Trimble Inc. (TRMB) September 2026 Conference Transcript

All right. Go ahead and get started. Well, my name is Clark Jeffries. I'm part of the tech research practice here at Piper Sandler. I'm very pleased to have Phil Swarinski, CFO of Trimble. Thanks for coming to Nashville.

Thanks. Good to be here again.

Yeah. Fantastic. Well, let's maybe just start with some brief overview of where the Trimble business stands in 2026, and then we'll get right into it with some segment questions.

So I would characterize 2026 as really across the business and maybe to step back and give a little bit of context to that statement, really like where Trimble is, I think, is I think about sort of the growth drivers and the thesis around us, around the markets, the strategy, the execution and the execution by the right management team. So when I think about the markets, large, global, underserved, underpenetrated markets for Trimble. Our investor day late 2024, we indicated $72 billion of addressable markets. It's only 25% penetrated across Trimble. So that says that there's a lot of ability for us to continue to grow, continue to drive our offerings and our applications, particularly in the world of AI that I'll talk about in a little bit. The right strategies. We started on our connect and scale strategy, and this is connecting workflows, connecting data via our ecosystems and our platforms. We have a platform within engineering and construction, which connects both the digital and the physical, which is unique, I think, for Trimble. And also within a transportation logistics business. And so we have the right strategy. We identified over a billion four of cross-sell opportunities with products that we have with the customers we have today. And that was actually as of investing in 2024. Since then, we continue to build more capabilities organically and inorganically, and be able to continue to have more options. How does that manifest in 2020 in the market? In Q2, for example, the company had a 10% revenue growth. That was despite about a $14 million headwind due to tariffs. So we had some tariff refunds, which were counter-revenue, but we were up 10%. Our ARR has been up 12% in the quarter. Our EPS was 21% growth year over year. And if I think back to our original guide for the year, we're up $65 million. We've guided now plus $65 million on revenue for the year and another $0.13, plus $0.13 EPS, which gives us a 17% EPS growth. So continue to execute on the market conditions, continue to execute with our strategy in delivering the results in 26.

Yeah, fantastic. Well, let's dive into ECO. So a big part of the story, 60% of ARR, a trillion dollars of capital project value managed through the platform. But also, you know, a mid-teens grower organically historically, and you've been able to do that mid-to-high-teens ARR growth basis for years. You know, how would you frame how you've been able to do that so durably? Lots of investors sort of try to pattern match Trimble to the rest of construction software. I don't think that that really is constructive, but maybe let's talk about Trimble Construction 1, the bundling effort, and the number one drivers of durable mid-teens organic growth.

Yeah, great question. And just to put it in context, the Trimble ACO business has grown. Mid-teens are higher for 28 straight coming out of Q2. The market size is there. Our capabilities are there. We focus on execution, our go-to-market. We unlock that cross-sell opportunity, which we're seeing in the business. We continue to add more and more capabilities to the business to unlock even more and more cross-sell. So, you know, the business has really been, I think the market's there and the business has been executing. And as we think about going forward, some of the particulates probably topical now is AI, which I think we're really, really set up very well as a company to be a leader and continue to be a leader as we think about AI and additional unlock for us as we go forward. And when I think about our platform, so I mentioned both the ACO and the transportation platform. So what makes Trimble unique and how do I think about our competitive moats and our moats? We have trusted data within our ecosystems, domain context. These are very large and complex industries that we're in. These are complex problems to be solved. We have the domain knowledge. I mentioned the connection to the office in the field from an engineering and construction standpoint. We have the hardware in the field to be able to move the dirt, build the buildings. That hardware also connects back into the back office where you have the digital twin. And so we think about a continuum where the digital to physical can move back and forth. And so I really like that set up. And how do we see it in action? Well, we continue to see within our Trimble Connect platform the growing amount of users, projects, data, and the engagement through the platform. And so all that lends itself to that opportunity in front of us.

