Q4 2023 Trimble Inc Earnings Call

Operator: Good morning, and welcome to the Trimble fourth quarter and full year 2023 results conference call. All lines have been placed on mute to prevent any background noise.

Good morning, and welcome to the Trimble fourth quarter and full year 2023 results conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you would like to ask a question. During this time simply press star followed by the number one on your telephone keypad, if you would like to.

Operator: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press the star followed by the number one on your telephone keypad. If you would like to withdraw your question, again press the star one. Thank you. Rob Painter, Chief Executive Officer of Trimble. You may begin your conference. Welcome everyone.

Withdraw your question again prestige star one.

Rob painter, Chief Executive Officer of Trimble, you May begin your conference.

Yeah.

Robert G. Painter: Welcome everyone before I get started her presentation is available on our website and we ask that you refer to the safe Harbor at the back.

Robert G. Painter: Before I get started, our presentation is available on our website, and we ask that you refer to the safe harbor at the back. Our financial commentary will reflect non-GAAP performance metrics, including organic growth comparisons, which refer to the corresponding period of last year unless otherwise noted. Strategic progression takes place as a series of a thousand little steps, periodically punctuated by non-linear moves and events.

Rob Painter: Our commentary will reflect non-GAAP performance metrics, including organic growth comparisons, which refer to the corresponding period of last year unless otherwise noted.

Rob Painter: Strategic progression takes places a series of a 1000 little steps periodically punctuated by non linear movies and events.

Robert G. Painter: Reflecting on the quarter and the year, 2023 represented a transformative year for Trimble. Within the portfolio, the Transporian acquisition and the announcement of the Agriculture Joint Venture with AGCO represent two of the larger moves in the history of our company. Reflecting on our Connect and Scale strategy over a five-year timeframe, the structural improvement in the business is self-evident and is the result of methodical work over the last few years by our colleagues and partners. Annualized recurring revenue finished 2023 at a record $1.98 billion, up 13% organically, and represents the single biggest lever we have to increase shareholder value. This compares with ARR of $1.1 billion five years ago. Recurring revenue is 49% of our total revenue in 2023 and 53% in the fourth quarter versus 31% in 2018. Remaining performance obligations close the year at $1.8 billion.

Putting on the quarter and the year 2023 represented a transformative year for trimble within the portfolio the transporting an acquisition and the announcement of the agricultural joint venture with Echo represent two of the larger moves in the history of our company.

Reflecting on our connect and scale strategy over a five year timeframe the structural improvement in the business is self evident and this is the result of methodical work over the last few years by our colleagues and partners.

Annualized recurring revenue finished 2023 at a record $1 98 billion up 13% organically and represents the single biggest lever we have to increase shareholder value. This compares with air are at $1 1 billion five years ago.

Rob Painter: Recurring revenue was 49% of our total revenue in 2023, and 53% in the fourth quarter versus 31% in 2018.

Rob Painter: Remaining performance obligations closed the year at $1 8 billion.

Robert G. Painter: Gross margin closed at a record 64.7% in 2023, up 470 basis points over 2022. This compares to 58% five years ago. This is a definitive structural improvement. EBITDA margin closed at a record 26.6% for the year.

Rob Painter: Gross margin closed at a record 64, 7% in 2023 up 470 basis points over 2022. This compares to 58% five years ago. This is definitive structural improvement.

Rob Painter: EBITDA margin closed at a record 26, 6% for the year and dollars we crossed the threshold of $1 billion of EBITA. This compares to EBITDA of 22, 6% five years ago.

Robert G. Painter: In dollars, we crossed the threshold of $1 billion of EBITDA. This compares to EBITDA of 22.6% five years ago. Operating leverage has been 44% over a five-year time frame. We are running with negative working capital, and we closed with free cash flow of $555 million, up 60% over the prior year. Our ARR and low capital intensity punctuate the difference between industrial technology and consumer electronics.

Rob Painter: Operating leverage has been 44% over a five year timeframe.

Rob Painter: We are running with negative working capital and we closed with free cash flow of $555 million up 60% over prior year or <unk> and low capital intensity punctuate the difference between industrial technology and industrial.

Robert G. Painter: While the evolution of our financial metrics during our transformation has been compelling, the bigger takeaway is how this positions the company today for success now and in the future. Trimble has never been in a better position to help our customers succeed with solutions that address the growing intersection of the physical and digital worlds. We are eager to leverage our strong market position and unique assets to drive continued profitable growth in software and technology-enabled services, to expand margins, and to showcase our ability to increase the company's overall returns through smart capital allocations. We believe this framework is the winning formula for a world-class industrial technology company. And we believe executing against this plan will allow Trimble to unlock and sustainably compound value for shareholders.

Rob Painter: Well the evolution of our financial metrics during our transformation.

Rob Painter: I've been compelling the bigger takeaway is how this positions the company today for success now and in the future.

Rob Painter: Trimble has never been in a better position to help our customers succeed with solutions that address the growing intersection of the physical and digital worlds, we are eager to leverage our strong market position and unique assets to drive continued profitable growth in software and technology enabled services to expand margins and to showcase our ability to increase.

Rob Painter: The Companys overall returns through smart capital allocation.

Rob Painter: We believe this framework is the winning formula for World Class Industrial Technology Company, and we believe executing against this plan will allow trimble to unlock and sustainably compound value for shareholders.

Robert G. Painter: With that structural context, let's turn to slide three and talk about a threefold framework that guides our capital allocation priorities, looking back on 2023 and forward into 2024. First, we remain committed to executing our Connect and Scale strategy. Over the last several years, our P&L investments have been heavily biased towards our software assets and architecture, engineering, construction, and owners, which we refer to as AECO. This focus is driven by the size and immediacy of the secular opportunity.

Rob Painter: With that structural context, let's turn to slide three and talk about a three fold framework that guides our capital allocation priorities looking back on 2023 and forward into 2024.

Rob Painter: First we remain committed to executing our connect and scale strategy over the last several years, our P&L investments had been heavily biased towards our software assets and architecture engineering construction and owners, which we referred to as E. C. O. This focus is driven by the size of the immediacy of the secular opportunity.

