Trimble (TRMB) 1 Nov 232023 Q3 Earnings call transcript

Thank you for standing by, and welcome to the Trimble Third Quarter 2023 Results Call. After the speaker's remarks, there will be a question-and-answer session. [Operator Instructions] And finally, I would like to advise all participants that this call is being recorded. I would now like to welcome Rob Painter, Chief Executive Officer, to begin the conference. Rob, over to you.

everyone. Welcome,

started, that available safe you the get and our harbor presentation back. ask we refer our I on is website, at Before to the

growth non-GAAP commentary of of period with themes followed the unless and metrics will of third we financial focus year overview refer reflect a noted. Simplification, are Our put in including environment then the action today last organic execution the comparisons, otherwise corresponding taking today. which financial to start maintain performance how the lens quarter, strategic current review by we to see, of Trimble a market and an are our progression. I'll

Agriculture venture reviews translating positions AGCO and while shareholders. us the progression, Slide model. EBITDA highlights also and is our XX% EBITDA now announcement finished and progression. XX% which third strategy X on focus record recurring. quarter big derisk attractive review a ARR our quarter. The venture stands and begin of at margin record. record were of Connect billion, durable up business of our growth deleveraging The of XX%, key joint clear into ARR revenue and messages a at up XX% the our capital a strategic our was is X our business in news shareholders. Gross margin a business. The more a Slide a the with to to Scale reflection translated Let's continued to $X.XX organically. into with simplify, returning gross of XX% at and

to forma XX% on revenue. XXXX announcement our on XX% call, we As impact the recurring pro numbers and Trimble software moves discussed

a mixed Hansotia partner to to team leader and with fleet, in proud global his autonomy AGCO and solutions. farming are We Eric at smart be

that our million revenue basis. the and close with also first quarter, reaction the to divested trailing our pleased are like and year on I'd business, to of partnership. In which to external the far of the $XX a expect half internal approximately next Land we Folio transaction say really We in thus we had XX-month

now We a and businesses focus simplification strategy. the X years have last to divested execute and pursued XX our better over

increasing and updated macroeconomic across signals. Looking at lens, fourth many view rates, see the end business stress a of geographies, have exacerbated interest and weakness with markets bullish global on we contribute war factors tensions. embedded bearish geopolitical signs our to and the quarter, which by These and

in impacting Geospatial. On hardware the and bearish downturn side, & businesses Infrastructure the see our residential construction both Buildings we in

projects, and notably also enough emerging especially manufacturing, While agriculture, we and see to in strength Europe. In within overcome Europe. aren't of Utilities, major renewables we onshoring seeing signs of see dynamic, in we earthmoving Resources activity in this weakness

preparation venture. In cut technology distribution we are a in also seen We we've our ambitions numbers as for and market, in choppiness transportation, companies and some expect of new back it's we out in think to down either some our safe strategy AGCO I joint their trucking execute the business go significantly. or say that freight

productivity, sell volume XX%, and that environmental the that evidence safety, side, Infrastructure, healthy. demonstrable quality, were This proposition. In the bullish works a bookings value the and than and construction more we is On software let's that up strategy remember dollar is sustainability. secular transparency Buildings of

delivering Our model results. is framework Trimble One Construction business

levels within and offerings mapping continue drive growing to innovate we cycle offering releasing expectations business. also and customer and the a our business a in providing a to In enhancements visibility control as of the the insight new replacement into at and ARR are models rate contribute our Geospatial, quarter. We to double-digit surveying exceeded of our new systems series are service bookings customers. Machine persona-based targeted

will discipline effect User digits. appropriate of learn non-Ag to shakeout to have in the and come landscape. Construction ARR initiatives more Next quarter. focus we that than Utilities, operate the the and latest restoring taking take Trimble double industry efficiently with backdrop, This we participants rate starting financial in protect this and collectively are capacity and our Dimensions transportation, to effectively. businesses to in bringing in better initiative a third annual engage as conference, thousands and our competitive and our together to time, we company our we will, will the and to the in undertook demand cost Against action greater In containment million is balance Engineering run the $XX grew addition hold model, innovations. In in of simplify week, reduction action our where Resources industry cost

We businesses customers. bringing and closer corporate will to by simplify resources reorganizing our operating

we capital allocation. example, corporate have work embed platform of incubated at For now cloud time sharpen industry the It's couple level to within years. our the last business that a and

to by the enable right focus midterm the and short- better the of will over you. some getting back to seats outcomes. to We core leaders and in right David, initiatives deliver our scaling

Thank you, Rob.