Well, certainly it was, you know, many years ago, a lot of it was an acquisition-driven portfolio in AACO. we've now gotten to the point where it's very much distanced from inorganic contributions. The first largest acquisition since 2023 came with Document Crunch. And so there might be a little bit of a change here with what AI can do in terms of creating new opportunities in the segment. So what's interesting about the Document Crunch business, what drove you to bring that capability in-house? And when you think about have we gotten to the point where a lot of the bundling efforts an execution game from now on and you can maybe go back to thinking about expansion of the portfolio, whether AI is the catalyst or not.

I think it's both to your last statement. We want to continue to add capabilities both organically and inorganically and we think about that regularly. We've done a lot of the tuck-ins. We like that play. We quickly can take capabilities and integrate them into our systems and put them in the hands of our sellers to be able to have more cross-sell and up-sell opportunities with the customers. So we really like that play. Document Crunch is really pleased. The business is at or ahead of the models with construction. I think the average disputes in construction are close to $60 million now, so it's a big It takes, I think, north of 12 months to resolve these, so it takes a lot of time and effort from our customers. So how do we get more proactive with our customers in risk managing their construction projects to get in front of these types of disputes? to save time, save money, and action upon them proactively versus the people in the team that's come along with the business. They're an AI-forward team and are really helping us as we continue to move forward in this age of AI and continue to up our game and those opportunities to deliver the products and the capabilities to our customers.

One thing that was interesting to me was this launch of Trimble Financials. You know, I'm very curious, you know, what was the opportunity to do that now and why a standalone subscription? I think a lot of investors would think about construction software as you're chasing the E&R 400 and you're chasing them with everything you can possibly sell. So it is interesting to see maybe taking that ERP heritage around the longstanding brands that you have on the financial management side and then kind of going after some smaller entities. So maybe we could talk a little bit about that solution, and then do you see them as customers that can actively transition to the existing products in the portfolio when they get past $10 million of revenue?

Yeah, it's a great question. I'm really excited about this product. So as we think about that, where is that addressable market that's not adopting technology? And we see that in a lot of the smaller customers or mid-sized customers. Maybe they're still using Spreadsheet or they don't have bespoke accounting people or job costing capabilities and they're doing everything manual. And so Trimble Financials is a way to tap into that market. Number one is get more customers that aren't in the Trimble ecosystem into the Trimble ecosystem, continue to create that network density within our platforms. But as they grow, is grow with Trimble. So number one is, you know, as they get bigger, moving into more sophisticated products, if it's in our ERP, for example, that we have within our viewpoint products and moving them up to higher and more capable products. So that's one path. The other path is building, continuing to build a customer base that we can have other relevant products that we can bring into from the cross-seller opportunity. Really excited about that. We actually did, which is, again, a similar type of approach where we can go into a market with a free version that has some limited projects to be able to access and bring more and more Trimble customers.

And just rounding out AACO, biggest obvious opportunities in AI that you think could be the most material use cases, whether that be 12 to 24 months?

Yeah, it's a really great question. What I really like is the team has been leaning really heavily into AI when we think about our product development. I'd say broadly speaking across Trimble, it's not just a product development, it's back office and others when I think about those opportunities. But, again, I go back to, you know, I think that AI is really, it can increase our platform value. The more folks that are in the platform, the density, this is where people go to work. They go to collaborate within our platforms. Having more AI capabilities only makes our customers do the work better, more productive. In some ways, if they're, you know, having a hard time finding labor or people, for example, Can they augment their own processes to be able to move faster and be able to get more done with less? So I think that, again, the Trimble's core capabilities, that platform play, the data density and the context that we have within very complex industries, I think it lends itself really well to applying AI and enhancing the value we can provide to customers.

Well, let's transition to field systems. I mean, this is probably the perfect example of a model transition story in terms of historically a hardware-driven business, various methods of go-to-market, 30% plus margins, I'll say, even though it's a hardware business. But that was because you disaggregated software and hardware, and you were still selling software attached to the hardware in a lot of instances. Now it's moving to hardware as a service. Maybe we could talk about where growth comes from in that industry. I think you've talked about it as being 50% from existing solutions, 50% from model conversions. Is that largely still true? And how do you expect that mix of model conversions versus existing to trend from here?

