion of our management;
•our commitments to environmental, social, and governance matters; and
•our ability to maintain effective internal controls over financial reporting, including our ability to remediate our material weaknesses in our internal control over financial reporting.
The forward-looking statements regarding future events and the future results of Trimble Inc. (“Trimble”, the “Company” or “we” or “our” or “us”) are based on current expectations and the beliefs and assumptions of our management that are subject to risks and uncertainties. Discussions containing such forward-looking statements may be found in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of this report. Forward-looking statements generally can be identified by words 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 (the “SEC”), specifically the most recent Annual Report on Form 10-K for 2023 filed with the SEC on February 26, 2024 (the “2023 Form 10-K”), as amended by Form 10-K/A (the “2023 Form 10-K/A”) filed with the SEC on January 15, 2025, 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 undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements, except as required by law. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.
TRIMBLE INC.
Form 10-Q for the Quarter Ended June 28, 2024
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 | ||||||||||||||||||||
| Second Quarter of | Year End | |||||||||||||||||||
| 2024 | 2023 | |||||||||||||||||||
| (In millions, except par value) | ||||||||||||||||||||
| ASSETS | ||||||||||||||||||||
| Current assets: | ||||||||||||||||||||
| Cash and cash equivalents | $ | $ | ||||||||||||||||||
| Accounts receivable, net | ||||||||||||||||||||
| Inventories | ||||||||||||||||||||
| Prepaid expenses | ||||||||||||||||||||
| 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 | ||||||||||||||||||||
| Equity investments | ||||||||||||||||||||
| 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)
| Second Quarter of | First Two Quarters of | ||||||||||||||||||||||
| (In millions, except per share amounts) | 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||
| 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, 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
(UNAUDITED)
| Second Quarter of | First Two Quarters of | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||
| Net income | $ | $ | $ | $ | |||||||||||||||||||
| Foreign currency translation adjustments, net of tax | ( | ( | |||||||||||||||||||||
| Net change related to derivatives and other, net of tax | ( | ( | ( | ( | |||||||||||||||||||
Comprehensive 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 2023 | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||||||||||||||
| 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 2024 | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||||||||||||||
| 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 2024 | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||||||||||||||
| 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 | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||||||||||||||
See accompanying Notes to the Condensed Consolidated Financial Statements.
8
TRIMBLE INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| First Two Quarters of | ||||||||||||||||||||
| (In millions) | 2024 | 2023 | ||||||||||||||||||
| Cash flow from operating activities: | ||||||||||||||||||||
| Net income | $ | $ | ||||||||||||||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||||||||||
| Depreciation and amortization | ||||||||||||||||||||
| 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: | ||||||||||||||||||||
| Proceeds from divestitures | ||||||||||||||||||||
| Acquisitions of businesses, net of cash acquired | ( | ( | ||||||||||||||||||
| Purchases of property and equipment | ( | ( | ||||||||||||||||||
| Other, net | ( | |||||||||||||||||||
| Net cash provided by (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 (used in) provided by financing activities | ( | |||||||||||||||||||
| Effect of exchange rate changes on cash and cash equivalents | ( | |||||||||||||||||||
| Net increase (decrease) in cash and cash equivalents | ( | |||||||||||||||||||
Cash and cash equivalents - beginning of period (1) | ||||||||||||||||||||
Cash and cash equivalents - end of period | $ | $ | ||||||||||||||||||
Supplemental cash flow disclosure: | ||||||||||||||||||||
Cash tax paid, net, excluding tax for the Ag divestiture | $ | $ | ||||||||||||||||||
Cash tax paid for the Ag divestiture | $ | $ | ||||||||||||||||||
(1) Includes $ | ||||||||||||||||||||
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. 2024 is a 53-week year and 2023 was a 52-week year. The second quarter of 2024 and 2023 ended on June 28, 2024 and June 30, 2023. 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 2023 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 2023 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 (i) revenue recognition, including determining the nature and timing of satisfaction of performance obligations and determining standalone selling price of performance obligations; (ii) inventory valuation; (iii) valuation of investments; (iv) valuation of long-lived assets and their estimated useful lives; (v) goodwill and other long-lived asset impairment analyses; (vi) stock-based compensation; and (vii) 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.
New Segment Structure
As a result of the Ag divestiture and our Chief Operating Decision Maker’s (“CODM”) revised organizational structure, effective in the first quarter of 2024, we reorganized our businesses under a new segment structure. This structure brings similar businesses together, which is expected to enhance our ability to achieve scale and growth consistent with our strategy. The updated segment structure is comprised of (i) Architects, Engineers, Construction and Owners (“AECO”), (ii) Field Systems, and (iii) Transportation and Logistics (“T&L”). Prior-year information has been adjusted to reflect the change in segment reporting.
Recently Issued Accounting Pronouncements Not Yet Adopted
In November 2023, the FASB issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The ASU updates reportable segment disclosure requirements primarily through (i) enhanced disclosures about significant segment expenses, (ii) the composition of other segment items, and (iii) optional disclosures of more than one measure of segment profit or loss if the CODM uses those measures to assess segment performance and allocate resources. The ASU is effective for our Annual Report on Form 10-K beginning in 2024 and subsequent interim reports. Early adoption is permitted. The ASU should be applied retrospectively to all prior periods presented in the financial statements. Adoption of this ASU will result in additional disclosures related to the reportable segments.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The ASU updates the annual income tax disclosures by requiring (i) specific categories and greater disaggregation of information in the rate reconciliation, (ii) income taxes paid disaggregated by taxing authority and jurisdiction, and (iii) disclosures of pretax income (or loss) and income tax expense (or benefit). Additionally, certain existing disclosure requirements are removed. The ASU is effective for our Annual Report on Form 10-K beginning in 2025 and is applied prospectively. Early adoption and retrospective application are permitted. We are currently evaluating the impact of adopting this ASU on our financial reporting disclosures.
Recently Adopted Accounting Pronouncements
10
NOTE 2. COMMON STOCK REPURCHASE
On January 28, 2024, our Board of Directors approved a new stock repurchase program (the “2024 Stock Repurchase Program”) authorizing up to $800.0 million in repurchases of our common stock. The 2024 Stock Repurchase Program replaced the prior stock repurchase program, which was approved in August 2021 and has been cancelled.
Under the 2024 Stock Repurchase Program, we may repurchase stock from time to time through accelerated share repurchase programs, open market transactions, privately negotiated transactions, block purchases, tender offers, 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 2024 Stock Repurchase Program may be suspended, modified, or discontinued at any time without prior notice. At the end of the second quarter of 2024, there were remaining authorized funds of $625.0 million. The stock repurchase authorization does not have an expiration date.
There were no stock repurchases during the second quarter of 2024. During the first two quarters of 2024, we repurchased approximately 2.9 million shares of common stock in open market purchases at an average price of $60.97 per share for a total of $175.0 million. There were no stock repurchases during the first two quarters of 2023.
NOTE 3. ACQUISITION
On April 3, 2023, we acquired Transporeon GmbH 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 T&L segment.
The total purchase consideration was €1.9 billion, or $2.1 billion, which included the repayment of outstanding Transporeon debt of $339.6 million. In allocating the purchase price, we recorded $1,390.1 million of goodwill, $939.8 million of identifiable intangible assets, $9.3 million of net tangible assets, and $256.6 million of deferred tax liability. See Note 3 “Acquisitions” of the 2023 Form 10-K for additional information.
Pro Forma Financial Information
The unaudited pro forma financial information presented in the following table was determined 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 beginning in the first quarter of 2022. This information is presented for informational purposes only, and it 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.
| First Two Quarters of | |||||||||||||||||
| 2023 | |||||||||||||||||
| (In millions) | |||||||||||||||||
| Total revenue | $ | ||||||||||||||||
| Net income | |||||||||||||||||
On September 28, 2023, we executed a Sale and Contribution Agreement with AGCO that provided for the formation of a joint venture, called PTx Trimble, that operates in the mixed fleet precision agriculture market. The agreement was amended and restated on March 31, 2024, and the transaction closed on April 1, 2024. Under the terms of the agreement, we contributed our Ag business, excluding certain GNSS and guidance technologies, to PTx Trimble, an LLC. Following the closing of the transaction, we own 15 % and AGCO owns 85 % of PTx Trimble. The agreement provides AGCO with a call option and Trimble with a put option with respect to our retained interest in PTx Trimble. Ag was reported as a part of our Field Systems segment.
11
Upon closing of the transaction in the second quarter of 2024, we received $1.9 billion of cash proceeds from AGCO, subject to working capital adjustments. As a result, we deconsolidated $457.3 million of net assets, including $357.4 million of goodwill, and recognized a pre-tax gain of $1.7 billion. The gain included $275.6 million for our retained 15 % ownership interest in PTx Trimble, which is reported as an equity method investment. The fair value of our equity method investment was determined by using a combination of the equity value, primarily based on the transaction price, and an option pricing model for a put and call option.
In addition to forming PTx Trimble, the parties concurrently entered into agreements that included the following:
•a seven-year renewable supply agreement (the “Supply Agreement”) through which we will provide key GNSS and guidance technologies to PTx Trimble 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 PTx Trimble in the agriculture field and, upon expiration of the Supply Agreement, to govern fixed and variable royalty payments made to us by PTx Trimble;
•a trademark license agreement to govern the licensing of certain Trimble trademarks for use by PTx Trimble in the agriculture field;
•a master sale and distribution agreement through which PTx Trimble will serve as our channel partner for 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.