Let's X review with third results. start of on Slide a quarter

X% revenue acquisitions quarter and strong of X%, in organically. at grow rate. of divestitures X%. Subscription net foreign increased and by Changes $XXX million up was while exchange X% total Third recurring to a in revenue continued revenue up revenue by rates increased

environment the across end impacted As all weakening sentiment ago, mentioned demand markets. adversely customer Rob hardware of a our moment and macro

year-over-year early basis end favorable of X%, quarter. Net the of cost impact reduction input year-over-year, earnings was EBITDA expanded XXX actions in and exceeding pricing year-over-year to XX%, due took per increased and also margins points and ongoing record and range. share margins high mix the and to up a business gross third net inflation. prior Adjusted our margin an progression the by of grew reduced $X.XX, in Gross the guidance by the income operating driven dollars benefit quarter the in cost we increasingly

environment. our We are line tougher in the margin quarter, a with strong third bottom in results the performance of delivering very pleased even face macroeconomic

driven few focus on construction review detail up in rates, excluding On in and growth divestitures fluctuations. more XX%, I'll impacts the our currency and strong pages, third part Slide the will trends. revenue across to by software bookings our Turning X. of acquisitions, ARR businesses. I quarter organic now next was this

is digital of work bundled cross-sell Our solutions. platform enabling

the Our nonrecurring and below including customer was In up revenues propensity by macro year-over-year difficult. From where perpetual expectations. came impact with the software, X%. American quarter Europe, macro end worsened weakening geographic The X% hardware in invest. in sentiment many X%. revenues late our environment revenue our North markets trends Europe contracted were and and The visible hardware were to most streams, especially perspective, a in down across are of

to Moving Slide X.

million, free significantly up of $XXX which $XXX was prior are cash flow both with of operations from flow cash Our versus year. million

million to capital flow dynamics in cash strong lower lower our Our when and X time of million repayment announced. tax below The JV commitment to as we the X.Xx, net with quarter that in we Ag pay the to with and the of during made deal our inventory, quarter EBITDA committed backlog project from purchases the expected Transporeon negative with closes. backlog, revenue our next are ship leverage of Ag reflecting before the quarter ended working XX within of of with inclusive profitability. remains of the the entered as business leverage that We higher be of transaction capital. We of net our net down quarter line ahead the since billion of will of debt debt our the $XXX recognized $XXX repayment quarter measured $X.X ahead Transporeon of was Note debt benefited $X.X payments fourth Xx billion closing working the acquisition. going months. We backlog

earlier. what Finally, mentioned I'll repeat Rob

an reached of of Ag majority the our more streams. further both milestone and business recurring we quarter, important coming from will our business accelerate resilient. half of recurring revenue, our making direction revenue more predictable now the During The with revenue in formation our JV

and Viewpoint, Let's our turn on our X the growth revenue double-digit strategy of up bundles. segment Slide of businesses Revenue the across our momentum to revenue X%. bookings, segments. Buildings broader larger was This reflects success detail Tekla. by & additional with growth strong growing Infrastructure especially SketchUp broad-based was each at software e-Builder, and year-over-year ARR in for and evidenced Scale and and now of reporting Connect increases

environment offsetting up of of reflecting the our in the Cityworks. and Organic was rate ARR customers, experienced reflecting network demand and demand Transportation and year-over-year end above of was in Revenue federal Financial row. X%, U.S. margins Forestry segment changes. our lower double-digit markets. expanded X%, declines hardware in sentiment construction a high showed to who revenue both well Our in business. civil farmer Services, ahead dealers Ag down revenue ARR the end Partially impact One quarter in down declining government business in Utilities which growth and and survey demand, with orders quarter and the customers. Geospatial a up Europe, results many hardware distribution single-digit year prior progression the Geospatial portion at segment a number seventh largest makes we continue our areas. Positioning were was across the down rate at among earlier mid-single-digit year. Resources weakened place most weakness the pronounced in a our bright for our as was business for was our in levels of expectations spot

quarter, With hand, North our seen originally in in segment business notifications year. bookings not top line momentum other trends shipment we next market. bought that will planned in in the the uptick expectations expected. On a America driven has our the industry ARR depressed the we overall below Transporeon when spot Transportation contraction mobility almost into remain going the and by entirely moderate our business, volumes chart

and takes the the transaction-based tough economy our has with costs in recover Importantly, The Transporeon with improvement And managed we our in operating are and expectations. inevitable in customers positioned when recurring closed model, overall with line to goods maintained well this European the team we original our since environment margin deal have share. upswing an place. our remained market our

fourth Slide now discuss the X. the our year. to I guidance for quarter will Moving and full

results quarter a weakening third environment. demand Our reflect

the into weakness and million. fourth We to quarter project $XXX next revenue year. fourth and now We through quarter between expect of million $XXX this extend

a outlook a of in $X.XX software revenue reflects to full ARR, offset low This by Our a yields year and billion. to billion in outlook decline our $X.XX quarter mid-single-digit at perpetual XX% fourth hardware growth rate.

in Civil A reduction majority Hardware. hardware revenue in significant Construction biggest our the impact outlook businesses the in with is of

perspective, EPS Construction an underlying core X higher For to outlook prior XXXX, our at and our will combined to a helped Civil the hardware and our since back for businesses. expense mid-single reflects hardware look offset fourth this long-term the project $X.XX period rate gross or revenue to Agriculture businesses, our of $X.XX. pre-COVID guidance versus grown trends better of Geospatial, forecast, resulting margins lower fourth of is digit of our and have in it impact to impact of of All the trend. We determine long-term much a range of quarter that lower operating the the of quarter compound continuation

$X.XX levels, Our but down year XX%, margins primarily quarter, to the full $X.XX. Fourth be guidance the for year a EPS from meaningful ago is to are by range improvement quarter projected updated of to third mix. driven XX.X% in sequentially from operating