Robert G. Painter: Our transformation of AECO software represents the tip of the iceberg for the company and increasingly provides a template for how we will operate across all of Trimble. Looking at tactical proof points of progression, let's start with our product strategy. Trimble Construction 1, or TC1, can be thought of as a commercial framework around pre-packaged bundled offerings.

Our transformation of ACO software represents the tip of the spear for the company and increasingly provides a template for how we will operate across all of Trimble.

Rob Painter: Looking at tactical proof points of progression, let's start with our product strategy Trimble construction, one our TC one can be thought of as a commercial framework around pre packaged bundled offerings in the fourth quarter. We doubled the number of these pre packaged offerings by serving more users across more vertical segments.

Robert G. Painter: In the fourth quarter, we doubled the number of these prepackaged offerings by serving more users across more vertical segments. Additionally, nearly half of our AECO bookings in the fourth quarter were TC1 bookings. We come into 2024 with a strong portfolio, and we will learn, adapt, and expand these offerings. As we connect more of our data and workflows, we will continue to expand these offerings, powered by the investments we have been making in our underlying systems and enhanced by our process transformation. After a couple of years of hard work, we can now see a 360-degree view of our customer set, which unlocks marketing and selling insights to enhance our go-to-market motion with more advanced marketing and selling strategies that are more efficient and cost-effective. We will continue to roll out functionality in 2024, and we will expand the capabilities across more geographies and more of the product portfolio.

Rob Painter: Only half of our ACO bookings in the fourth quarter were Tc one bookings.

Rob Painter: We can't we come into 2024 with a strong portfolio and we will learn adapt and expand these offerings.

Rob Painter: We connect more of our data and workflows, we will continue to expand these offerings powered by the investments we have been making in our underlying systems and enhanced by our process transformation.

After a couple of years of hard work, we can now see a 360 degree view of our customer set which unlocks marketing and selling insights to enhance our go to market motion with more advanced marketing and selling strategies that are more efficient and cost effective we will continue to rollout functionality in 2024, and we will expand the capabilities.

Rob Painter: <unk> across more geographies and more of the product portfolio and it goes further because product systems and process work have to link to an aligned go to market organization in order to turn possibility into a reality as.

Robert G. Painter: And it goes further because product, systems, and process work have to link to an aligned go-to-market organization in order to turn possibility into a reality. As measured by cross-sell activity, more than 20% of 2023 Annualized Contract Value, or ACV, bookings in AECO were cross-sell bookings. In the fourth quarter, this number accelerated to over 25%. This didn't happen by accident.

Rob Painter: As measured by cross sell activity more than 20% of 2023 annualized contract value, where ACB bookings and E. C. O were cross sell bookings in the fourth quarter. This number accelerated to over 25%. This didn't happen by accident. The acceleration comes from our packaging our solutions across.

Robert G. Painter: The acceleration comes from packaging solutions across business lines and is enabled by our digital transformation. We are winning on the breadth of capability. To put this into further context, the AECO teams delivered over 30% ACB bookings growth in 2023 and had a record fourth quarter. Slide 4 shows a number of quotes from our customers, who continue to give us positive feedback about our direction. We are delivering lifecycle value and uniquely connecting workflows, all while making ourselves easier to do business with. As we come into 2024, we are moving towards an account-based selling model, which will further align ourselves to sell TC1 and cross-sell offerings. This capital allocation is working and is built on our strategy around the construction continuum that has been accelerated by successful M&A over the last 10 years. Back to slide three.

Rob Painter: Business lines and is enabled by our digital transformation, we are winning on the breadth of capability to put this into further context. The ACO teams delivered over 30% ACB bookings growth in 2023 and had a record fourth quarter.

Rob Painter: Slide four shows a number of quotes from our customers who continue to give us positive feedback about our direction.

Rob Painter: We are delivering lifecycle value and uniquely connecting workflows, all while making ourselves easier to do business with.

Rob Painter: As we come into 2024, we are moving towards an account based selling model, which will further align ourselves to sell T. C. One in cross sell offerings.

Rob Painter: This capital allocation is working and is built on our strategy around the construction continuum. There has been accelerated by successful M&A over the last 10 years.

Rob Painter: Back to slide three.

Rob Painter: Number three capital allocation priorities is to further simplify and focus our business in the last four years, we have divested 21 businesses that did not meet the must have threshold of our connect and scale business, namely the ability to further our connected industry solution, while delivering compelling and sustainable financial results.

Robert G. Painter: The second of our three capital allocation priorities is to further simplify and focus our business. In the last four years, we have divested 21 businesses that did not meet the must-have threshold of a connect-and-scale business, namely, the ability to further a connected industry solution while delivering compelling and sustainable financial results. In early 2024, we divested a small water metering business and a dealer business that we owned in Germany. We continue to look for areas where we can further simplify our portfolio, which goes beyond divestiture. We have reduced thousands of FKUs in the last couple of years and turned a number of stand-alone products into features within larger bundled solutions. In September, we announced our joint venture with Agco, which naturally led us to rethink how we organize ourselves, which, in turn, unlocked an ability for us to further simplify and focus our team. In the second half of 2023, we undertook $50 million of run rate cost reduction.

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Rob Painter: In early 2024, we divested a small water metering business and the dealer business that we earned in Germany.

Rob Painter: We continue to look for areas, where we can further simplify our portfolio, which goes beyond divestitures, we have reduced thousands of skus in the last couple of years and turned a number of standalone products and features within larger bundled solutions.

Rob Painter: In September we announced our joint venture with Agco, which naturally led us to rethink how we organize ourselves which in turn unlocked an ability for us to further simplify and focus our teams in the second half of 2023, we undertook a $50 million of run rate cost reductions 10 million ahead of our commitment in November.

Rob Painter: Recognizing that we needed to say no to more things. So that we can further focus the organization.

Rob Painter: Given the pending <unk> JV and the new organizational structure that officially went in to effect in January we reorganized the business under three pillars, eight H E C O field systems and transportation and logistics. This.

Robert G. Painter: $10 million ahead of our commitment in November, recognizing that we needed to say no to more things so that we could further focus the organization. Given the pending ADCO-JB and the new organizational structure that officially went into effect in January, we reorganized the business under three pillars: AECO, field systems, and transportation and logistics. This structure brings similar businesses together, enhancing our ability to achieve scale and growth. The new organization in place is already off to a good start, and hats off to the team for executing these changes seamlessly.