NOTE 5. INTANGIBLE ASSETS AND GOODWILL
Intangible Assets
The following table presents a summary of our intangible assets:
As of | |||||||||||||||||||||||||||||||||||
| Second Quarter of 2024 | Year End 2023 | ||||||||||||||||||||||||||||||||||
| 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 other intellectual properties | ( | ( | |||||||||||||||||||||||||||||||||
| $ | $ | ( | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||
The estimated future amortization expense of intangible assets at the end of the second quarter of 2024 was as follows:
| (In millions) | |||||
| 2024 (Remaining) | $ | ||||
| 2025 | |||||
| 2026 | |||||
| 2027 | |||||
| 2028 | |||||
| Thereafter | |||||
| Total | $ | ||||
12
Goodwill
The changes in the carrying amount of goodwill by segment for the first two quarters of 2024 were as follows:
AECO | Field Systems | T&L | Total | ||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||
| Balance as of year end 2023 | $ | $ | $ | $ | |||||||||||||||||||
| Additions due to acquisitions | |||||||||||||||||||||||
Decreases due to divestitures | ( | ( | ( | ||||||||||||||||||||
| Foreign currency translation and other adjustments | ( | ( | ( | ( | |||||||||||||||||||
| Balance as of the end of the second quarter of 2024 | $ | $ | $ | $ | |||||||||||||||||||
NOTE 6. INVENTORIES
The components of inventory, net were as follows:
| As of | |||||||||||
| Second Quarter of | Year End | ||||||||||
| 2024 | 2023 | ||||||||||
| (In millions) | |||||||||||
| Raw materials | $ | $ | |||||||||
| Work-in-process | |||||||||||
| Finished goods | |||||||||||
| Total inventories | $ | $ | |||||||||
NOTE 7. SEGMENT INFORMATION
Our Chief Executive Officer, who is our CODM, views and evaluates operations based on the results of our reportable operating segments under our management reporting system.
Our reportable segments are described below:
•Architects, Engineers, Construction and Owners (“AECO”). This segment primarily provides software solutions that sell primarily through a direct channel to customers in the construction industry.
•Field Systems. This segment primarily provides hardware and associated software solutions that sell primarily through dealer partner channels.
•Transportation and Logistics (“T&L”). This segment primarily provides solutions for 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. This is consistent with the way the CODM evaluates each of the segment’s performance and allocates resources.
13
| Reporting Segments | |||||||||||||||||||||||
AECO | Field Systems | T&L | Total | ||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||
| Second Quarter of 2024 | |||||||||||||||||||||||
| Segment revenue | $ | $ | $ | $ | |||||||||||||||||||
| Segment operating income | |||||||||||||||||||||||
| Second Quarter of 2023 | |||||||||||||||||||||||
| Segment revenue | $ | $ | $ | $ | |||||||||||||||||||
| Segment operating income | |||||||||||||||||||||||
| First Two Quarters of 2024 | |||||||||||||||||||||||
| Segment revenue | $ | $ | $ | $ | |||||||||||||||||||
| Segment operating income | |||||||||||||||||||||||
| First Two Quarters of 2023 | |||||||||||||||||||||||
| Segment revenue | $ | $ | $ | $ | |||||||||||||||||||
| Segment operating income | |||||||||||||||||||||||
| Reporting Segments | |||||||||||||||||||||||
| AECO | Field Systems | T&L | Total | ||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||
As of the end of the Second Quarter of 2024 | |||||||||||||||||||||||
| Accounts receivable, net | $ | $ | $ | $ | |||||||||||||||||||
| Inventories | |||||||||||||||||||||||
| Goodwill | |||||||||||||||||||||||
| As of Year End 2023 | |||||||||||||||||||||||
| Accounts receivable, net | $ | $ | $ | $ | |||||||||||||||||||
| Inventories | |||||||||||||||||||||||
| Goodwill | |||||||||||||||||||||||
A reconciliation of our condensed consolidated segment operating income to condensed consolidated income before income taxes was as follows:
| Second Quarter of | First Two Quarters of | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| (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 | $ | $ | $ | $ | |||||||||||||||||||
14
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 | |||||||||||||||||||||||
| AECO | Field Systems | T&L | Total | ||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||
| Second Quarter of 2024 | |||||||||||||||||||||||
| North America | $ | $ | $ | $ | |||||||||||||||||||
| Europe | |||||||||||||||||||||||
| Asia Pacific | |||||||||||||||||||||||
| Rest of World | |||||||||||||||||||||||
| Total segment revenue | $ | $ | $ | $ | |||||||||||||||||||
| Second Quarter of 2023 | |||||||||||||||||||||||
| North America | $ | $ | $ | $ | |||||||||||||||||||
| Europe | |||||||||||||||||||||||
| Asia Pacific | |||||||||||||||||||||||
| Rest of World | |||||||||||||||||||||||
| Total segment revenue | $ | $ | $ | $ | |||||||||||||||||||
| First Two Quarters of 2024 | |||||||||||||||||||||||
| North America | $ | $ | $ | $ | |||||||||||||||||||
| Europe | |||||||||||||||||||||||
| Asia Pacific | |||||||||||||||||||||||
| Rest of World | |||||||||||||||||||||||
| Total segment revenue | $ | $ | $ | $ | |||||||||||||||||||
| First Two Quarters of 2023 | |||||||||||||||||||||||
| North America | $ | $ | $ | $ | |||||||||||||||||||
| Europe | |||||||||||||||||||||||
| Asia Pacific | |||||||||||||||||||||||
| Rest of World | |||||||||||||||||||||||
| Total segment revenue | $ | $ | $ | $ | |||||||||||||||||||
15
NOTE 8. DEBT
Debt consisted of the following:
As of | |||||||||||||||||||||||||||||
| Second Quarter of | Year End | ||||||||||||||||||||||||||||
| Instrument | Date of Issuance | 2024 | 2023 | ||||||||||||||||||||||||||
| (In millions) | Effective interest rate | ||||||||||||||||||||||||||||
| Senior Notes: | |||||||||||||||||||||||||||||
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 second quarter of 2024, our debt maturities based on outstanding principal were as follows (in millions):
| Year Payable | |||||
| 2024 (Remaining) | $ | ||||
| 2025 | |||||
| 2026 | |||||
| 2027 | |||||
| 2028 | |||||
| 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 8 “Debt” of the 2023 Form 10-K.
Credit Facilities
2023 Term Loans
In 2023, we entered into two unsecured, variable-rate term loans comprised of a 3-year tranche for $500.0 million and a 5-year tranche for $500.0 million. In the second quarter of 2024, we repaid the term loans in full using a portion of the funds received in connection with the Ag divestiture.
2022 Credit Facility
In 2022, we entered into a five-year , unsecured, revolving credit facility in the aggregate principal amount of $1.25 billion. Subject to approval, we may 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.
Uncommitted Facilities
At the end of the second quarter of 2024, we had two $75.0 million and one €100.0 million revolving credit facilities, which are uncommitted. Generally, these variable-rate, uncommitted facilities may be redeemed upon demand. Borrowings under uncommitted facilities are classified as short-term debt in the Condensed Consolidated Balance Sheet.
16
Covenants
The 2022 credit facility contains customary covenants, including, among other requirements, limitations that restrict our and our subsidiaries’ ability to create liens and enter into sale and leaseback transactions, and restrictions on the ability of the subsidiaries to incur indebtedness. The facility contains financial covenants that require the maintenance of maximum leverage and minimum interest coverage ratios, as well as the timely delivery of quarterly financial reports and compliance certificates. At the end of the second quarter of 2024, we were in compliance with our debt covenants under a waiver of the financial reporting covenants.
NOTE 9. FAIR VALUE MEASUREMENTS
Fair value is measured by using observable or, to the extent necessary, unobservable inputs.
Financial instruments recorded at fair value include our deferred compensation plan. The fair value was $32.1 31.2
Financial instruments not recorded at fair value on a recurring basis (debt) had an estimated fair value of $1.8 billion and $3.1 billion at the end of the second quarter of 2024 and the end of 2023. The fair value of the debt was determined based on observable market prices in less active markets. 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 second quarter and the first two quarters of 2024 and 2023 were as follows:
| Second Quarter of | First Two Quarters of | ||||||||||||||||||||||
| (In millions) | 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||
| 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 second quarter of 2024, approximately $1.7 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 $1.2 billion or 69 % of our remaining performance obligations as revenue during the next 12 months and the remainder thereafter.
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 shares of common stock include outstanding stock options, restricted stock units, contingently issuable shares, and shares to be purchased under our employee stock purchase plan.
The following table shows the computation of basic and diluted earnings per share:
17
| Second Quarter of | First Two Quarters of | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| (In millions, except per share amounts) | |||||||||||||||||||||||
| Numerator: | |||||||||||||||||||||||
| Net income | $ | $ | $ | $ | |||||||||||||||||||
| Denominator: | |||||||||||||||||||||||
| Weighted-average shares of common stock outstanding - basic | |||||||||||||||||||||||
| Effect of dilutive securities | |||||||||||||||||||||||
| Weighted-average shares of common stock outstanding - diluted | |||||||||||||||||||||||
| 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.