Even strong hardware to the rate. strongest at our down the our remain Within organic trends. are following we we overall businesses environment, software the our while will be in segment anticipate quarter, Buildings for the quarter the accelerating levels revenue single outlook mid-single-digit in for digits. segment from to the demand fourth macro mid-to-high expected third with a current quarter and Infrastructure offerings, see

to Geospatial business the in flat aftermarket or fourth a of to as level. Transportation federal business a segment in quarter. will higher by government. our network margins growth in growth the down churn and fourth lower be the low mid-single-digit from Gradual our areas mix. Resources $XXX sales in offerings. rest down to come the transportation our a offsets the North strong perspective, overall outlook environment ongoing a expected rate impact no expect reflects at mobility Geospatial segment single-digit core both This in customer across we our revenues the transition. levels will Transporeon's $XXX revenues remain down at modestly the of to revenue be across business to and down the impact a market due are of sequentially be fourth of will segment of the to million. American dealer flat core ARR cash survey some demand adverse improvement quarter Utilities will flow less offset million rate. quarter expected quarter quarter. From assumes the low XXXX free fourth the favorable in are flow year transportation European U.S. full outlook in fourth field at improvement cash to meaningful quarter third in range the This be double-digit

Excluding share million, Ag transaction-related net this with JV restructuring-related fourth our close February. cash in approximately income. practice, cash past certainty we cash upcoming outflows free outlook issue and of characterized XXXX the With reinitiate for of performance Xx represents and to of at outlook repurchases year this plan on year-to-date impact the release flow full of approximately we contractual flow next guidance our point, the $XXX in transaction, our quarter. Consistent earnings quarter threefold. plan be fourth our for year to with can strong At

proportion our expect has and following trends those will be of recurring our hardware sources year growth declines revenue growing as we XXXX as posted we that up of business organic base. than First, total revenue revenue this a better make stabilized the

continue the retention will a tough bookings and environment, support to continue a performance to at macro of ARR believe Even we context grow double-digit net outlook. this in rate. our Second,

the Third, margin achieve the taking, cost improve our EBITDA close track This Day of put last margins year. we Rob, with we are of AGCO back goals it expect to hold deal. to with I'll we Investor outlook reduction leaves the over in actions forward you. on the us or EBITDA turn our even to impact

strategy. On focus Connect the today: end to themes action started humbly venture, simplification, focus enhanced we forthcoming The Scale want and the all our call and the Ag we've and addition and to on our joint organizational failures learned execution, same discussed, with I moves simplification in successes. on from the drive execution. cost and we

continue and focused for we And on environment. We've we and safety, sustainability the decades, this to customers. against opportunities. productivity, We growth this conviction transparency done will best our innovate and we delivering what also will manage invest confidence to have through economic and for quality, we know do, stay our to need

downturn exit will We economic this stronger competitive footing. a on

has and Ventures, our will Finally, will David. Phil over he we've from of for time deep character company True very diverse that Phil we his Trimble the Sawarynski, would set smooth role decided been we of in a Treasurer are as having Co-Head announcing today David's transition of roles neither into Trimble over President Vice that crisis. steady and along strong crises X frame. I'm XX having leverage can the character to to that very our grateful May. together way. to will had David value. in is retire emulating. as the David's of Development, a team the line something comes worked Phil us Barnes work that open years, a Corporate of for the finance hand to ever succeed navigated our shareholder CFO ensure David, for last at questions. role Phil's envisioned. the we now itself reveals represents knowledge mandate years across unlock straightforward: all benefit having Operator,

from Goldman of comes And Jerry Revich question Sachs. line from Instructions] your the [Operator first

And David, congratulations.

Thanks, Jerry.

that could Rob, portfolio. looks the you the based the Can expand touch means construction you if seeing XX% moving just quarter, magnitude on of on you're specifically for slowing the where what the don't and you're about for into seeing It outlook for David, guidance construction quarter I a pieces, the ARR nearly are revision. talk just slowing what software in there wonder ARR you mind. if other growth on like fourth portfolio, you

it. well was for the in software Actually, construction B&I businesses QX. And the Rob. the quarter. ARR to bookings be strong This the thanks third for quarter The the over in continue I'll and the question. XX% is in segment as take for growth

our the growth ARR into see in I actually, with segment. fourth continued view that on So quarter strengths

the of a narrative say really the posted bit would a that will is ARR to I there. line. headwind FX holds the actually, be growth So at top

that, we remain for track. I adjusted think on So

talking tens is The Jerry, the the basis growth big story changes in is ARR we're growth, that points. sustained. of

ARR of business. As the good. our really momentum There's B&I said, Rob bookings no in fundamental change are

Okay.