Rob Painter: This structure brings similar businesses together enhancing our ability to achieve scale and growth.

Rob Painter: The new organization in place is already off to a good start and hats off to the team for executing these changes seamlessly.

Rob Painter: Beginning with the first quarter, we will naturally re segment are reporting results to reflect the way we view our business and when we do this we will simultaneously be able to deliver an increased level of clarity on our business models that many of you have been seeking.

Slide five provides an overview of the direction, we're going with these three segments will providing a bit of color on the software and recurring revenue centricity of each segment.

Robert G. Painter: Beginning with the first quarter, we will naturally re-segment our reporting results to reflect the way we view our business. And when we do this, we will simultaneously be able to deliver an increased level of clarity on our business models that many of you have been seeking. Slide 5 provides an overview of the direction we are going with these three segments, while providing a bit of color on the software and recurring revenue centricity of each segment. Now, returning again to slide three, let's talk about the third of our three capital allocation priorities, which has returned capital to shareholders. In September, when we announced the JV, we communicated our plan to pay down debt and return capital to shareholders via a buyback. In the fourth quarter, we executed $100 million of buyback.

Rob Painter: Returning again to slide three let's talk about the third of our three capital allocation priorities.

Rob Painter: Which has returned capital to shareholders.

Rob Painter: In September when we announced the JV, we communicated our plan to pay down debt and return capital to shareholders via a buyback.

Rob Painter: In the fourth quarter, we executed $100 million of buyback.

Rob Painter: 30th our board approved a new buyback authorization of 800 million, replacing the remaining authority under the prior plan.

Rob Painter: We reiterated our intention to pay down $1 1 billion of debt and communicated that our near term intentions on M&A or to focus on tuck in opportunities.

These capital allocation priorities set against the backdrop of our day to day execution. They also sit within a context of what we are seeing in our end markets across the global economy.

Rob Painter: Geographically speaking North America has been overall healthy.

Robert G. Painter: On January 30th, our board approved a new buyback authorization of $800 million, replacing the remaining authority under the prior plan. We reiterated our intention to pay down $1.1 billion of debt and communicated that our near-term intentions on M&A are to focus on top-down opportunities. These capital allocation priorities sit against the backdrop of our day-to-day execution, and they also sit within a context of what we are seeing in our end markets across the global economy. Geographically speaking, North America has been overall healthy, while Europe remains quite challenged.

Europe remains quite challenged the agriculture and transportation markets face macro headwinds are result of commodity prices and overcapacity and trucking.

Rob Painter: The engineering and construction markets have proved to be more resilient with puts and takes across sub segments control. What we control is the operating team in place we deliver an enduring value proposition in the form of productivity quality safety transparency and environmental sustainability record bookings in parts of the business such as E C O software and.

Rob Painter: Transport and demonstrate the durability of the business.

Robert G. Painter: The agriculture and transportation markets face macro headwinds as a result of commodity prices and overcapacity in trucking. The engineering and construction markets have proved to be more resilient with put and takes across subsegments. Control what we control is the operating theme in play. We deliver an enduring value proposition in the form of productivity, quality, safety, transparency, and environmental sustainability. Record bookings in parts of the business, such as AECO software and Transporian, demonstrate the durability of the business. David, over to you.

David: David over to you.

David: Thank you Rob Slide six seven and eight cover the financial highlights for the quarter and the year.

Organic revenue growth in the fourth quarter was plus 3% and for the year was plus 1%.

David: Excluding the agriculture business growth was 6% in the fourth quarter and 4% for the year.

David: Standout metrics for 2023 include a 470 basis point improvement in gross margin and $555 million of free cash flow enabled by profit growth and the success of our efforts to bring inventory levels down.

With net debt at $2 8 billion. We remain ahead of the deleverage plan, we put in place at the time of the transport and acquisition.

David: We have paid down $268 million of the debt incurred to finance the deal.

David: We ended the year with net leverage of two eight times only modestly above our long range target of two five times.

David Barnes: Thank you, Rob. Slides 6, 7, and 8 cover the financial highlights for the quarter and the year. Organic revenue growth in the fourth quarter was plus 3%, and for the year it was plus 1%. Excluding the agriculture business, growth was 6% in the fourth quarter and 4% for the year.

David: The JV with Agco is pending regulatory approval and we continue to expect that the transaction will close in the first half of this year for modeling purposes, we have assumed that.

David: <unk> closes early in the second quarter.

David: With debt pay down following the Agco JV transaction close our leverage will be below two times.

David Barnes: Standout metrics for 2023 include a 470 basis point improvement in gross margin and $555 million in free cash flow, enabled by profit growth and the success of our efforts to bring inventory levels down. With net debt at $2.8 billion, we remain ahead of the deleverage plan we put in place at the time of the Trans-Borean acquisition. We have paid down $268 million of the debt incurred to finance the deal.

David: Slide nine covers revenue trends by geography and business model.

David: $198 billion of IRR is the standout highlight up 24% year on year and up 13% on an organic basis.

David: Product revenues, which are nonrecurring and predominantly our bundled hardware and perpetual software were down 3% year on year.

David: Excluding agriculture product revenues were down less than 1%, reflecting the stabilization of these businesses now the dealer inventories have come well down from their peak in early 2022.

David Barnes: We ended the year with net leverage of 2.8 times, only modestly above our long-range target of 2.5 times. The JV with AGCO is pending regulatory approval, and we continue to expect that the transaction will close in the first half of this year. For modeling purposes, we have assumed that the deal closes early in the second quarter. With debt paid down following the AGCO JD transaction close, our leverage will be below two times.

David: Dealer inventories are now broadly in line with dealers business outlook and our sales trends going forward are expected to track underlying demand trends.

David: By geography growth in North America reflects the relative strength that Rob referenced earlier.

David: <unk> revenues were strong driven by growth in Australia and India.

David: Revenues were down organically in Europe, reflecting challenging macroeconomic conditions across many of the end markets we serve there.