NOTE 12. INCOME TAXES
For the second quarter, our effective income tax rate was 25.3 %, as compared to 22.4 % in the corresponding period in 2023. For the first two quarters, our effective income tax rate was 25.1 %, as compared to 20.5 % in the prior year. The increases were primarily due to a geographic mix of gains from the Ag divestiture.
NOTE 13. COMMITMENTS AND CONTINGENCIES
Commitments
At the end of the second quarter of 2024, we had unconditional purchase obligations of approximately $543.6 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, to which we or any of our subsidiaries are a party, or to which any of our or our subsidiaries’ property is subject.
18
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 two quarters of 2024. For a complete discussion of our critical accounting policies and estimates, refer to the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of the 2023 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, natural resources, utilities, transportation, and government. Our representative customers include construction owners, contractors, engineering and construction firms, surveying 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;
•Focus on delivering customer outcomes that can enable productivity, quality, safety, transparency, and environmental sustainability;
•Focus on attractive markets with significant growth and profitability potential;
•Domain knowledge and technological innovation that benefits a diverse customer base;
•Increasing focus on software and services;
•Geographic expansion with a localization strategy;
•Optimized go-to-market strategies to best access our markets; and
•Strategic and targeted acquisitions, divestitures, joint ventures, and investments.
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 $2,113.0 million, which represents growth of 12% year-over-year at the end of the second quarter of 2024. Excluding the impact of foreign currency, acquisitions, and divestitures, ARR organic growth was 14%. 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. Our software, services, and recurring revenue represented 75% and 65% of total revenue for the second quarter of 2024 and 2023 and 74% and 65% of total revenue for the first two quarters of 2024 and 2023. Additionally, we continue to maintain focus on increasing our mix of recurring revenue, which is accelerated by the Transporeon acquisition that closed in the second quarter of 2023 and the Ag divestiture that closed in the second quarter of 2024.
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” section, 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 businesses that no longer fit those strategies. This is demonstrated by the 12 acquisitions and 22 divestitures that we have completed since 2020, including the Transporeon acquisition and the Ag divestiture.
On September 28, 2023, we executed a Sale and Contribution Agreement with AGCO that provided for the formation of a joint venture, called PTx Trimble, that operates in the mixed fleet precision agriculture market. The agreement was amended and restated on March 31, 2024, and the transaction closed on April 1, 2024. Under the terms of the agreement, we contributed our Ag business, excluding certain GNSS and guidance technologies, in exchange for $1.9 billion in cash proceeds, subject to
19
working capital adjustments. Following the closing of this transaction, we own 15% and AGCO owns 85% of PTx Trimble. In addition to forming PTx Trimble, the parties concurrently entered into agreements that include the following: (i) long-term supply agreement for key GNSS and guidance technologies, (ii) technology transfer and license agreement, (iii) trademark license agreement, (iv) master sale and distribution agreement for positioning services, and (v) transition services agreement. Ag was reported as a part of our Field Systems segment.
Upon closing of the transaction, we recognized a pre-tax gain of $1.7 billion. The gain included $275.6 million for the fair value of our retained 15% ownership interest in PTx Trimble, an LLC, which is reported as an equity method investment.
The formation of PTx Trimble 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.
We repaid $1.0 billion of our variable-rate debt through use of the net proceeds and expect to use the majority of the remaining proceeds after tax to repurchase stock.
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. These macroeconomic conditions have had and may continue to have a negative impact on our results of operations.
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:
| Second Quarter of | First Two Quarters of | ||||||||||||||||||||||||||||||||||||||||||||||
| 2024 | 2023 | Dollar Change | % Change | 2024 | 2023 | Dollar Change | % Change | ||||||||||||||||||||||||||||||||||||||||
| (In millions, except per share amounts) | |||||||||||||||||||||||||||||||||||||||||||||||
| Revenue: | |||||||||||||||||||||||||||||||||||||||||||||||
| Product | $ | 320.4 | $ | 490.5 | $ | (170.1) | (35)% | $ | 687.5 | $ | 924.9 | $ | (237.4) | (26)% | |||||||||||||||||||||||||||||||||
| Subscription and services | 550.4 | 503.1 | 47.3 | 9% | 1,136.6 | 984.1 | 152.5 | 15% | |||||||||||||||||||||||||||||||||||||||
| Total revenue | $ | 870.8 | $ | 993.6 | $ | (122.8) | (12)% | $ | 1,824.1 | $ | 1,909.0 | $ | (84.9) | (4)% | |||||||||||||||||||||||||||||||||
| Gross margin | $ | 545.9 | $ | 604.5 | $ | (58.6) | (10)% | $ | 1,139.5 | $ | 1,165.3 | $ | (25.8) | (2)% | |||||||||||||||||||||||||||||||||
| Gross margin as a % of revenue | 62.7 | % | 60.8 | % | 62.5 | % | 61.0 | % | |||||||||||||||||||||||||||||||||||||||
| Operating income | $ | 61.6 | $ | 93.6 | $ | (32.0) | (34)% | $ | 170.8 | $ | 230.6 | $ | (59.8) | (26)% | |||||||||||||||||||||||||||||||||
| Operating income as a % of revenue | 7.1 | % | 9.4 | % | 9.4 | % | 12.1 | % | |||||||||||||||||||||||||||||||||||||||
| Diluted earnings per share | $ | 5.34 | $ | 0.18 | $ | 5.16 | 2867% | $ | 5.56 | $ | 0.70 | $ | 4.86 | 694% | |||||||||||||||||||||||||||||||||
Non-GAAP operating income (1) | $ | 194.4 | $ | 231.0 | $ | (36.6) | (16)% | $ | 428.8 | $ | 457.1 | $ | (28.3) | (6)% | |||||||||||||||||||||||||||||||||
Non-GAAP operating income as a % of revenue (1) | 22.3 | % | 23.2 | % | 23.5 | % | 23.9 | % | |||||||||||||||||||||||||||||||||||||||
Non-GAAP diluted earnings per share (1) | $ | 0.62 | $ | 0.64 | $ | (0.02) | (3)% | $ | 1.26 | $ | 1.35 | $ | (0.09) | (7)% | |||||||||||||||||||||||||||||||||
Annualized Recurring Revenue (“ARR”) (1) | $ | 2,113.0 | $ | 1,882.9 | $ | 230.1 | 12% | 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.
20
Second Quarter and First Two Quarters of 2024 as Compared to 2023
Revenue
Change versus the corresponding period in 2023 | Second Quarter of 2024 | First Two Quarters of 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| % Change | % Change | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Product | Subscription and Services | Total Revenue | Product | Subscription and Services | Total Revenue | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Change in Revenue | (35) | % | 9 | % | (12) | % | (26) | % | 15 | % | (4) | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Acquisitions | 2 | % | — | % | 1 | % | 1 | % | 5 | % | 3 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Divestitures | (27) | % | (2) | % | (14) | % | (15) | % | (2) | % | (8) | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Foreign currency exchange | — | % | — | % | — | % | — | % | — | % | 1 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Organic growth | (10) | % | 11 | % | 1 | % | (12) | % | 12 | % | — | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Organic total revenue increased for the second quarter and remained flat for the first two quarters.
Organic product revenue decreased for the second quarter and first two quarters primarily due to a large government sale of Surveying hardware in the prior year. Additionally, the decrease for the first two quarters was due to lower Ag demand in the first quarter.
Organic subscription and services revenue for the second quarter increased primarily due to strong growth in subscription product offerings in AECO, and to a lesser extent, Positioning Services in Field Systems and Transporeon in T&L. Organic subscription and services revenue increased for the first two quarters primarily due to strong growth in subscription and software term licenses in AECO, and to a lesser extent, positioning services in Field Systems and enterprise and MAPS in T&L. 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 14%.
Gross Margin
Gross margin decreased for the second quarter and first two quarters primarily due to the Ag divestiture.
Gross margin as a percentage of revenue increased for the second quarter due to the strong growth of higher margin software and subscription sales, including from organic growth, and from the Ag divestiture’s lower margin hardware sales. Additionally, the increase for the first two quarters was due to the impact of the Transporeon acquisition, which was not applicable in the first quarter of the prior year.
Operating Income
Operating income and operating income as a percentage of revenue decreased for the second quarter and first two quarters primarily due to the Ag divestiture, partially offset by organic revenue and gross margin expansion, and for the first two quarters, from the impact of the Transporeon acquisition.