So FX is driver a key then.

guidance we can not shift and margin it the the given but feels the performance the yet, got in rate trajectory, first in year. of then quarter half about talk we're and I margin 'XX versus like And about the Okay. run tailwinds XXXX. talking the know gears you've exiting

we takes at about in challenges. end and should mind? there like, and it the think what puts 'XX we be a as some market But basis, you momentum. like, might should obviously, least any around commenting year-over-year some margin So if feels look wondering on takes puts wouldn't mind keep I'm other on

the reiterate prepared the Jerry. Sure, I'll in remarks. Yes. comments

good had a hardware very the our We And Our margin between hardware to are and But issue, is fundamentally, both operating of and expense strong. our look actions carefully. margin story taken good. as trends that's portfolio. think sequentially, our won't manage very part software we've -- We QX QX. mix as within quite really

mentioned move Actually, in early here that that this started we're to year. going Rob even further QX.

to go the Our And that year goal where points looking XX of in when to maintain had the -- our the that. or we to we the pressure EBITDA if EBITDA impact back that point announcement, of made our the puts on said next be margin. the can is a out JV cover we And We're looking we're creation into position of creation I'll basis includes margins. JV. that grow downward remarks financial you Ag we of

even softer of are is Obviously, margin into top is margin great a yes, But anticipated. looking we managing So our on better line carefully business the something the year. story. that's and we the has been hardware than part story next

portfolio? plans quarter or the seasonally thinking indicators know And on of you I about are that in anything part Transporeon? that folks how fourth of don't business lines. on for based along visibility customers those shipping just you leading can within lastly, if have you And terms prepared comment

Yes.

we're a of visibility to as day significant we market. transportation -- can every very imagine, So the have you European portion

over well, the think we or We're characterize as a quarters, yet. weak bought after I last stabilizing I'd it since turnaround very a business. declaring after X -- period X the not

But worse. not but spot if utilization, you look better, volumes, necessarily transportation the getting pricing, capacity getting at of it stopped metrics

the see the ARR time, stabilization recover and our recover over very with can we to when. and time, will So But hard those model, will transaction-based with over exactly it. predict business

see markets. stabilizing. the the in in characterize you freight in some So I we Actually, market can It's America, think particularly end it's Europe. it as still recession, of part And of equipment, macroeconomic shipping there's packaging paper way construction overall year, on fewer But reflecting weak, what's versus and the the are economy trucks road, goods. the where down weakness. last by

think we've the basis stabilized. our some year, we last we'll So into of but that occurred quarter, the the improvement given the plan over next That's quarters. we'll be cautious, fourth drop of looking X magnitude for and

And the look that, micro win-loss to we our that's Jerry, at and When macro. are if I customer XXX% ratios the holding. retention complement have

is in share the region. market So our holding

keep that's think the I as important of in underlying the business. to well health for mind

of Your Melius comes Wertheimer next Rob question from Research. the line from

I have may. X if questions, I

then whether that's here. take? And bit And is But just inventory to And ballpark seeing Rob, guess. forecast? of channel you businesses inventory construction bit already really on micro, destock that because hardware or come a a market a how one second much if there and you how out that you question side? tone more little at curious might is of is I'm the a could do in I a see if look first could you're a for environment channel more the across obviously of an kind macro indicates negative The or your have long the estimate today's

million half good first back end than in really it was $XX dealer in factor Probably said the seeing, level seeing a of by civil did on I'll first. meaningful in change Actually, the in up dealers just we're year, our in about referenced we a inventory is little that Rob, Rob the first this point, went inventory. rates, We the quarter. half and first inventory the the our I reflects second we're the supply. the interest quarter, year. frankly, not inventory has this higher of recall, about his product our in That question it's David. estimate quarter. It's remarks, bit set in so down. of destock reflects side, carrying actually for take particularly QX. The in and less some markets, cost dealer see very of very the come the the a this inventory uncertainty desired one It that demand higher market

the So need less it than was. is hold inventory to

So that won't be helpful us. to

see a modest we'll I think correction.

Nowhere where in We're QX. But QX $XX range. close are in we inventories they $XX the will longer and aggregate be million think term. million the dealer to to over near like talking

There's I'll the geographies seeing. take the of macro embedded within and tale we're second part, that -- Rob, a the on within what answer.

speaking Asia So and North America, I'll roughly to Europe Pacific.

Let's at look North America.

such the subsegments eating dollar bill infrastructure dollars as centers, The dirt The inflation that catalyst. amount up on been the surprised build, to asteric compare positive of energy, remains catalysts. you see associated manufacturing, fair be won't is that the when and are within onshoring a spend. And data what the residential. You has infrastructure all is additional we compared those a renewable positive actually with that then the volume moved as the one

having what see residential markets. we We Asia is factors, China surprisingly, see well, you For but say have same worse. see -- you India an U.S. see worse we not rates we see And sure, being I impact than have Pacific, in better. In Europe, in the we the interest residential the would being

the Australian and residential we economy, China economy slower of of some market. You decent being amount that to see in connect the a the construction

mentioned it you first bookings ARR construction that XX% me So had we have business over the of in increase third have quarter. We and clear, growing add be that and let the within view during in B&I. in I our our present had And have hardware question we is the we on software businesses. those construction. businesses software XX% state up

in The feedback labor. continue qualified managing within finding They that customers, happening behavior backlog, different have that that to particularly software the the have is market a they trouble on hardware strong we labor, from there's business overall So that the the and Americas. business. get within

in is a And for numbers and so backlog that through that managing field plays workout into catalyst and that the adoption software and we complexity the have. the the

So now saying the better, fundamentally on future, we see and We're should we and into map the your that's is one don't other the part fundamentally the we question. which inflecting, as probably on it point was better, comment present of I the take essentially residential, better. assumption to this that our get XXXX discretely particularly it assumed planning most at getting doesn't