David Barnes: Slide nine covers revenue trends by geography and business model. 1.98 billion of ARR is the standout highlight, up 24% year-on-year and up 13% on an organic basis. Product revenues, which are non-recurring and predominantly are bundled hardware and perpetual software, were down 3% year on year. Excluding agriculture, product revenues were down less than 1%, reflecting the stabilization of these businesses. Now, dealer inventories have come well down from their peak in early 2022.

David: Slide 10 breaks down performance at the segment level and buildings and infrastructure. The highlight in the quarter was the strong performance of our recurring revenue offerings.

David: Bookings in our Acos software businesses increased over 30% year on year driven in part by the strong cross sell cross sell and TC, One performance, which Rob mentioned earlier.

David: Aided by the bookings performance segment <unk> grew year on year by just under 20% with net net retention over 110% and at the highest levels of this business has seen.

David: Segment revenues of nonrecurring offerings, principally machine control for civil construction customers were relatively flat year on year, resulting in total segment revenue up organically by 10%.

David Barnes: Dealer inventories are now broadly aligned with dealers' business outlook, and our sales trends going forward are expected to track underlying demand trends. By geography, growth in North America reflects the relative strength that Rob referenced earlier. APAC revenues were strong, driven by growth in Australia and India.

David: Segment margins were up by 290 basis points year on year, driven both by fixed cost leverage and by the mix shift toward higher margin software offerings.

David: And geospatial revenues grew organically by 1%.

David: Our revenue in this segment breaks down across three broad categories field sales to end users government business and OEM business.

David Barnes: Revenues were down organically in Europe, reflecting challenging macroeconomic conditions across many of the end markets we serve there. Slide 10 breaks down performance at the segment level. In buildings and infrastructure, the highlight of the quarter was the strong performance of our recurring revenue offering. Bookings in our AECO software businesses increased over 30% year-on-year, driven in part by the strong cross-out and PC1 performance which Rob mentioned earlier. Aided by the bookings performance, Segment ARR grew year-on-year by just under 20%, with net retention over 110%, and at the highest levels this business has seen, segment revenues of non-recurring offerings, principally machine control for civil construction customers, were relatively flat year-on-year, resulting in total segment revenue up organically by 10%. Segment margins were up by 290 basis points year-on-year, driven both by fixed cost leverage and by the mixed shift toward higher-margin software offerings.

David: Sales of our core survey and mapping products to end users return to meaningful growth in the quarter, reflecting a healthier state of dealer inventories and improving underlying market conditions are.

Setting the strong end user user growth component sales to Oems were down as we lap some unusually large shipments a year ago.

David: Segment margins were up by 180 basis points, driven principally by lower component input costs versus year ago levels.

David: In resources and utilities organic revenue for the quarter was down year on year by 4%.

David: Excluding sales of products to agriculture customers resources and utilities revenues were up by approximately 10%.

David: Segment operating margins were lower year on year by 160 basis points, driven principally by lower revenue.

David: In transportation revenue was up 1% organically.

David: <unk> organic IRR was up mid single digit as growth in our transportation enterprise software and maps businesses offset the anticipated impact of churn in our north American mobility offerings transfer.

David: Transport him remains an inorganic comparison and the highlight in the quarter for transport Ann was achieving a record level of bookings up over 20% versus prior year.

David: We are encouraged by the sales performance of the team in light of the difficult macro dynamics and transport <unk> core European market.

David Barnes: In geospatial, revenues grew organically by one percent. However, revenue in this segment breaks down across three broad categories. Field Sales to End Users, Government Business, and OEM Business. Sales of our core survey and mapping products to end users returned to meaningful growth in the quarter, reflecting a healthier state of dealer inventories and improving underlying market conditions. Offsetting the strong end user growth, component sales to OEMs were down as we lapped some unusually large shipments a year ago. However, segment margins were up by 180 basis points, driven principally by lower component input costs versus year-ago levels. In Resources and Utilities, organic revenue for the quarter was down year-on-year by 4%.

David: Segment margins increased year on year by 610 basis points, reflecting the higher margins of transport.

David: And margin progression in the balance of the segment.

David: Let's move now to 2024 guidance on slide 11.

David: I will focus on our performance, excluding our agriculture business and including on a go forward basis are more limited exposure to AG is a 15% owner of the JV and a supplier of products to the JV.

David: For the sake of completeness, we show in page 11, two views are reported view with the AG business included through the first quarter of 2024, and an as adjusted view without the agriculture business, which will ultimately be operated within the JV.

David: The outlook for IRR growth remains strong driven by momentum across our Acos software businesses, we expect full year organic growth rates in the 11% to 13% range off our year end 2023 levels of $1 98 billion.

David Barnes: Excluding sales of products to agriculture customers, resources and utilities revenues were up by approximately 10 percent, segment operating margins were lower year-on-year by 160 basis points, driven principally by lower revenue. In transportation, revenue was up 1% organically. Segment Organic ARR was up mid-single digit as growth in our transportation enterprise software and maps businesses offset the anticipated impact of churn in our North American mobility office. Transporian remains an inorganic business, and the highlight in the quarter for Transporian was achieving a record level of bookings, up over 20% versus the prior year.

David: As adjusted organic revenues are expected to grow for the year in the 4% to 7% range.

David: Please note that our fiscal 2024 will include 53 weeks and the extra week will includes will increase full year and fourth quarter revenues by approximately $85 million.

David: On an as adjusted basis, we expect margins to improve with EBITDA margins between 26, 5% and 27, 5%.

David: This represents margin improvement year on year of between 102 hundred basis points the.

The margin improvement will come from a combination of improved software mix and the impact of the cost actions, we took coming out of 2023.

David: From a cash flow perspective, we expect full year cash flow of approximately <unk> 85 times non-GAAP net income.

David Barnes: We are encouraged by the sales performance of the team in light of the difficult macro-dynamics in Transporian's core European market. Segment margins increased year-on-year by 610 basis points, reflecting the higher margins of Transporium and margin progression in the balance of the segment. Let's move now to 2024 guidance on slide 11. I will focus on our performance excluding our agriculture business and including, on a go-forward basis, our more limited exposure to agriculture as a 15% owner of the JV and a supplier of products to the JV. For the sake of completeness, we show on page 11 two views, a reported view with the ag business included through the first quarter of 2024, and an as-adjusted view without the ag business, which will ultimately be operated within the JV. The outlook for ARR growth remains strong, driven by momentum across our AECO software business. We expect full-year organic growth rates in the 11% to 13% range off our year-end 2023 levels of $1.98 billion. As adjusted, organic revenues are expected to grow for the year in the 4% to 7% range.