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:
| Second Quarter of | First Two Quarters of | ||||||||||||||||||||||||||||||||||||||||||||||
| 2024 | 2023 | Dollar Change | % Change | 2024 | 2023 | Dollar Change | % Change | ||||||||||||||||||||||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||||||||||||||||||||||||||
| Research and development | $ | 161.5 | $ | 174.8 | $ | (13.3) | (8)% | $ | 331.7 | $ | 334.1 | $ | (2.4) | (1)% | |||||||||||||||||||||||||||||||||
| Percentage of revenue | 18.5 | % | 17.6 | % | 18.2 | % | 17.5 | % | |||||||||||||||||||||||||||||||||||||||
| Sales and marketing | $ | 142.5 | $ | 155.3 | $ | (12.8) | (8)% | $ | 289.3 | $ | 290.7 | $ | (1.4) | —% | |||||||||||||||||||||||||||||||||
| Percentage of revenue | 16.4 | % | 15.6 | % | 15.9 | % | 15.2 | % | |||||||||||||||||||||||||||||||||||||||
| General and administrative | $ | 148.7 | $ | 141.3 | $ | 7.4 | 5% | $ | 282.8 | $ | 252.0 | $ | 30.8 | 12% | |||||||||||||||||||||||||||||||||
| Percentage of revenue | 17.1 | % | 14.2 | % | 15.5 | % | 13.2 | % | |||||||||||||||||||||||||||||||||||||||
| Total | $ | 452.7 | $ | 471.4 | $ | (18.7) | (4)% | $ | 903.8 | $ | 876.8 | $ | 27.0 | 3% | |||||||||||||||||||||||||||||||||
21
R&D expense decreased for the second quarter primarily due to the impact of the Ag divestiture, and for the first two quarters, the divestiture impact was partially offset by expense related to Transporeon. 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 decreased for the second quarter primarily due to the impact of the Ag divestiture. S&M expense was flat for the first two quarters as the divestiture impact was offset by expense related to Transporeon.
G&A expense increased for the second quarter and first two quarters primarily due to divestiture transaction costs, partially offset by the impact of the Ag divestiture.
Amortization of Purchased Intangible Assets
| Second Quarter of | First Two Quarters of | ||||||||||||||||||||||||||||||||||||||||||||||
| 2024 | 2023 | Dollar Change | % Change | 2024 | 2023 | Dollar Change | % Change | ||||||||||||||||||||||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||||||||||||||||||||||||||
| Cost of sales | $ | 28.0 | $ | 30.2 | $ | (2.2) | (7)% | $ | 55.8 | $ | 53.2 | $ | 2.6 | 5% | |||||||||||||||||||||||||||||||||
| Operating expenses | 26.5 | 31.9 | (5.4) | (17)% | 53.2 | 43.6 | 9.6 | 22% | |||||||||||||||||||||||||||||||||||||||
| Total amortization expense of purchased intangibles | $ | 54.5 | $ | 62.1 | $ | (7.6) | (12)% | $ | 109.0 | $ | 96.8 | $ | 12.2 | 13% | |||||||||||||||||||||||||||||||||
| Total amortization expense of purchased intangibles as a percentage of revenue | 6 | % | 6 | % | 6 | % | 5 | % | |||||||||||||||||||||||||||||||||||||||
Total amortization expense of purchased intangibles decreased for the second quarter primarily due to the impact of divestitures. Total amortization expense of purchased intangibles increased for the first two quarters primarily due to the amortization of intangibles acquired from Transporeon, which was not applicable in the first quarter of the prior year, and partially offset by the impact of divestitures.
Non-Operating Income (Expense), Net
The components of non-operating income (expense), net, were as follows:
| Second Quarter of | First Two Quarters of | ||||||||||||||||||||||||||||||||||||||||||||||
| 2024 | 2023 | Dollar Change | % Change | 2024 | 2023 | Dollar Change | % Change | ||||||||||||||||||||||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||||||||||||||||||||||||||
| Divestitures gain, net | $ | 1,714.1 | $ | 1.1 | $ | 1,713.0 | 155727% | $ | 1,717.6 | $ | 5.1 | $ | 1,712.5 | 33578% | |||||||||||||||||||||||||||||||||
| Interest expense, net | (18.1) | (46.7) | 28.6 | (61)% | (63.3) | (66.4) | 3.1 | (5)% | |||||||||||||||||||||||||||||||||||||||
| Income from equity method investments, net | 4.3 | 8.0 | (3.7) | (46)% | 9.9 | 19.4 | (9.5) | (49)% | |||||||||||||||||||||||||||||||||||||||
| Other income, net | 0.1 | 1.5 | (1.4) | (93)% | — | 29.4 | (29.4) | (100)% | |||||||||||||||||||||||||||||||||||||||
| Total non-operating income (expense), net | $ | 1,700.4 | $ | (36.1) | $ | 1,736.5 | (4810)% | $ | 1,664.2 | $ | (12.5) | $ | 1,676.7 | (13414)% | |||||||||||||||||||||||||||||||||
Non-operating income, net increased for the second quarter primarily due to the divestiture gain from the Ag divestiture and lower interest expense from the $1.3 billion repayment of debt. Non-operating income, net also increased for the first two quarters due to the Ag divestiture gain, partially offset by a foreign currency hedging gain associated with the acquisition of Transporeon in the prior year that was included in Other income, net.
Income Tax Provision
For the second quarter, our effective income tax rate was 25.3%, as compared to 22.4% in the corresponding period in 2023. For the first two quarters, our effective income tax rate was 25.1%, as compared to 20.5% in the prior year. The increases were primarily due to a geographic mix of gains from the Ag divestiture.
Results by Segment
We report our financial performance, including revenue and operating income, based on three reportable segments: AECO, Field Systems, and T&L.
Our Chief Executive Officer, who is our Chief Operating Decision Maker (“CODM”), 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.
22
The following table is a summary of revenue and operating income by segment compared for the periods indicated:
| Second Quarter of | First Two Quarters of | ||||||||||||||||||||||||||||||||||||||||||||||
| 2024 | 2023 | Dollar Change | % Change | 2024 | 2023 | Dollar Change | % Change | ||||||||||||||||||||||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||||||||||||||||||||||||||
| AECO | |||||||||||||||||||||||||||||||||||||||||||||||
| Segment revenue | $ | 299.7 | $ | 264.1 | $ | 35.6 | 13% | $ | 638.8 | $ | 552.2 | $ | 86.6 | 16% | |||||||||||||||||||||||||||||||||
| Segment revenue as a % of total revenue | 34 | % | 27 | % | 35 | % | 29 | % | |||||||||||||||||||||||||||||||||||||||
| Segment operating income | $ | 79.1 | $ | 62.4 | 16.7 | 27% | $ | 205.8 | $ | 157.8 | 48.0 | 30% | |||||||||||||||||||||||||||||||||||
| Segment operating income as a % of segment revenue | 26.4 | % | 23.6 | % | 32.2 | % | 28.6 | % | |||||||||||||||||||||||||||||||||||||||
| Field Systems | |||||||||||||||||||||||||||||||||||||||||||||||
| Segment revenue | $ | 379.3 | $ | 540.6 | (161.3) | (30)% | $ | 798.5 | $ | 1,020.5 | (222.0) | (22)% | |||||||||||||||||||||||||||||||||||
| Segment revenue as a % of total revenue | 44 | % | 54 | % | 44 | % | 53 | % | |||||||||||||||||||||||||||||||||||||||
| Segment operating income | $ | 109.8 | $ | 175.9 | (66.1) | (38)% | $ | 208.1 | $ | 313.3 | (105.2) | (34)% | |||||||||||||||||||||||||||||||||||
| Segment operating income as a % of segment revenue | 28.9 | % | 32.5 | % | 26.1 | % | 30.7 | % | |||||||||||||||||||||||||||||||||||||||
| T&L | |||||||||||||||||||||||||||||||||||||||||||||||
| Segment revenue | $ | 191.8 | $ | 188.9 | 2.9 | 2% | $ | 386.8 | $ | 336.3 | 50.5 | 15% | |||||||||||||||||||||||||||||||||||
| Segment revenue as a % of total revenue | 22 | % | 19 | % | 21 | % | 18 | % | |||||||||||||||||||||||||||||||||||||||
| Segment operating income | $ | 35.9 | $ | 26.7 | 9.2 | 34% | $ | 72.2 | $ | 47.0 | 25.2 | 54% | |||||||||||||||||||||||||||||||||||
| Segment operating income as a % of segment revenue | 18.7 | % | 14.1 | % | 18.7 | % | 14.0 | % | |||||||||||||||||||||||||||||||||||||||
The following table is a reconciliation of our consolidated segment operating income to consolidated income before taxes:
| Second Quarter of | First Two Quarters of | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||
| Consolidated segment operating income | $ | 224.8 | $ | 265.0 | $ | 486.1 | $ | 518.1 | |||||||||||||||
| Unallocated general corporate expenses | (30.4) | (34.0) | (57.3) | (61.0) | |||||||||||||||||||
| Amortization of purchased intangible assets | (54.5) | (62.1) | (109.0) | (96.8) | |||||||||||||||||||
| Acquisition / divestiture items | (33.9) | (26.5) | (57.8) | (33.5) | |||||||||||||||||||
| Stock-based compensation / deferred compensation | (38.1) | (42.1) | (76.9) | (77.5) | |||||||||||||||||||
| Restructuring and other costs | (6.3) | (6.7) | (14.3) | (18.7) | |||||||||||||||||||
| Consolidated operating income | 61.6 | 93.6 | 170.8 | 230.6 | |||||||||||||||||||
| Total non-operating income (expense), net | 1,700.4 | (36.1) | 1,664.2 | (12.5) | |||||||||||||||||||
| Consolidated income before taxes | $ | 1,762.0 | $ | 57.5 | $ | 1,835.0 | $ | 218.1 | |||||||||||||||
AECO
| Second Quarter of 2024 | First Two Quarters of 2024 | |||||||||||||||||||||||||
| Change versus the corresponding period in 2023 | % Change | % Change | ||||||||||||||||||||||||
Change in Revenue - AECO | 13 | % | 16 | % | ||||||||||||||||||||||
| Acquisitions | — | % | 1 | % | ||||||||||||||||||||||
| Divestitures | (1) | % | (1) | % | ||||||||||||||||||||||
Organic growth | 14 | % | 16 | % | ||||||||||||||||||||||
Organic revenue increased for the second quarter and first two quarters due to strong demand for our subscription and term license software, particularly Viewpoint and Architecture and Design product offerings. Additionally, the increase for the first two quarters was driven by the growth in Structures annual term license software sales.