Yeah, as you're talking specifically about the ARR and the conversions from our perpetual licenses into more subscriptions than term licenses. So we've been on a journey in that business for a few years now. and set it at Investor Day as 200 to 300 basis points of headwind to revenue in that business as we convert more and more. There's still an opportunity as we go forward in that business, but the percent the last two years of AOR, now there are some attaching our RTX product, which is a subscription product, and that created a tailwind for the last two years. We knew coming into this year that it would moderate a bit, which we expected, and it's showing that trend. I find it really interesting and exciting as well in that business is the subscription offering. and been doing very well there. But what's even more exciting to me is that it's actually unlocking additional TAM for us that we're seeing. And, you know, some of the numbers are around 50% of our new bookings in that product are with new logos and new customers, right? So we're able to unlock, again, some more addressable market by having a subscription offering with the hardware and the software. And so we'd like to see the progress of that and have good optimism as we go forward.

Is that the sensitivity to capital purchasing versus sort of a more lower run rate OPEX purchase, or is that by nature of combining them and being able to deliver the software product, there is opportunity to tack on another software product without it being a whole new selling motion?

Yeah, I think part of it could be how you make the decisions within your firm of CAPEX versus OPEX. So that is a good point. The other thing is we make it – it's a compelling offering. We have what's called a technology assurance on that. So if you're on the subscription and Trimbo happens to come out with new hardware that's a like-for-like, you get the new hardware. So you don't have to worry about staying current on the technology. As long as you're on the subscription, we can keep you current. And that's really attractive for our customers because they don't have to come.

And one of the strategies here has been the technology outlets. um could you maybe talk about mixed fleets and um where you think the industry is at in terms of it feels like doing the best that they can uh there are obviously uh there are some customers that might be able to buy first you know oem there might be some customers that can buy first party all the way through oem but there's a lot of the market that that can't and so when you're talking about an organization that wants to embed more autonomy, how does mixed fleets present a pretty big challenge for them?

Yeah, it's a great question. And our customers, actually, a lot of them are mixed fleets. They have different types of machine. And what they really want to standardize is on the technology and the workflows. And so this really comes from a customer-first perspective of, for that customer that wants to standardize on Trimble, how do we give them access to Trimble regardless of the machine type or the brand? And so the Trimble technology outlet is a natural evolution. So prior, I think it was late last year, or the year before, we were selling most of our products through Cytex, and these are extensions of CAT dealerships. And so what we're now doing is we're selling what's called these Trimble technology outlets, and it enables us to access more of the market from different types of brands and machines. And so, again, this is really centered around the customers and whether that customer buys it factory fit or whether the customer buys it aftermarket, which is really where we sell to, they want to standardize on Trimble and Trimble's technologies and Trimble's workflows. And this just gets them more access to more points of sale and more points of service to be able to standardize on the Trimble.

Before continuing on, any questions? from the room? Well, T&L, you know, T&L's probably the topic du jour. You know, I think the way to frame it is you've got incredible inbound interest on that segment. There's a responsibility to shareholders to do a strategic review. But let's just talk about, like, broader picture around rationale and portfolio management. What do you still like about the transportation logistics business, such that if a few months from now nothing happens, there's no transaction, what will you be focusing on, and what do you think are the long-term opportunities of T&L? And then I'd love to just understand maybe if that transaction does happen, what priorities might change.

Sure. So really like the T&L business. We've had it for a while. It's been several segments, the main being our enterprise business, which is our TMS, our maps business. U.S. and our transportation business. Also within there is a forestry business. So those are the four parts to it. But, you know, we really like it. I started with the conversation around attractive markets that are underpenetrated, underserved with technology. Supply chain in particular, you know, transportation logistics is one of those markets. So we see a real big opportunity in that business. The market has been down. We've been in a freight recession for several. And I'm really excited about the opportunity when the market does turn around because we're setting ourselves up very well. The business continues to grow even in a challenging market. And we've seen that. We see the margin expansion. So demonstrating the shareholders was best that those are the ones.