Of And positive additional interest when the course, rates thing in places here that come do down, next that a like U.S. will be we in housing. know year. we need

dislocation is there So a -- dislocation. fundamental

get So interest reasonable as assume doesn't. planning just that our moderate, the But it now, to smart to for it's the that, rates thing think better. assumption, think do I think I will is

comes the Baird. of Rob Mason question from next Your line from

tracks to Should back the ARR. said, about to B&I sound your Like What related digits, that on? expect around around been mid-single the outlook Just the transportation? much like overall it's to expectations in that movement go you we still ARR. it up not there's track did that,

Rob, in of and it's churn coming received forward. that mobility my mentioned will we occur business North bookings take I remarks in are Barnes. David in prepared that transportation that. in our American notification I'll going soft

QX churn points. going and by that do -- will next while business will year our looking around into ARR in better the XXX -- our mobility So we have think growth American our in North been basis adversely somewhere recently, affect transportation we ARR has

transportation base of is emphasize doing really Now the ARR rest the well. that I'll

rate, Our Maps ARR growing business were double-digit is even growing Transporeon at ARR.

and growing business is enterprise Actually, in ARR. our Our mobility business Brazil in good. is Europe

that the American of be are to the there So adverse. represents North going transportation X/X and mobility ARR trends about business more --

outlook ARR points dynamic base in transportation, be impacted to American hundred North core couple mobility. by of of growth basis for of sort because a churn the adversely forward the So is going

Understood.

should XXXX, as just somewhat follow-up just But think too may about speak this I is just up. just that CNH transaction coming the to about be dynamic closes, Maybe efforts ending want with a transaction to we impact impact the don't the curious relative understand and But how transitory of you then. of to how Okay. Obviously, the that that. AGCO year. broadly to a modeling and aftermarket next about agreement I'm until to backfill AGCO try solution. think a your

take for Rob, that CNH question. customer partner and that's the a an I'll basis. good ongoing important JV one. for on to and continues be Trimble an

of market as customer. able work going we our nature in to the Ag dealers change have changed to approach the the through we're year. part more -- the and to the distribution, the -- it we earlier work that change when announcement the end did a partner, directly CNH a with the of closer our was our and dealers the really as which in with strategy not with to be from a in of need being distribution in as future, the we saying made agreement and of customer we to CNH the relationship that to That's signal So aftermarket what's happening

and going over the nature be They forward, they fleet. means work XXX been say, important obviously, the serve an all that will are And well important So including AGCO, mixed through iron, venture remember, of the joint we have an customer. customer OEMs They an of customer. that important we as with colors today.

that's of our on market. So the view the shape

that clearly, more of an Now have we know the and own that -- that their they've know technology. set you done. acquisitions ambition to And will through CNH have

out the of So hundreds let's units thousands that in But say, time, topic. of I'd in have be, machine. remember that a we will

on to many, many who Trimble continue operate we have future. technology, farms do believe and We we'll the so in

change conversation numbers when largely certainly we been in part go we be expected for disruption the some AGCO we the That's sure. had through there with establish we So a had will joint venture. the And that. and as we've of

reference the the way, quarter, third some a how Rob, that's causing to distribution there isolate was -- Is today? transition much impact the in how there to segment much R&D

be I that, also in would very the But millions of a of timing low so measure it in, well the dollars, percentage call I'd say, that think disruption. single-digit I topic. like some it could

X changing CNH this at In of case, relationship; talked year, one when the this the we year, the were in announcement. was when about the fairness there of beginning second to arc JV the and dealers, announcements the

I customers where hey, there reasonable said, demand So a and customers to do our back use some taken our step these -- is it and mean what think out this and dealers and in market assume the we technology. go? of that There's okay, paused does use have

and may So through that new It the our marketplace. capture strategy into strategy distribution distribution shift we just Vantage year can from, meet this believe I'd say, through we that year. the out in next need

next Your the William Jonathan from line Ho question of from Blair. comes

guess, Just sort what better customers maybe understand they're us sort commentary your Can starting are I some means adopt wanted around from you opportunities approach your the help opportunity what that One the an to maybe the Trimble and understand ASP in upsell B&I perspective? seeing bundling as and business. broader maybe of and of to, platform

customers earlier to the saying, with. good see productivity yourselves more -- easier similar What been we is they and that's -- has part Construction that from continue differential business the from they're do Trimble to part the to -- about well, to and They're have from we with that we we of What volume the do and with what question. is that from that. And is way. that in. looking looking task move delivering consistent It's us in looking system the complexity customers. us hear of you, the data Jonathan, we cross-sells. hear And we're hear my make to is grow Trimble." what business of at to from part One looking let's remarks doing what the work where theme want "we They're work delivering They're productivity. to to they're manage is in a talk of

So we year-over-year look a and the strong on at the it's a increase of basis, amount cross-selling cross-selling. double-digit in

bundle. And set a fabricator general solutions And Trimble than so TCX of is manifest those That further is a of mechanical we architect. it could than offering. level, Trimble solutions makes essentially bundles where through, at persona-based go a the agreement or different benefit we than or defining in use more and different a different with it cross-selling a as contract buy persona-based together the contract to from the those think to say framework customer steel easier that is level. TCX then can the that