23
Operating income and operating income as a percentage of revenue increased for the second quarter and first two quarters primarily due to strong organic revenue growth and gross margin expansion, partially offset by increased operating expense associated with revenue growth.
Field Systems
| Second Quarter of 2024 | First Two Quarters of 2024 | |||||||||||||||||||||||||
| Change versus the corresponding period in 2023 | % Change | % Change | ||||||||||||||||||||||||
Change in Revenue - Field Systems | (30) | % | (22) | % | ||||||||||||||||||||||
| Acquisitions | 2 | % | 1 | % | ||||||||||||||||||||||
| Divestitures | (26) | % | (14) | % | ||||||||||||||||||||||
| Organic growth | (6) | % | (9) | % | ||||||||||||||||||||||
Organic revenue decreased for the second quarter and first two quarters primarily due to a large government sale of Surveying hardware in the prior year. Additionally, the decrease for the first two quarters was due to lower sales to agriculture OEMs and aftermarket customers from slowing demand in agriculture markets.
Operating income and operating income as a percentage of revenue decreased for the second quarter and first two quarters primarily due to the impact of the Ag divestiture and reduced organic revenue and gross margin.
T&L
| Second Quarter of 2024 | First Two Quarters of 2024 | |||||||||||||||||||||||||
| Change versus the corresponding period in 2023 | % Change | % Change | ||||||||||||||||||||||||
Change in Revenue - T&L | 2 | % | 15 | % | ||||||||||||||||||||||
| Acquisitions | — | % | 13 | % | ||||||||||||||||||||||
| Divestitures | (1) | % | (1) | % | ||||||||||||||||||||||
| Organic growth | 3 | % | 3 | % | ||||||||||||||||||||||
Organic revenue increased for the second quarter and first two quarters primarily driven by Transporeon, MAPS and Enterprise subscription revenue growth.
Operating income and operating income as a percentage of revenue increased for the second quarter and first two quarters primarily due to organic revenue growth and gross margin expansion. The increase for the first two quarters was also driven by the impact of the Transporeon acquisition.
LIQUIDITY AND CAPITAL RESOURCES
As of | |||||||||||||||||||||||
| Second Quarter of | Year End | ||||||||||||||||||||||
| 2024 | 2023 | Dollar Change | % Change | ||||||||||||||||||||
| (In millions, except percentages) | |||||||||||||||||||||||
Cash and cash equivalents (1) | $ | 944.1 | $ | 238.9 | $ | 705.2 | 295 | % | |||||||||||||||
| As a percentage of total assets | 9.8 | % | 2.5 | % | |||||||||||||||||||
| Principal balance of outstanding debt | $ | 1,800.0 | $ | 3,080.4 | $ | (1,280.4) | (42) | % | |||||||||||||||
| First Two Quarters of | |||||||||||||||||||||||
| 2024 | 2023 | Dollar Change | % Change | ||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||
| Net cash provided by operating activities | $ | 321.4 | $ | 351.1 | $ | (29.7) | (8) | % | |||||||||||||||
| Net cash provided by (used in) investing activities | 1,871.1 | (2,050.2) | 3,921.3 | (191) | % | ||||||||||||||||||
| Net cash (used in) provided by financing activities | (1,479.9) | 1,662.0 | (3,141.9) | (189) | % | ||||||||||||||||||
| Effect of exchange rate changes on cash and cash equivalents | (7.4) | 3.4 | (10.8) | (318) | % | ||||||||||||||||||
| Net increase (decrease) in cash and cash equivalents | $ | 705.2 | $ | (33.7) | |||||||||||||||||||
(1) Includes $9.1 million of cash and cash equivalents classified as held for sale as of December 29, 2023.
24
Operating Activities
The decrease in cash provided by operating activities was primarily driven by lower operating income resulting from the Ag divestiture, higher tax and interest payments, partially offset by reductions in net working capital requirements associated with a greater mix of subscription and services revenue.
Investing Activities
The increase in cash provided by investing activities was primarily due to the $1.9 billion of proceeds received from the Ag divestiture in the current year, as compared to the $2.0 billion payment in the prior year for the acquisition of Transporeon.
Financing Activities
The increase in cash used in financing activities was primarily driven by the $1.3 billion repayment of debt and $175.0 million repurchases of common stock in the current year, as compared to the prior year’s $2.0 billion of proceeds from the issuance of debt for the acquisition of Transporeon, partially offset by the $300.0 million repayment of debt.
Cash and Cash Equivalents
We believe that our cash and cash equivalents and available borrowing capacity under our existing lines of credit, along with cash provided by operations will be sufficient in the foreseeable future to meet our anticipated operating cash needs, including expenditures related to our Connect and Scale strategy, debt service, acquisitions, and any stock repurchases under the stock repurchase program.
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 June 28, 2024, there was no outstanding debt under the 2022 credit facility.
Our 2024 senior notes totaling $400.0 million are maturing in December 2024. We anticipate using a combination of cash on hand, borrowing from our existing revolvers, or new debt to repay the 2024 senior notes.
In the second quarter of 2024, we completed the Ag divestiture and received $1.9 billion of cash proceeds, subject to working capital adjustments. The total tax payment for the transaction is $379.8 million, of which $50.0 million was paid in the second quarter of 2024, with the remaining amount to be paid within one year. We used a portion of the proceeds to repay $1.0 billion of term loans and expect to use the majority of the remaining proceeds after tax to repurchase stock.
Our cash requirements have not otherwise materially changed since the 2023 Form 10-K.
25
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 that closed in the prior 12 months. 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 reconciliation tables 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 and maintenance and support for the current quarter and adding the portion of the contract value of all our term licenses attributable to the current quarter, then 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 that closed in the prior 12 months. 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:
| Second Quarter of | First Two Quarters of | ||||||||||||||||||||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||||||||||||||||||||
| 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: | $ | 870.8 | $ | 993.6 | $ | 1,824.1 | $ | 1,909.0 | |||||||||||||||||||||||||||||||||
| GROSS MARGIN: | |||||||||||||||||||||||||||||||||||||||||
| GAAP gross margin: | $ | 545.9 | 62.7 | % | $ | 604.5 | 60.8 | % | $ | 1,139.5 | 62.5 | % | $ | 1,165.3 | 61.0 | % | |||||||||||||||||||||||||
| Amortization of purchased intangible assets | (A) | 28.0 | 30.2 | 55.8 | 53.2 | ||||||||||||||||||||||||||||||||||||
| Acquisition / divestiture items | (B) | — | 0.2 | — | 0.4 | ||||||||||||||||||||||||||||||||||||
| Stock-based compensation / deferred compensation | (C) | 4.2 | 4.1 | 8.5 | 7.6 | ||||||||||||||||||||||||||||||||||||
| Restructuring and other costs | (D) | 0.6 | (1.0) | 2.0 | (0.7) | ||||||||||||||||||||||||||||||||||||
| Non-GAAP gross margin: | $ | 578.7 | 66.5 | % | $ | 638.0 | 64.2 | % | $ | 1,205.8 | 66.1 | % | $ | 1,225.8 | 64.2 | % | |||||||||||||||||||||||||
| OPERATING EXPENSES: | |||||||||||||||||||||||||||||||||||||||||
| GAAP operating expenses: | $ | 484.3 | 55.6 | % | $ | 510.9 | 51.4 | % | $ | 968.7 | 53.1 | % | $ | 934.7 | 49.0 | % | |||||||||||||||||||||||||
| Amortization of purchased intangible assets | (A) | (26.5) | (31.9) | (53.2) | (43.6) | ||||||||||||||||||||||||||||||||||||
| Acquisition / divestiture items | (B) | (33.9) | (26.3) | (57.8) | (33.1) | ||||||||||||||||||||||||||||||||||||
| Stock-based compensation / deferred compensation | (C) | (33.9) | (38.0) | (68.4) | (69.9) | ||||||||||||||||||||||||||||||||||||
| Restructuring and other costs | (D) | (5.7) | (7.7) | (12.3) | (19.4) | ||||||||||||||||||||||||||||||||||||
| Non-GAAP operating expenses: | $ | 384.3 | 44.1 | % | $ | 407.0 | 41.0 | % | $ | 777.0 | 42.6 | % | $ | 768.7 | 40.3 | % | |||||||||||||||||||||||||
| OPERATING INCOME: | |||||||||||||||||||||||||||||||||||||||||
| GAAP operating income: | $ | 61.6 | 7.1 | % | $ | 93.6 | 9.4 | % | $ | 170.8 | 9.4 | % | $ | 230.6 | 12.1 | % | |||||||||||||||||||||||||