David: Excluding the costs relating to our agco JV transaction and the impact of the 50 <unk> week free cash flow is estimated to be approximately equal to non-GAAP net income.

David: Our base case cash flow forecast assumes no change in tax legislation.

David: A bill moving through the U S Congress will if enacted restored the immediate expensing of R&D for tax purposes.

David: Pass this legislation would improve incrementally or couch cash outlook for 2024 by approximately $130 million.

David: Our EPS forecast for the year reflects the beneficial impact of our planned deleveraging following the close of the <unk> JV and up to $800 million of share repurchase we expect EPS for the year in the range of $2 60.

David: <unk> to $2 80 sets.

Speaker Change: I'll finish by offering a few comments on our guidance for 2024 breaks out by quarter and by segment.

Speaker Change: We expect organic revenue growth to be strongest in buildings and infrastructure.

Speaker Change: Software businesses in buildings and infrastructure are expected to grow in the mid to high teens with product related businesses up slightly leading to organic revenue growth for the full year of between 11 and 13%.

Speaker Change: Buildings and infrastructure organic growth includes approximately approximately $70 million from the 50 <unk> week.

Speaker Change: We plan to accelerate model conversion from perpetual to subscription software tied with hardware in our civil construction business.

Speaker Change: Geospatial revenue is expected to be down slightly on an organic basis.

David Barnes: Please note that our fiscal 2024 will include 53 weeks, and the extra week will increase full year and fourth quarter revenues by approximately $85 million. On an as-adjusted basis, we expect margins to improve, with EBITDA margins between 26.5% and 27.5%. This represents margin improvement year on year of between 100 and 200 basis points. The margin improvement will come from a combination of improved software mix and the impact of the cost actions we took coming out of 2023. From a cash flow perspective, we expect full-year cash flow of approximately.85 times non-GAAP net income. Excluding the costs relating to our AGCO-JV transaction and the impact of the 53rd week, free cash flow is estimated to be approximately equal to non-GAAP net income. Our base cash flow forecast assumes no change in tax legislation.

Speaker Change: With growth in field sales and survey offset by lower sales to U S federal customers, where business tends to be lumpy from year to year.

Speaker Change: We will also accelerate model conversions from perpetual to subscription software in our survey and mapping business.

Speaker Change: Resources and utilities as adjusted organic growth will be up in the high single digits led primarily by continued growth in our positioning services business.

Transportation revenues are expected to be up in the mid single digits for the year and relatively flat on an organic basis with growth in transport and offset by lower North American mobility revenue.

Speaker Change: We expect reduced hardware revenue in mobility as we are intentionally pivoting that business away from lower margin hardware sales to Oems instead, focusing on the higher value added data flows.

Speaker Change: From an operating margin perspective, we expect to grow margins year over year in the buildings and infrastructure and resources and utilities segments transportation margins will be up slightly while geospatial segment margins are expected to be down year over year due to changes in customer and product mix for.

Speaker Change: For the first quarter, let's turn to slide 12 for additional color.

Speaker Change: On an as adjusted basis, we expect organic growth between 2% and 6% and EBITDA margin between 26 and 27%.

David Barnes: A bill moving through the U.S. Congress will, if enacted, restore the immediate expensing of R&D for tax purposes. If passed, this legislation would improve our cash outlook for 2024 by approximately $130 million. Our EPS forecast for the year reflects the beneficial impact of our Plan D leveraging following the close of the ICO-JV and up to $800 million of share repurchase. We expect EPS for the year in the range of $2.60 to $2.80.

Speaker Change: Buildings and infrastructure is expected to drive most of the organic growth in the first quarter with low single digit growth in geospatial.

Speaker Change: As adjusted resources and utilities is expected to post high single digit revenue growth in the first quarter.

Speaker Change: During the first quarter, we expect to see softness in AG.

Speaker Change: Weakness in the global AG market is certainly a factor, but the bigger driver is the expected impact of the transition in our distribution strategy.

Speaker Change: <unk> revenues in the quarter are expected to be down modestly on an organic basis.

David Barnes: I'll finish by offering a few comments on how our guidance for 2024 breaks out by quarter and by segment. We expect organic revenue growth to be strongest in buildings and infrastructure. Software businesses in buildings and infrastructure are expected to grow in the mid to high teens, with product-related businesses up slightly, leading to organic revenue growth for the full year between 11 and 13 percent. Buildings and Infrastructure Organic Growth includes approximately $70 million from the 53rd week. We plan to accelerate model conversions from perpetual to subscription software tied to hardware in our civil construction business. Geospatial revenue is expected to be down slightly on an organic basis, with growth in field sales and survey offset by lower sales to U.S. federal customers, where business tends to be lumpy from year to year.

Speaker Change: Overall, we expect sequential improvement in transportation segment organic growth rates as the year progresses, driven by gradually improving end market conditions and the inclusion of transport in our organic trends beginning in the second quarter.

Speaker Change: As Rob mentioned earlier, we are moving to implement a new segment reporting structure that reflects our updated organization and the way, we will evaluate our businesses and allocate capital going forward.

Speaker Change: Our plan is to publish more details on our new segment reporting structure later in the first quarter with financials going back two years and a perspective on how our 'twenty 'twenty four annual guidance Cascades to the new segments.

Speaker Change: We will have a separate conference call with investors to review that information when it is available Rob I'll turn it back over to you.

Robert G. Painter: Thanks, David.

Robert G. Painter: We were busy in the fourth quarter preparing ourselves to come into 2024 with a running start.

Robert G. Painter: We were with over 10000 customers at Trimble user conferences in September October and November we recommitted to our capital allocation priorities undertook cost reduction prepared to reorganize the company and made our numbers for the quarter. We plan to host an investor day later in the year to discuss the evolution of the business and to provide investors with more financial detail.

David Barnes: We will also accelerate model conversions from perpetual to subscription software in our survey and mapping. Resources and utilities, as adjusted to organic growth, will be up in the high single digits, led primarily by continued growth in our positioning services. Transportation revenues are expected to be up in the mid-single digits for the year and relatively flat on an organic basis, with growth in Transporian offset by lower North American mobility revenue.