And And I'd bundles manifestation or we say, quite best our good, offer offering so this, at journey. offer a to persona-based the those of we best, bundling can this in can And fullest specific create of offerings still, sort we're personas. those personas. early within better,

got of so me with business. the that to in one runway conviction the here many that And gives that's we've work things

us customers cost give is as this Got on then can environment? And the follow-up. as help control more work a it. and of in service more bit those And quick business a Can a how you color deals trending? machine whether a just how sort contained

during Thanks have machine call. -- of should original have higher the actually in probably the mentioned of for control I in a the seen a service expectations. that that question. than as We actually our adoption level was

revenue, line subscription delta as a to to a negative you opposed a right, as creates for top sales. So know, the perpetual actually, that

So in for been that of adoption the have third ahead we business. the really the quarter actually expectations year-to-date has the

served think the the monetizing you can machine do cost more we're so, made if even we affordable only seen size in you that that about in addressable the is offerings a it with think And that we're once is positive you're you doing a that than we that side, in expand environment sure, that to interesting transitions. on think more the it of in technology we've time the addressable we've proxy certainly the we we along make outcome of as the through in expand what believe the not we've software For made world, software on catalyst transitions as markets and in in much hardware see level subscription that, that software you see that market. the size well. the or as the believe market. And world, these package control easier again as I possible is to market. But we we've the relevant becomes seen a I'd we've and that's time like in well about

had And is the nominal software, monetize other a you'd which the subscription. one a you some of that's the we've do to rest about it. then entirety the business hardware releases And the do with into straight offering. Trimble relevant capture say of with of the it along bundles Well, hardware. And goes so with of you model then where subscription go you will split of you of and go that Infrastructure a the for asked preview the some X the specifically. on upfront software along next that civil versions is our amount hardware the One, and

us of I over latter see time. more going think do we're to the

the in helps of You channel hardware some, have the of you indifferent economics that the I'd amount also customers ourselves sold be offerings. to upfront nominal dealer with say, Trimble flow can cash our a have and create reasonably when aligned seemed upfront, between as actually being X and better the

where one that's going think I more So we'll forward. into that lean

Bernstein. the Your from Charles Dillard next question of comes from line

just I prepared million. you that $XX your on So remarks, highlighted double-click to the cuts cost wanted have in

give So of first run bit it's hit Second, how all, can rate full how XXXX? you allocated? to that structural third, variable? is are on in a more much And expecting little color versus you

-- the on it's the the structural all So number. is answer first well, so

allocation, forward that is portfolio build and XXXX that within activities a want on with Our the then of it one. And at the come to we into place to as have. expectation we how the in that subset that businesses portray here's move I'd of we look

the the of we've invest strong cost growth. And in beyond software the of at that lifetime are where acquisition businesses, customer cases, that, where which expenses driving rule capital. a particularly and rule in ARR our First, take businesses where the bookings, continue We're to XX to posting some that value as the to drives we XX, the we're going you got of grow measure allocate ARR and to the look growth.

look the is set on, back On the activities a out say, side, little back, scaling their let's shape the been where world nature the that further that have. is or have market we ambition adoption scaling at in of flip where we some of the

we'll so there. And look

our based approach. very ROI it's So in

not this approach. be And it's going a to very of peanut a strategic kind just based because butter is

corporate businesses. at to will We we've the closer had the level activities move that

been excuse the for think corporate incubate and me, For doing, we we've couple been level to that last -- industry years. I thing we've the did the through the cloud -- example, work right company of that the

we that do get Now term. business the the allocation sharpen we short, and between within embedded within can into the a then business and long mid work the

Maybe break to second slow can X up just parts, trying B&I And question it helpful. you hardware. business is into the That's how then resilient versus to down. understand is software

think significant and Software side, I'd like it to sounds like is the hardware the contract to love duration based to is bookings, on understand there? about then about But just relatively that. And try how on think resilient. how amplitude long

on to the shelf. software nice the far more the resilient. software. same customers you're side is I'd I it it's the have. is think Chad, a sitting on about the It's It's thing way has software hardware. software to thus be certainly Trimble, a say Hey, in with but using mission-critical not that proven the use our But

that we the work. good agree become setup could got customers customers digitization and within customers and industries a that, of So need have I the megatrend think have efficient. I'd Then more the business. And that's we the a many resilience -- as long happening work trust digitize, a and say productive has a need the of for is more as I backlog to to the the they've that could as

view closer, we usage that other the selling as in of our we and that over we the drives has that become drives closer that, them the selling The to been we way, have When bundled thing us we're offerings. continued broader a is bigger are that, technology working time. relationships think when with and the in resilience customers customers think