Well, last time you did sort of a major divestiture, it was a time period where that kind of money was transitioned to an accelerated share repurchase. It was a certain time period in the history, but I'm just curious if you were thinking about tomorrow having the proceeds, where do you think sorts out as a top priority and, you know, in the evolution of the portfolio, you've been doing a lot more tuck-in kind of activity. So, you know, when does it start?

Yeah, so let me take it. Here's how I think about capital allocation in general. So first and foremost, we put our money and P&L money into the growth of the business. That's first and foremost when we talk about efficiencies in AI and back office and how we can pivot more capital into growth opportunities for the business. So that's first and foremost along the line. Now, if I look at Trimble's balance sheet, I really like the balance sheet of the financial health of the company. We're below our two-and-a-half times long-term target from a leverage ratio. We're closer to 1, 1.1. So we've got a lot of flexibility on the balance sheet to do things. And I look at, you know, so where are those opportunities then, from a capital standpoint, not being in a high-leverage situation. So you look at M&A, and we've talked about sort of the tuck-ins and buying capabilities that we can then cross-sell and up-sell. We've been doing that. We like that motion. And for opportunities for a larger M&A, we definitely look at that through, again, a strategic lens and does it make sense from either, you know, another anchor tenant that we can cross-sell or run the cross-sell play into, just like the viewpoint opportunity that we've seen very successful over the years. And then beyond that, we look at share repurchases. And I committed to invest share repurchases, and I think you've seen our track record over history that we're also opportunistic on the share buybacks. I think if you go back to the beginning of 2025, we've actually bought back close to $1.2 billion worth of shares in that time frame. So we're willing to be opportunistic as well in the share repurchases.

All right. Well, last question. We'll take it to wrap it up. And it's just, what have you learned from the CFOC about investing in AI through the development effort and maybe even how the development organization has changed as a second derivative of AI investment? because you've talked a little bit about accelerating practical AI releases and having even given a target of how much of the development resources might go to AI. And so I think that's a very much more explicit messaging around that effort. And, you know, it didn't exist five years ago probably as a concerted effort within the organization. So from your perspective, are you pleased with being able to ship code faster? or what's required that might be like kind of a hump that you think will have more leverage over time as you kind of grow into it? Any kind of CFO takeaways from AI investors?

Yeah, it's a great question. I'm sure a lot of CFOs are looking at it in similar ways as I am. You know, maybe if I just bifurcate it a little bit, it's can we bring product to market faster, right? And so as I think about we're places that we have opportunities for us to grow our revenue, our ARR. Okay, is it bringing more products to the market faster and leveraging the speed and time to market of that? We are seeing cogeneration and improvements there to be able to do that as we go forward. I also think about internal use and how we can be more effective and efficient within not just product development, but across the board in a lot of the groups that I manage. And we're definitely, the teams are leaning in and we're finding opportunities to do that. So I really like where we're going, but, and again, it comes back to our capital allocation of saying where we can get more efficient, how can we then pivot that to areas of growth? But I also think about it as an and, and again, if you look at the numbers this year for Trimble, we're delivering the expansion on the margins. At Investor Day, I talked about a 30% EBITDA margin for 2027, and we're very close to that, pretty much at that for our guide this year already, so a full year early on the margin expansion. So I see us as a story of an and where we're able to move faster, focus to the growth, allocate capital to the best growth and the best return.

And we've got an Investor Day coming up in the future, refreshing all of these.

Yeah, right now we're talking about potentially because we put targets out to 2027, so you can actually expect that sometime in 2027 we'll do a refresh and more to come.

All right. Well, Phil, thank you so much for coming to Nashville.