Robert G. Painter: Including updated targets.

Robert G. Painter: I will end by taking a moment to welcome Ron nurse, ACN and Kara Sprague to the Trimble Board two fantastic additions.

Operator, we can now open the line for questions.

Speaker Change: At this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad. We ask that you. Please limit yourself to one question and one follow up.

David Barnes: We expect reduced hardware revenue and mobility as we are intentionally pivoting that business away from lower-margin hardware sales to OEMs and instead focusing on the higher-value-added data flow. From an operating margin perspective, we expect to grow margins year over year in the buildings and infrastructure and resources and utilities segments. Transportation margins will be up slightly, while geospatial segment margins are expected to be down year over year due to changes in customer and product mix. For the first quarter, let's turn to slide 12 for additional color.

Speaker Change: Our first question comes from the line of Christian Owen from Oppenheimer. Your line is open.

Christian Owen: Hi, Good morning, Thank you for taking the questions.

I wanted to start with maybe the Q1 guidance it sounds like there's some moving pieces in there and.

Christian Owen: Okay.

Christian Owen: An outline that you provided on slide 12, it looks like.

Christian Owen: That's really the driver between the revenue growth numbers, there and maybe what we would've expected. So if you could help us just understand what the underlying growth and the JV assets looks like in Q1, and just any other moving parts that we should be considering for the <unk> guidance. Thank you.

David Barnes: On an as-adjusted basis, we expect organic growth between 2% and 6% and an EBITDA margin between 26% and 27%. Buildings and infrastructure are expected to drive most of the organic growth in the first quarter, with low single-digit growth in geospatial. As adjusted, Resources and Utilities is expected to post high single-digit revenue growth in the first quarter. However, during the first quarter, we expect to see softness in A. Weakness in the global ag market is certainly a factor, but the bigger driver is the expected impact of the transition in our distribution strategy. Transportation revenues in the quarter are expected to be down modestly on an organic basis.

Christian Owen: Good morning, Kristen This is robin thanks for the.

Robin: Question, so coming into Q1 and thinking about the guide at the company level.

Robin: What I would want you to hear is the momentum we have what they are are in the overall business and the stabilization of the supply chains throughout most of the hardware businesses, which reflects in the total year guide with respect to the first quarter, specifically within the current resources and utilities segment.

Robin: Some of this is a quarter renovation topic and then when we double click within that within the AG business, specifically, there's two dynamics to consider one is at the overall market level. So call. It market sentiment and then the other is within the transition.

Robert G. Painter: Overall, we expect sequential improvement in transportation segment organic growth rates as the year progresses, driven by gradually improving end market conditions and the inclusion of Transporian in our organic trends beginning in the second quarter. As Rob mentioned earlier, we are moving to implement a new segment reporting structure that reflects our updated organization and the way we will evaluate our businesses and allocate capital going forward. Our plan is to publish more details on our new segment reporting structure later in the first quarter, with financials going back two years and a perspective on how our 2024 annual guidance cascades to the new segment. We will have a separate conference call with investors to review that information when it is available. Rob, I'll turn it back over to you. Thanks, David. We were busy in the fourth quarter preparing ourselves to come into 2024 with a running start.

Robin: The relationships so at the overall AG market level, you can see that from some of the markets statistics from farmer sentiment in the U S and in Europe, and what we've seen from some of the OEM posts on their numbers and unit expectations coming into the year. So that's part of the topic and then the other one.

Robin: As in that call it more of the aftermarket side.

Robin: In the transition with the prior corporate relationship we've had in into the new JV relationship and in that time of transition, there's a natural gap and so we never expected as we've been making this distribution transition that it was going to be a perfectly linear transition. So we really think about it at the annual level not just at <unk>.

Robert G. Painter: We were with over 10,000 customers at Trimble user conferences in September, October, and November. We recommitted to our capital allocation priorities, undertook cost reduction, prepared to reorganize the company, and hit our numbers for the quarter. We plan to host an investor day later in the year to discuss the evolution of the business and to provide investors with more financial detail, including updated targets. I will end by taking a moment to welcome Ron Nersacean and Kara Sprague to the Trimble Board. Two fantastic additions.

Robin: Quarter to quarter comparison to really track the progress. So the work is well underway from the the integration planning between the teams from signing up dealers and the aftermarket.

Robin: Before you get that revenue in the aftermarket and we've got to be signing up dealers and so it looks like comparative to looking at bookings in software business that you got to get the booking before you get the.

Speaker Change: So I hope that color helps you Kristen.

Kristen: Yeah. Thanks, Thanks for that Rob and the other question that I have is a little bit longer term sort of post poster Zhang co JV.

Kristen: Some of the momentum that you outlined particularly around like the TC one platform.

Operator: Operator, we can now open the line. At this time, I would like to remind everyone that in order to ask a question, press star, then the number one on your telephone keypad. We ask that you please limit yourself to one question and one follow-up. Your first question comes from Kristen Owen from Oppenheimer. Your line is open.

Kristen: How do you use that as a framework and some of the other areas of the business going forward. If you can outline any areas, where maybe youre seeing growth with existing customers.

Kristen: That's driving that cross sell revenue and as you go through these model transitions and some of the field services business. How you can use the success that you've seen in TC one in those areas.

Kristen Owen: Hi, good morning. Thank you for taking the questions. I wanted to start with maybe the Q1 guide because it sounds like there are some moving pieces in there. And when I look at this outline that you provided on slide 12, it looks like ag is really the driver between the revenue growth numbers there and maybe what we would have expected. So if you could help us just understand what the underlying growth in the JV assets looks like in Q1 and just any other moving parts that we should be considering for the 1Q guidance. Good morning, Kristen.

Speaker Change: Yes, Im glad you asked that question because the work that we're doing around TC one and within currently within the P&I segment seem to be.

Speaker Change: Here with me talking about it with ACO moving forward architects engineers construction and owners.

Speaker Change: And the digital transformation work that we've been undertaking people process systems work over the last few years, it's really been Vasily proportionate to this construction overall construction software.