There's be -- be certainly just will net and our what resilient. opportunities would what it the can does to on of -- have. the we have. look gross we millions it the look think We we opportunity take that We we're many retention dollars retention, we point we hundreds certainly inflect, ratios. that from sitting that at within portfolio of at look but for perfectly that of challenged at seen So haven't upsell cross-sell, at

that me have. So makes the we'll optimistic setup about that

numbers percentage within $X almost much ARR large the -- just numbers alone. grow some at $X just likely B&I in time, segment billion approaching as will over We're in Now the point. not law well, well, kicks at billion, approaching terms of of

the is special the -- is facts that. The the pretty and fact the hey, deserves businesses So it more little basis. posting XX% over recognition book sold subscription a like And and resilient. and less on ARR of Very growth team is business. XX% growth bookings is do today would for it the hardware burn that are hardware time. we that brutal The to of yes,

the are have the Trimble also of into drive expansion the that it's own in at Now and to It's hardware geographic we of some our of that. -- we control software to resilience it's There's types, resilience penetration. machine combining that. the geographic

think think the hardware resilient also by So us. that. there's think around don't that victim out lot we're control saying And net as I'll I is I environment to ultimately software. I don't that within as the just a can we

it the think we that and connect ability what I software worlds is can at the physical especially uniquely is and unique Trimble do field as and because and software digital and connect different. the office in work is the the However, powerful the to as hardware

[Operator Oppenheimer. Kristen the from Instructions] next Your question line of comes from Owen

B&I maybe some to speak versus wondering business the wanted of I market you've some up noted that given on to I'm in can with, share And success just do you follow to the becoming commentary. of if using you growth easier much you space any competitive of merely white Trimble are landscape? products there? is more tackling are Or experiencing the customers just shift How versus the just coming gains. in through share wallet

peers in construction lot are continuing the space, is space I'd the them white there grow. look to say we at the the a also is in of and that of many reality technology market, and

the to look of so there's been has as underserved We construction of only and industry in works underpenetrated and the the is trillion around And on the industry. greater that $X are me, the historically that technology that with adoption of technology. And at the know positive collective that I a peers than a growth and way secular the adoption for trends catalyst the industry technology digitizes. the it's math map

me let So with that. start acknowledging

from we can. wallet see and that that we a to the that is that can that unique think share nobody else quite says that's that, different would is cross-selling within do are call where like doing we're I the doing, something Now what that we we and me metric

owners. have That's We and architects, across -- different. landscape, serves quite that technology engineers, the construction the AGCO the

that's often just creates And that's a creating just within And the very workflow with there. the but in the digital workflows is we starts bring turning B&I, set of the there. software. now the that Because the into the hardware construction survey. ultimately survey in model hardware But from not -- happen that's components hardware the and then is digital that

because customers space share within those for buy we a breed, suites certain. construction I who On some I the some buy the would now, I gaining me, say with within topic, to that believe qualify with that, And certain as share and going the simply double-click business. I'd ARR best gaining who modeling. buy say share who look could in gaining But market best increasingly better customers data put the within market would a And suggest we're the we're word characterize that, in I ERP do of strong customers. certain gained that that we wanting we segments product, very that in growth. own to say who uptake or serve. breed say you architecture hold I we buy feedback of for and suite, years our with offer even overall. would cycle a conceptual we're we're I'd multiple we on double-digit have SketchUp integration of positive I'd clearly the markets say buying share the across of the very, are can industry companies. share workflow native could say see suite. When from those the best could and life customers best customers we and are of I

to a going gears bit. I'm little shift

before But transportation the is the about segment headwinds talked highest facing the operating margins, printed macro ELD of You the this environment, the that at business. you margin some mandates. since XX.X% operating

talk is the Transporeon a cost about that some for working over from doing of equation business, if the uplift So the you how the little on what's that hard have versus last of years? guys wondering of side I'm can much couple been that work bit maybe you of

margins straight margin that that to in gross margins, operating I -- within the first. give business, the to I'd is the gross steadily me, question. Transportation path a then the at it, about call been we growing answer the business. we increase level. to the, you I'd second -- the and the within think say the have have, the with working think within have twofold rate dynamic And Good structural around I run rate Transporeon the go grow I topic business we that we've run that

and right the the the COGS proposition with both implies with which associate having right that get So got of right set then that. product price right the you to value

I more becoming be transportation. want the on less and It's software-centric dependent to hardware.

rest hardware the be the of fact, side computer basis, business. agnostic the differentiates case whereas of so hardware the -- truly It's throughout less with on more more differentiates In Trimble. the telematics the in long-term that of business, the side onboard in

gross the slow expenses along -- good where a that's be margin that's it's when for noted. so the many gross to now, as can then quarters really you you I'd that, So forward, which can team done, getting business. And do with has structural steady margins operating manifest pretty a they certainly way shift you're we the we the of the incrementing also job the the as and -- and where it's say, need that forward managing in when a structural that more software other of profitability down increase that to

layer the in and that top you is the Now within accretive Transporeon of to margins segment. that, and on

again next we if start favors year, positive turn the us market and that the in margins the will do catalyst our if so do then business. some be would a job for to here and And

the line from comes Markets. Capital question KeyBanc next from Your of Jason Celino

Great.

we and are are they know When who for on software, good construction hardware separate of that's decisions? follows if purchasing questions. about up between of thinking it. don't those I typical think at other are me. Like customers? Just How one the decision-makers way B&I the X? one budget This tight about a the your decisions

the the the levels on we're the hardware C more Jason, not question. the small bigger size more say it And in it's who's the I'd to say thanks and economic then And doing the of the customer, buyer. the of the segmented depends company for mid-market, the our customers. the across I'd software. customer between with surprisingly,

make we Let more see question of moving that to that point as from selling. at connected I think connected something you're nature is It happening to offering, should side you of doing your go-to-market we shift a is our say from more who offerings. Because the the increasingly fundamentally selling do strategically solutions unlocks on different solution the how sell what as me point the approach and we to selling account-based sell customers.