| Amortization of purchased intangible assets | (A) | 54.5 | 62.1 | 109.0 | 96.8 | ||||||||||||||||||||||||||||||||||||
| Acquisition / divestiture items | (B) | 33.9 | 26.5 | 57.8 | 33.5 | ||||||||||||||||||||||||||||||||||||
| Stock-based compensation / deferred compensation | (C) | 38.1 | 42.1 | 76.9 | 77.5 | ||||||||||||||||||||||||||||||||||||
| Restructuring and other costs | (D) | 6.3 | 6.7 | 14.3 | 18.7 | ||||||||||||||||||||||||||||||||||||
| Non-GAAP operating income: | $ | 194.4 | 22.3 | % | $ | 231.0 | 23.2 | % | $ | 428.8 | 23.5 | % | $ | 457.1 | 23.9 | % | |||||||||||||||||||||||||
26
| Second Quarter of | First Two Quarters of | ||||||||||||||||||||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||||||||||||||||||||
| NON-OPERATING INCOME (EXPENSE), NET: | |||||||||||||||||||||||||||||||||||||||||
| GAAP non-operating income (expense), net: | $ | 1,700.4 | $ | (36.1) | $ | 1,664.2 | $ | (12.5) | |||||||||||||||||||||||||||||||||
| Acquisition / divestiture items | (B) | (1,716.1) | (0.9) | (1,719.5) | (32.5) | ||||||||||||||||||||||||||||||||||||
| Deferred compensation | (C) | (0.7) | (1.7) | (3.1) | (3.7) | ||||||||||||||||||||||||||||||||||||
| Restructuring and other costs | (D) | 5.4 | — | 5.4 | 1.3 | ||||||||||||||||||||||||||||||||||||
| Non-GAAP non-operating expense, net: | $ | (11.0) | $ | (38.7) | $ | (53.0) | $ | (47.4) | |||||||||||||||||||||||||||||||||
| 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: | $ | 445.6 | 25.3 | % | $ | 12.9 | 22.4 | % | $ | 461.4 | 25.1 | % | $ | 44.7 | 20.5 | % | |||||||||||||||||||||||||
| Non-GAAP items tax effected | (E) | (399.4) | 30.2 | (373.6) | 41.4 | ||||||||||||||||||||||||||||||||||||
| Difference in GAAP and Non-GAAP tax rate | (F) | (14.7) | (9.8) | (23.0) | (13.3) | ||||||||||||||||||||||||||||||||||||
| Non-GAAP income tax provision: | $ | 31.5 | 17.2 | % | $ | 33.3 | 17.3 | % | $ | 64.8 | 17.2 | % | $ | 72.8 | 17.8 | % | |||||||||||||||||||||||||
| NET INCOME: | |||||||||||||||||||||||||||||||||||||||||
| GAAP net income: | $ | 1,316.4 | $ | 44.6 | $ | 1,373.6 | $ | 173.4 | |||||||||||||||||||||||||||||||||
| Amortization of purchased intangible assets | (A) | 54.5 | 62.1 | 109.0 | 96.8 | ||||||||||||||||||||||||||||||||||||
| Acquisition / divestiture items | (B) | (1,682.2) | 25.6 | (1,661.7) | 1.0 | ||||||||||||||||||||||||||||||||||||
| Stock-based compensation / deferred compensation | (C) | 37.4 | 40.4 | 73.8 | 73.8 | ||||||||||||||||||||||||||||||||||||
| Restructuring and other costs | (D) | 11.7 | 6.7 | 19.7 | 20.0 | ||||||||||||||||||||||||||||||||||||
| Non-GAAP tax adjustments | (E) - (F) | 414.1 | (20.4) | 396.6 | (28.1) | ||||||||||||||||||||||||||||||||||||
| Non-GAAP net income: | $ | 151.9 | $ | 159.0 | $ | 311.0 | $ | 336.9 | |||||||||||||||||||||||||||||||||
| DILUTED NET INCOME PER SHARE: | |||||||||||||||||||||||||||||||||||||||||
| GAAP diluted net income per share: | $ | 5.34 | $ | 0.18 | $ | 5.56 | $ | 0.70 | |||||||||||||||||||||||||||||||||
| Amortization of purchased intangible assets | (A) | 0.22 | 0.25 | 0.45 | 0.39 | ||||||||||||||||||||||||||||||||||||
| Acquisition / divestiture items | (B) | (6.82) | 0.10 | (6.73) | — | ||||||||||||||||||||||||||||||||||||
| Stock-based compensation / deferred compensation | (C) | 0.15 | 0.16 | 0.30 | 0.29 | ||||||||||||||||||||||||||||||||||||
| Restructuring and other costs | (D) | 0.05 | 0.03 | 0.08 | 0.08 | ||||||||||||||||||||||||||||||||||||
| Non-GAAP tax adjustments | (E) - (F) | 1.68 | (0.08) | 1.60 | (0.11) | ||||||||||||||||||||||||||||||||||||
| Non-GAAP diluted net income per share: | $ | 0.62 | $ | 0.64 | $ | 1.26 | $ | 1.35 | |||||||||||||||||||||||||||||||||
| ADJUSTED EBITDA: | |||||||||||||||||||||||||||||||||||||||||
| GAAP operating income: | $ | 61.6 | 7.1 | % | $ | 93.6 | 9.4 | % | $ | 170.8 | 9.4 | % | $ | 230.6 | 12.1 | % | |||||||||||||||||||||||||
| Amortization of purchased intangible assets | (A) | 54.5 | 62.1 | 109.0 | 96.8 | ||||||||||||||||||||||||||||||||||||
| Acquisition / divestiture items | (B) | 33.9 | 26.5 | 57.8 | 33.5 | ||||||||||||||||||||||||||||||||||||
| Stock-based compensation / deferred compensation | (C) | 38.1 | 42.1 | 76.9 | 77.5 | ||||||||||||||||||||||||||||||||||||
| Restructuring and other costs | (D) | 6.3 | 6.7 | 14.3 | 18.7 | ||||||||||||||||||||||||||||||||||||
| Non-GAAP operating income: | 194.4 | 22.3 | % | 231.0 | 23.2 | % | 428.8 | 23.5 | % | 457.1 | 23.9 | % | |||||||||||||||||||||||||||||
| Depreciation expense and cloud computing amortization | 12.1 | 12.5 | 23.0 | 23.8 | |||||||||||||||||||||||||||||||||||||
Income from equity method investments, net | 7.5 | 8.0 | 13.1 | 19.4 | |||||||||||||||||||||||||||||||||||||
| Adjusted EBITDA | $ | 214.0 | 24.6 | % | $ | 251.5 | 25.3 | % | $ | 464.9 | 25.5 | % | $ | 500.3 | 26.2 | % | |||||||||||||||||||||||||
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.
27
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, excluding our proportionate share of items such as amortization of purchased intangibles, stock-based compensation, and restructuring costs. Other companies may define Adjusted EBITDA differently. 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 awards and adjustments to the fair value of earn-out liabilities. Non-GAAP non-operating expense, net, excludes one-time acquisition/divestiture charges, including foreign currency exchange rate gains/losses related to an acquisition, divestiture gains/losses, and strategic investment gains/losses. 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
28
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. Non-GAAP non-operating expense, net, excludes our proportionate share of items recorded in income from equity method investment items, such as amortization of purchased intangibles, stock-based compensation, and restructuring costs.
(E).Non-GAAP items tax effected. This amount adjusts the provision for income taxes to reflect the effect of the non-GAAP items (A) through (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 (i) deferred tax impacts from tax amortization relating to a non-U.S. intercompany transfer of intellectual property and R&D cost capitalization impact to global intangible low-taxed income, and (ii) 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 they are readily convertible to cash—we do not anticipate any material effect on our portfolio due to fluctuations in interest rates.
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.
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 second quarter and first two quarters of 2024, changes in foreign currency exchange rates had an unfavorable impact of $1.2 million and a favorable impact of $2.3 million on revenue, and a favorable impact of $1.4 million and $2.3 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, British Pound, New Zealand Dollars, 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.
29
Our foreign currency contracts are marked-to-market through earnings every period and generally range in maturity from one to two months. We do not enter into foreign currency contracts for trading purposes. Foreign currency contracts outstanding at the end of the second quarter of 2024 and at the end of 2023 are summarized as follows:
| Second Quarter of 2024 | Year End 2023 | ||||||||||||||||||||||
| Nominal Amount | Fair Value | Nominal Amount | Fair Value | ||||||||||||||||||||
(In millions) | |||||||||||||||||||||||
| Forward contracts: | |||||||||||||||||||||||
| Purchased | $ | (352.3) | $ | (0.8) | $ | (120.3) | $ | 0.3 | |||||||||||||||
| Sold | 24.6 | 0.1 | 50.8 | (0.3) | |||||||||||||||||||
ITEM 4. CONTROLS AND PROCEDURES
(a) Evaluation of Disclosure Controls and Procedures.
Management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), 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 Exchange Act), as of the end of the period covered by this report. Based on that evaluation, our CEO and CFO concluded that our disclosure controls and procedures were not effective as of the end of such period because of certain material weaknesses in internal controls related to the accounting for the Company’s business combination with Transporeon, certain information technology general controls (“ITGCs”), undue reliance on controls over information technology (“IT”) interfaces, and the evaluation of standalone selling prices of performance obligations utilized in the accounting for revenue, all of which support the Company’s financial reporting processes.