Robert G. Painter: This is Rob, and thanks for the question. So coming into Q1 and thinking about the guide at the company level, what I would want you to hear is the momentum we have with the ARR and the overall business and the stabilization of the supply chain throughout most of the hardware businesses, which reflects in the total year guide. With respect to the first quarter, specifically within the current resources and utility segment, some of this is a quarterization topic, and then when we double-click on that, within the ag business specifically, there are two dynamics to consider. One is at the overall market level, so call it market sentiment, and then the other is within the transition of the relationship.

Speaker Change: Part of the business.

Speaker Change: And really we see it as the template for the rest of the company, we see it as the tip of the tip of the spear Theres a lot of work that's gone into it. There's also a lot of learnings.

Speaker Change: Have have come along with it and I mean that in a very good way the success of what we see in those bookings as demonstrable proof point.

Speaker Change: Is that the strategy works so as we think about taking that into other parts of the business and we look forward, let's say into the future field systems part of the company what we saw in the in the quarter is that we're growing.

Robert G. Painter: At the overall ag market level, you can see that from some of the market statistics from farmer sentiment in the U.S. and Europe, and what we've seen from some of the OEM posts on their numbers and unit expectations coming into the year. So that's part of the topic. And then the other one is in what is called more the aftermarket side.

Speaker Change: At a double digit.

Speaker Change: Double digit clip in those businesses and so we can already take some of the ideas and frameworks around TC went into other parts of the business for example, bundling of our correction services positioning services with.

Speaker Change: The hardware products that we have we've been undergoing some model transitions and some of the hardware businesses, where we can separate value between the underlying hardware and then have a subscription or term license.

Robert G. Painter: We're in transition with the prior corporate relationship we had and into the new JV relationship. And in that time of transition, there's a natural gap. And so we never expected, as we've been making this distribution transition, that it was gonna be a perfectly linear transition.

Speaker Change: On top of that so it's there are things that happen in parallel ups aren't perfectly cereal, but for sure.

Speaker Change: On the ACO software side of the business that is a great template for us and it has certainly been working so so far.

Speaker Change: Thank you for the time.

Speaker Change: Your next question comes from the line of Jerry Revich from Goldman Sachs. Your line is open.

Robert G. Painter: So we really think about it at the annual level, not at just a quarter to quarter comparison to really track the progress. So the work is well underway, from the integration planning between the teams, to signing up dealers in the aftermarket. So before you get that revenue in the aftermarket, we've gotta be signing up the dealers. And so it's like that. And then we have a couple of questions that are more comparable to looking at bookings and the software business, where you've got to get the booking before you get the ARR. So I hope that color helps.

Jerry Revich: Yes, hi, good morning, everyone.

Jerry Revich: Hi, Rob.

Jerry Revich: Robert what are we just talk about given the organizational change obviously you laid out the restructuring.

Jerry Revich: Maybe some opportunities can you comment on just beyond restructuring how has the P&L responsibilities shifted at all it sounds like there are.

Jerry Revich: More changes beyond just cost savings I'm wondering if you just.

Jerry Revich: Expand on that you alluded to cutting back I think comes from lower ROI projects.

Robert G. Painter: Yeah, thanks for that, Rob. The other question that I have is a little bit longer term, sort of post this ADCODE-JV, when we look at some of the momentum that you outlined, particularly around like the TC1 platform, how do you use that as a framework in some of the other areas of the business going forward? If you can outline any areas where, maybe you're seeing growth with existing customers, how that's driving that cross-sell revenue. And as you go through these model transitions in some of the field services business, how you can use the success that you've seen in TC1 in those areas. Yeah, I'm glad you asked that question, because the work that we're doing around TC1 and within, currently within the B&I segment, soon to be, you'll hear me talking about it with AECO moving forward, architects, engineers, construction and owners, and the digital transformation work that we've been undertaking, people, process, systems work over these last few years, it's really been vastly proportionate to this construction, overall construction software, www.trimbleinc.com that the strategy works.

Jerry Revich: Just talk about more about the opportunities.

Jerry Revich: Of the realignment beyond cost savings.

Speaker Change: Sure Jerry Thanks for the question the I'll give you a couple of examples at the ACO leadership, Mark Schwartz is looking after that segment for us now and at the field systems.

Level Ron Vizio.

Mark Schwartz: Looking after that so those are two examples of where we reoriented leaders Ron history as long baseline history of Trimble is within our hardware businesses and dealer channel.

Mark Schwartz: <unk> expertise and so we have all of that consolidated under Ron now across all of the hardware centric businesses, we have Mark Schwartz and I spent the bulk of it is trimble career.

Mark Schwartz: And that ACO software space and has just done a terrific job picking up.

Mark Schwartz: The baton here and taking the business forward and actually.

Under his leadership the growth has been accelerating in the business. So that's on the people side of the realignment a couple of examples.

Mark Schwartz: On the cost side.

Mark Schwartz: Jerry we took a couple of lenses to this one was we looked at some bigger areas, where we saw that.

Mark Schwartz: Revenue potential it was pushing out for more near to midterm to mid to long term. So autonomy is an example of that where we took I would say a bigger chunk view of a realignment with you on that and did a re prioritization of capital allocation. The other one was a fair amount of the.

Robert G. Painter: So as we think about taking that into other parts of the business, and we look forward, let's say, into future field systems, part of the company, what we saw in the quarter is that we're growing ARR at a double-digit, double-digit clip in those businesses. And so we can already take some of the ideas and frameworks around TC1 into other parts of the business. For example, bundling our correction services and positioning services with the hardware products that we have. We've been undergoing some model transitions in some of the hardware businesses where we can separate value between the underlying hardware and then have a subscription or, on top of that. There are things that happen in parallel; it's not perfectly serial, but for sure, on the AECO software side of the business, that is a great template for us and it is certainly Thank you for your time. Your next question comes from a line from Jerry Revich from Goldman Sachs. Your line is open. Yes, hi. Good morning, everyone.

Mark Schwartz: Cloud investments, we're making platform investments we were doing at the corporate level and what we decided to do is move those closer to the coal face closer to the business. So it manifested given that ACO is the tip of the spear for the transformation work move that closer.