to may So deciding had department they're in use. virtual construction historically, have you the could going design have on you technology, then -- some

want You hardware in out field. kit deciding, can to or use they have survey field control machine the which crew

to dollar perpetual subscription to move becomes nature move amount we as the higher we even that basis. actually, -- bigger is to As over the these the this of offerings, from

part now uplifts are they're go the from when on and uplift to and starting people very a organization set uplift. often multiple within higher, different us, those customers. see bigger our you're of Well, of when as a the we're portfolio, naturally, within see subscribing get we work And taking we the customers we converting with see it to dollar a already we where

level Now typically because of ERP who's level more that CFO using already be who's customer the at has been to although that. a that ERP buying type been often buying going the is and

think for we're different us. it, you about able persona to to a motion when sales go bigger that's that a offering, now So with

changing as are nature us of And so a very when the that is we buyers we a see the actually, for solution. positive thing economic offering

may seeing. as software my penetrated smaller not who at is the mostly side? with the it or be here you're quick Trimble, Is customers the the Well, on -- either hardware I hardware follow-up guess weakness

data and a being more many fact-based contractors do markets asking. work, good to I been come that of That say, back We've looking mind the residential end what don't see is nature that are that. infrastructure of a you're those let work with more me more question. who at you, answer on about think Oh, kinds have I more both a work. or the served do and

more you to If to apt you're contractor, fit civil be business. Trimble buying are software a that's going your

for a If construction, you're too additional you more more construction, becomes doing you're residential residential the of doing By applicable. that not It's time you're that construction. multifamily, doing if a set there kind is you're doing Trimble big of single-family ERP. technology you're buying

out So probably talk I as say I'm answering -- that your question now loud.

Tilton comes from Research. Your the from Wolfe Joshua next of question line

with It have. My drive worse, you guys when strength the like kind think on goals, is sector, feels kind numerous about save we software and an of software customers hear some the first question high-level achieve one. like throughout But of macro like about go other to questions getting bundle I it and the time now money a to you in Q&A, bundle talked the the want in that in their all was ROI. the of answers

more? So And guys you that environment I of aren't bundle to we that should benefit maybe expect when the sell? guess maybe offset other see is little my seeing investors why demand weakness the a bit for some attractive like, the question

Josh, David. it's

business say strong, our software in the in XX%. construction is XX-plus Rob at I'd we mentioned are where that all, near really business. ARR seeing of growing First that software the percent bookings still

labor is path So I'll mentioned hardware customers have and that hardware technology is from B&I, to more construction clear out and -- side contractors. to being software our mean point business that needed. value, The benefiting I within is our the sold Rob it civil constraints

range -- more software. a for So sale our Rob's that use our of the moving And by segment customers dirt. to it's is buy narrow hardware than driven of

inflation and B&I being actual and risen And infrastructure fundamental driver take hardware of out, are moved of you the the time, over not much and back that's materials that amount if our has the business. the dirt going inflation, cost labor dollars while up,

much offerings that's So actual our the hasn't and -- for for as demand meet earth the the of anticipated. the -- growth. is But to seeing -- geared has as moving we need that where and grown software had need, productivity technology are the isn't to we're grown

plays I we be AGCO think into the reference financial asking And we'd we point of going pro Trimble XX% Josh, said software venture, forma joint just after One XX% as also recurring. you're model. about it into when seeing and is announced playing it, full over forward, the

So the to law should the through of well. math, think, little more start I bit play as a

it order maybe just you segment. then maybe can and the And us detail like past, it us you it, now extent more feeling it Any in there? provide structural. about when feels you a follow-up. I to to the we helpful. give can can It felt talked churn a isolated that that in guys just provide just Super quick guys wanted more it's to color any was tad more the the more mobility specific like on

mobility I'd It be would say on would structural. the that the answer churn. not

Jeffries our time, Sandler. final of comes interest Clarke the line question of from In today the from Piper

time, interest it one. I'll keep of In to

answered part next in say fair months through growth whether the of construction, you dirt, I think of hardware a of understand the the the projects input come as you and might this the the it think stage versus a of may more paradigm, ARR that to to portfolio ARR outperform? still projects wanted when think costs. I cyclical dollar shovel we portfolio and B&I opportunity When at between and moving of due factors about have are this, sort XX to wanted engineering maybe but and stop ready that procurement but is kind in what capture products, further into about can going clarify. the to David relationship part lot I if

outperformance the software operations through engineering, the the of the to I'd business through feasibility of and on maintenance. from really to the that expect that involved the itself, board and ARR work side to that, are in the broad procurement, design, the aspects the across earthmoving the

dollar work the So amount there. overall is of

presentation, does This your joining Q&A like our day. for all us and end today's to to us. I This our thank conference. Enjoy for of you today. session for rest the the the now of would concludes speakers thank bring

disconnect. now may You