(b) Remediation of Previously Reported Material Weaknesses.
As reported in our 2023 Form 10-K/A filed with the SEC on January 15, 2025, we previously identified certain material weaknesses in internal controls as noted above. Management, under the oversight of the Audit Committee is currently taking actions to remediate these material weaknesses.
•We have finalized the design of review controls over third-party valuation specialists to add greater levels of precision to detect and prevent potential misstatements, including the establishment of process and controls to evaluate adequate review and evidence used in the valuation of acquired intangible assets. The Company had an acquisition with a purchase price of $26 million in the second quarter of 2024 for which the Company successfully tested the operating effectiveness of the remediated design of applicable business combination controls.
•We are in the process of finalizing the design and implementation of controls of certain ITGCs for business systems related to the Company’s financial reporting processes.
•We are in the process of finalizing the design and implementation of certain ITGCs and other controls for systems related to the Company’s financial reporting processes, specifically on the IT interfaces that transfer data between the order processing system and (i) billing system; (ii) financial reporting system; or (iii) revenue calculation system impacting the majority of revenue.
•We are in the process of finalizing the design and implementation of controls over the evaluation of standalone selling prices of performance obligations utilized in accounting for revenue, including review controls over pricing and discounting.
While we have taken steps to implement our remediation plan, the material weaknesses will not be considered remediated until the enhanced controls operate for a sufficient period of time and management has concluded through testing that the related controls are effective. The Company will continue to monitor the effectiveness of its remediation plans and refine plans as appropriate.
(c) Changes in Internal Control over Financial Reporting.
In addition to the identified material weaknesses noted above, we are implementing a customer relationship management tool across our businesses as a strategic initiative that will replace many legacy systems and that could materially affect our internal control over financial reporting (as such term is defined in Rules 13a - 15(f) and 15d - 15(f) under the Exchange Act). Other than as described above, there have been no changes which have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting during the quarter for which this report relates.
PART II. OTHER INFORMATION
30
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 are a party or to which any of our or our subsidiaries’ property is subject.
ITEM 1A. RISK FACTORS
There have been no material changes to our risk factor disclosures since our 2023 Form 10-K. The risk factors described in the 2023 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.
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.
31
ITEM 5. OTHER INFORMATION
Rule 10b5-1 Trading Plan
During the second quarter of 2024, none of our directors or executive officers (as defined in Rule 16a-1(f) under the Exchange Act) adopted terminated
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 filed Apr. 1, 2024 | |||||||
| 3.1 | Exhibit 3.1 to Form 8-K filed Oct. 3, 2016 | |||||||
| 3.2 | Exhibit 3.1 to Form 8-K filed May 31, 2024 | |||||||
| 10.1 | Exhibit 10.1 to Form 8-K filed May 22, 2024 | |||||||
10.2 + | 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 June 28, 2024, 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, (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 | |||||||
+ Indicates management contract or compensatory plan or arrangement.
32
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/ PHILLIP SAWARYNSKI | ||||
Phillip Sawarynski Chief Financial Officer (Authorized Officer and Principal Financial Officer) | |||||
DATE: January 15, 2025
33
Exh. 10.2
TRIMBLE INC.
AGE AND SERVICE EQUITY VESTING PROGRAM
initially effective as of January 31, 2017;
amended as of August 6, 2021;
amended as of March 20, 2023;
amended as of May 1, 2024
1.Purpose of the Program. The Committee has adopted this Age and Service Equity Vesting Program, as amended from time to time (the “Vesting Program”), to provide enhanced equity award vesting treatment and certain health benefits to selected employees who are nearing retirement age and have demonstrated a commitment to the success of the Company’s business over many years of service.
2.Definitions. As used in this Vesting Program, the following terms shall have the respective meanings set forth below:
(a)“Board” means the Board of Directors of the Company.
(b)“Cause” means (i) the Participant’s engagement in acts of embezzlement, dishonesty or moral turpitude; (ii) the conviction of the Participant for having committed a felony; (iii) a breach by the Participant of the Participant’s fiduciary duties and responsibilities to the Company having the potential to result in a material adverse effect on the Company’s business, operations, prospects or reputation; or (iv) the repeated willful failure of the Participant to perform duties and responsibilities as an employee of the Company to the reasonable satisfaction of the Board (except in the case of death or disability) that has not been cured within thirty (30) days after a written demand for substantial performance has been delivered to the Participant by the Board. The determination of Cause shall be made by the sole determination of the Board.
(c)“Code” means the Internal Revenue Code of 1986, as amended.
(d)“Combined 70 Requirement” means that the sum of the following is equal to or greater than 70: (i) the Participant’s age on the Date of Termination, and (ii) the number of years of Continuous Service or Cumulative Service that the Participant has completed as of the Date of Termination. For example, if a Participant both has reached the age of 60 and has completed 10 years of Continuous Service or Cumulative Service as of the Date of Termination, the Participant will be considered to have met the Combined 70 Requirement.
(e)“Committee” means the Compensation Committee of the Board.
(f)“Company” means Trimble Inc., a Delaware corporation.
(g)“Continuous Service” means the period of continuous service with the Company that the Participant is deemed to have completed in accordance with the policies of the Company governing continuous service credit.
(h)“Cumulative Service” means the total period of service with the Company that the Participant is deemed to have completed during a period comprising no more than two periods of Continuous Service, provided that the period of Continuous Service immediately prior to the date of Termination shall be no less than five years.
(i)“Date of Termination” means the date on which the Participant’s employment by the Company terminates and such termination constitutes a “separation from service” as defined and applied under Section 409A of the Code and the related Treasury Regulations and guidance thereunder.
(j)“Eligible Equity Award” means an award of TRSUs, PRSUs or Options granted to a Participant under the Stock Plan on or after the date the Participant is selected by the Committee to participate in the Vesting Program.
(k)“Minimum Age Requirement” means attaining a minimum age of 55 years old on or before the Date of Termination.
(l)“Minimum Service Requirement” means (x) having a minimum of 10 years of Continuous Service on or before the Date of Termination, or (y) having a minimum of 15 years of Cumulative Service.
(m)“Option” has the meaning ascribed to it in the Stock Plan.
(n)“Participant” means an employee who is selected by the Committee to participate in the Vesting Program.
(o)“PRSU” means a Restricted Stock Unit, the vesting of which is based, in whole or in part, upon the attainment of performance goals or conditions.
(p)“Restricted Stock Unit” has the meaning ascribed to it in the Stock Plan.
(q)“Stock Plan” means the Trimble Inc. Amended and Restated 2002 Stock Plan, as may be amended and restated from time to time, or any successor plan.
(r)“Subsidiary” means any corporation or other entity in which the Company has a direct or indirect ownership interest of 50% of more of the total combined voting power of the then outstanding securities of such corporation or other entity.
(s)“TRSU” means a Restricted Stock Unit, the vesting of which is conditioned solely on the Participant’s continued service with the Company or a Subsidiary.
3.Eligibility.
(a)Eligible Employee. Employees of the Company and its Subsidiaries are eligible to participate in the Vesting Program. The Committee, in its sole discretion, selects the employees who will participate in the Vesting Program.
(b)Eligible Equity Awards. This Vesting Program applies only with respect to Eligible Equity Awards. All other Company equity awards will vest according to their terms.
(c)Eligibility for Benefits. To qualify for the benefits set forth in Section 4(a) below, a Participant must meet the Minimum Age Requirement, the Minimum Service Requirement and the Combined 70 Requirement, and circumstances giving rise to a termination of the Participant’s employment for Cause may not exist as of such time. The Committee has sole discretion to waive the Minimum Age Requirement, the Minimum Service Requirement, and/or the Combined 70 Requirement, as it deems advisable.
2
4.Rights of the Participant upon Voluntary Termination (or Company Termination Without Cause).
(a)Subject to the requirements in Sections 5 and 6 below, if the Participant terminates employment at a time when the Participant satisfies the conditions in Section 3(c), then the Participant will be entitled to receive the following payments and benefits:
(i)a lump sum cash payment equal to $50,000, representing a payment with respect to medical and dental benefits, which shall be payable within 65 days of the Date of Termination;
(ii)the immediate vesting of each outstanding Eligible Equity Award granted in the form of a TRSU that is held by the Participant immediately prior to the Date of Termination; the TRSUs that vests pursuant to this Section 4(a)(ii) shall be settled within 65 days of the Date of Termination; and
(iii)the pro rata vesting of any outstanding Eligible Equity Award granted in the form of PRSUs that is held by the Participant immediately prior to the Date of Termination equal to the number of PRSUs that become eligible to vest based on actual attainment of the performance goals, multiplied by a fraction, the numerator of which is the number of calendar days that have elapsed between the commencement of the performance period applicable to the PRSUs and the Date of Termination, and the denominator of which is the total number of calendar days contained in the corresponding performance period; the PRSUs that vest pursuant to this Section 4(a)(iii) shall be settled within 65 days of the last day of the applicable performance period.
(iv)the immediate vesting of each outstanding Eligible Equity Award granted in the form an Option that is held by the Participant immediately prior to the Date of Termination and an extended post-termination exercisability period continuing through the expiration date of the original term of the Option (without regard to any reduction in the post-termination exercisability period resulting from a termination of employment that may be contemplated under the terms of the agreement evidencing the Option).
(b)In the event a Participant’s termination of employment also gives rise to payments and benefits under a Change in Control Severance Agreement, Executive Severance Agreement, or other similar arrangement (a “Severance Arrangement”), the Participant shall elect whether to receive payments and benefits under the Severance Arrangement or this Vesting Program, but shall not be eligible to receive payments and benefits under both. The Participant shall make such an election by completing, signing, and returning to the Company the election notice form provided by the Company (the “Benefit Election Form”). If the Benefit Election Form is provided by the Company via an electronic signature platform such as Adobe Sign, it will be deemed returned to the Company upon completion of electronic signature through that platform. If the Participant fails to sign and return the Benefit Election Form within seven (7) calendar days of the date on which the Benefit Election Form is provided to the Participant, the Participant will be automatically deemed to have elected to receive payments and benefits under option (i) below as if the Participant had completed and signed the Benefit Election Form.
(i)If the Participant elects to receive payments and benefits under the Severance Arrangement, the Participant shall not receive any payments or benefits under this
3
Vesting Program as a result of such termination of employment and shall only receive such payments and benefits to which the Participant is entitled under the Severance Arrangement, and such election shall constitute a waiver by the Participant of its entitlement to any payments or benefits under this Vesting Program.
(ii)If the Participant elects to receive payments and benefits under this Vesting Program, the Participant shall not receive any payments or benefits under the Severance Arrangement as a result of such termination of employment and shall only receive such payments and benefits to which the Participant is entitled under this Vesting Program, and such election shall constitute a waiver by the Participant of its entitlement to any payments or benefits under the Severance Arrangement.
(iii)Notwithstanding anything in this Section 4 to the contrary, the election contemplated under this Section 4 shall not be given effect and will be disregarded if the Company determines in its sole discretion that the election would result in adverse tax consequences under Section 409A of the Code. If the election is not given effect, then each payment and/or benefit shall be paid in full under the applicable Severance Arrangement and (ii) any payment and/or benefit under the Vesting Program that is in the same category of payment and/or benefit provided under the Severance Arrangement (e.g., COBRA-related payments) shall be reduced by the similar payment and/or benefit payable under the Severance Arrangement. Anything in the foregoing to the contrary notwithstanding, no reduction shall be made in a manner that would fail to comply with, or would result in adverse tax consequences, under Section 409A of the Code.
5.Release. Unless the following requirement is waived by the Committee in its sole discretion, the payments and benefits payable under Section 4(a) shall not apply unless the Participant delivers (and does not revoke) an executed and effective release acceptable to the Company releasing the Company, its Subsidiaries, stockholders, partners, officers, directors, employees and agents from any and all claims and from any and all causes of action of any kind, including but not limited to all claims or causes of action arising out of the Participant’s employment with the Company or the termination of such employment (the “Release”). The Participant shall execute and return such Release within the time period provided for by the Company, but in no event later than 50 days of the Date of Termination (the “Release Deadline”). If the Release has not been returned on or before the Release Deadline, the Participant shall not be entitled to any benefits and payments pursuant to Section 4(a) of this Vesting Program.
6.Non-Solicitation and Non-Competition. Unless the requirement contemplated under this Section 6 is waived by the Committee in its sole discretion, the payments and benefits payable under this Vesting Program shall not apply unless the Participant agrees to (and complies with) a non-solicitation and non-competition agreement in a form provided by the Company, in its discretion, with a restricted period not to exceed 24 months.
7.Withholding Taxes. The Company may withhold from all payments due to the Participant (or his beneficiary or estate) hereunder all taxes which, by applicable federal, state, local or other law, the Company is required to withhold therefrom.
4
8.Scope of Vesting Program. Nothing expressed or implied in this Vesting Program shall create any right or duty on the part of the Company or the Participant to have a Participant remain in the employment of the Company. If this Vesting Program or the employment of the Participant is terminated under circumstances in which the Participant is not entitled to any payment or benefit under this Vesting Program, neither the Participant nor the Company shall have any further obligation or liability hereunder.
9.Amendment and Termination of the Vesting Program. The Compensation Committee may at any time amend, alter, suspend or terminate the Vesting Program.
10.Eligible Equity Award Provisions. The terms of this Vesting Program are intended to and shall modify and supersede the terms set forth in the agreement evidencing the Eligible Equity Awards. In the event of any conflict or inconsistency between the terms of the agreement evidencing an Eligible Equity Award and the terms set forth in this Vesting Program, the terms in this Vesting Program shall prevail over the terms set forth in the agreement evidencing the Eligible Equity Award (including, for the avoidance of any doubt, the provision set forth in Section 11 hereof).
11.Section 409A.
(a)Notwithstanding anything to the contrary in this Vesting Program or in the terms of any Eligible Equity Award, if the Participant is a “specified employee” (as defined and applied in Section 409A of the Code) as of the Date of Termination, the Participant shall receive the payments specified in Section 4(a) above on the earlier of (a) the first day following the six-month anniversary of the Date of Termination, or (b) the Participant’s date of death, to the extent such delay is required in order to avoid a prohibited distribution under Section 409A of the Code. For purposes of Section 409A of the Code, each “payment” (as defined by Section 409A of the Code) made under this Vesting Program shall be considered a “separate payment.” Further, if the 65-day payment period described in Section 4(a) spans two calendar years, then the payments contemplated thereunder shall be paid in the second calendar year. Notwithstanding anything to the contrary in this Vesting Program, the Committee may amend the Vesting Program, or take any other actions, as deemed necessary or appropriate to (a) preserve the intended tax treatment of the payments or benefits under the Vesting Program, or (b) comply with the requirements of Section 409A of the Code and related U.S. Department of Treasury guidance and thereby avoid the application of any penalty taxes under such Section, but the Committee shall not be under any obligation to make any such amendment. Nothing in this Vesting Program shall provide a basis for any person to take action against the Company based on matters covered by Section 409A of the Code, including the tax treatment of any payment or benefit under the Vesting Program, and the Company shall not under any circumstances have any liability to the Participant, his estate or any other party for any taxes, penalties or interest due on any payment or benefit under this Vesting Program, including taxes, penalties or interest imposed under Section 409A of the Code.
(b)Notwithstanding anything to the contrary in the terms of any Eligible Equity Award and except as set forth in Section 4(a) of this Vesting Program, for purposes of complying with Section 409A of the Code: (i) a Participant’s TRSUs shall be settled on or as soon as practicable, but no later than 60 days following the date on which the awards vest according to their fixed schedule; (ii) a Participant’s PRSUs shall be settled within 65 days of the
5
last day of the applicable performance period; and (iii) regardless of any acceleration of the vesting of the Participant’s Eligible Equity Awards that may occur under their terms, in no event will payment of vested awards occur other than as set forth in Section 11(b)(i) and (ii) hereof except where vesting occurs upon a Permissible Payment Event, and in such case, settlement of the vested awards will be made within 60 days following the applicable Permissible Payment Event. For purposes of the foregoing, a “Permissible Payment Event” means the Participant’s death, “separation from service” or “disability” or a “change in control event” in each case as defined and applied under Section 409A of the Code and the related Treasury Regulations and guidance thereunder. Notwithstanding anything herein to the contrary, nothing in this Section 11 shall serve to modify the payment terms of any equity award that constitutes non-qualified deferred compensation that is subject to Section 409A in a manner that would cause the equity award to fail to comply with, or otherwise result in adverse tax consequences, under Section 409A of the Code.
12.Compensation Recoupment. Pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Act”), any payment or benefit under this Vesting Program shall not be deemed fully earned or vested, even if paid or distributed to the Participant, if such payment, benefit, or any portion thereof is deemed incentive compensation and subject to recovery, or “clawback” by the Company pursuant to the provisions of the Act and any rules or regulations promulgated thereunder or by any stock exchange on which the Company’s securities are listed (the “Rules”). In addition, the Participant hereby acknowledges that this Vesting Program may be amended as necessary and/or shall be subject to any recoupment policies adopted by the Company to comply with the requirements and/or limitations under the Act or the Rules, or any other federal or stock exchange requirements, including by expressly permitting (or, if applicable, requiring) the Company to revoke, recover and/or clawback any payment or benefit under this Vesting Program.
13.Employment with Subsidiaries. Employment with the Company for purposes of this Vesting Program shall include employment with any Subsidiary.
14.Governing Law; Validity. The interpretation, construction and performance of this Vesting Program shall be governed by and construed and enforced in accordance with the internal laws of the State of California without regard to the principle of conflicts of laws. The invalidity or unenforceability of any provision of this Vesting Program shall not affect the validity or enforceability of any other provision of this Vesting Program, which other provisions shall remain in full force and effect.
6
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: | January 15, 2025 | /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, Phillip Sawarynski, 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: | January 15, 2025 | /s/ Phillip Sawarynski | ||||||
Phillip Sawarynski | ||||||||
| 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 June 28, 2024 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 | ||
January 15, 2025 | ||
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 June 28, 2024 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Phillip Sawarynski, 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/ Phillip Sawarynski | ||
Phillip Sawarynski | ||
| Chief Financial Officer | ||
January 15, 2025 | ||