Mark Schwartz: The ACO leadership, and where you have to make those capital allocation tradeoffs, there closer to the coal face and what I CSM organizational efficiency that comes that comes out of that so those are a couple of examples on the cost side. When we really took a look at saying how do we get how do we get simpler how do we get more focused.

To execute.

Mark Schwartz: At a sharper clip and I think Q4 was evidence that those moves.

Mark Schwartz: Our working and so we come into Q1 and come into 'twenty 'twenty, four and I'm confident that we've got the right, Oregon place working on the right things.

Speaker Change: Thank you, Rob and separately can I trouble you folks just to flesh out the performance of transport in for us exiting the fourth quarter.

Speaker Change: What was organic growth logo growth retention rates you mentioned bookings were good can you just.

Speaker Change: And on some of the quantitative numbers on the performance.

Jerry Revich: Robert, given the organizational change, what did we just talk about? Obviously, you laid out the restructuring savings and opportunities. Can you comment on just beyond restructuring? How has the P&L responsibility shifted at all? It sounds like there are more changes beyond just cost savings. I'm wondering if you could just expand on that. You alluded to cutting back, I think, on some lower ROI projects. Can you just talk more about the opportunities of the realignment beyond cost savings? Sure, Jerry.

Speaker Change: 24.

Speaker Change: Sure happy to do that so just as a reminder, that business model is mostly a transaction model of consumption model and so let's say at the macro level the European account and it's still predominantly a European <unk>.

<unk> business the economy Hasnt improved I think we understand that about Europe, when I say that so that's a headwind to some of the transactions and theres less spot.

Speaker Change: As compared to contract, which is unfavorable to the business model.

Robert G. Painter: Thanks for the question. I'll give you a couple examples of where we reoriented leaders. Mark Schwartz is looking after that segment for us now, and at the field systems level, Ron Vizio is looking after that. So those are two examples of where we reoriented leaders.

Speaker Change: Within that though we think about control what we can control. So give you some numbers gross retention in the business is essentially 100% exclude Russia, where we elected not to do some business.

Speaker Change: To get out of that business in Russia.

Robert G. Painter: Ron's baseline history of Trimble is within our hardware businesses and dealer channel, and expertise, and so we have all of that consolidated under Ron now across all the hardware-centric businesses we have. Mark Schwartz has spent the bulk of his Trimble career in the AECO software space and has just done a terrific job picking up the baton here and taking the business forward. In fact, under his leadership, growth has been accelerating in the business. So that's the on the people side of the realignment. A couple of examples on the cost side. Jerry, we took a couple lenses to do this.

Speaker Change: In the high single digits operating margins above 20% and that deal model level that we had which means the team is doing a good job.

Speaker Change: On the cost.

Speaker Change: Line, the fourth quarter itself was a record bookings in the company's history.

Speaker Change: At the new product introduction level, we have new products, such as autonomous procurement in which are driving that but part of the reason that's driving that bookings growth beyond the value proposition that we have already delivered to the customers and that our product integration level.

Speaker Change: Our global teams are working together to come to a single just one single.

Robert G. Painter: One was we looked at some bigger areas where we saw that the revenue potential was pushing out from more near-to-mid-term to mid-to-long-term. So autonomy is an example of that, where we took, I'd say, a bigger chunk view of a realignment view on that and did a reprioritization of capital allocation. The other one was a fair amount of the... Transcompany, The AECO leadership, where you have to make those capital allocation trade-offs, they are closer to the coal face, and what I see is some organizational efficiency., and Paul Coster.

Speaker Change: Feature for real time visibility, bringing the maps technology, we already had a trimble into the transport business. For example, so those are a few.

Speaker Change: Statistics, quantitative and qualitative free journey.

Speaker Change: Thank you Rob.

Speaker Change: Your next question comes from the line of Jonathan Ho from William Blair. Your line is open.

Jonathan Ho: Hi, good morning.

Jonathan Ho: Just wanted to get a little bit more color on your thoughts around I guess the macro environment.

Jonathan Ho: Relates to your guidance and the potential impact to I guess to organic.

Robert G. Painter: Those are a couple of examples on the cost side when we really took a look at saying how do we get simpler, how do we get more focused, we have to execute the cost and the cost and the cost and the cost at a sharper clip. And I think Q4 was evidence that those moves are working. And as we come into Q1 and come into 2024, I'm confident that we've got the right organization in place. Thank you, Rob. And Severly, can I trouble you folks just to flesh out the performance of Transporian for us, exiting the fourth quarter? What was organic growth, logo growth, retention rates? You mentioned bookings were good. Can you just expand on some of the quantitative numbers on the performance entries? Sure, happy to do that. So just as a reminder, that business model is mostly a transaction model, a consumption model. And so let's say at the macro level, the European economy, and it's still predominantly a European-centric business, the economy hasn't improved. I think we understand that about Europe when I say that.

Jonathan Ho: Haneke growth outlook as you start to look to next year.

Robert G. Painter: Hey, Jonathan Good morning, it's Rob on the macro outlook.

Jonathan Ho: Well I'll start with North America geographically North America.

Robert G. Painter: Our strongest of the overall geographies Europe is still a challenge and I think will remain a challenge throughout 2024. So those are the two major geos that impact the overall business I would say Asia Pacific feels a little bit more steady as she goes.

Robert G. Painter: Within that within that context within the vertical markets and construction. It won't surprise you that we overall see strength and sub segments, such as infrastructure renewables data centers reassuring onshoring drive positive.

Robert G. Painter: <unk> for.

Robert G. Painter: Bookings residential remains more challenged on a global level and more so.

Robert G. Painter: In Europe, the freight markets, which would impact our transportation business that has remained quite challenged I'd say I'd really say globally on that I commented already on agriculture, and we see those macros challenged a little bit more globally.

Robert G. Painter: So that's a headwind to some of the transactions, and there's less spot as compared to contract, which is unfavorable to the business model. Within that, though, we think about control, what we can control. So I'll give you some numbers. Gross retention in the business is essentially 100%. I exclude Russia, where we elected not to do some business and to get out of that business in Russia.

Robert G. Painter: As well there.

Robert G. Painter: Thing I would overlay on top of that.

Jonathan as we think about coming into 2024.

Robert G. Painter: How structurally different our businesses as compared to the Trimble of origin. So I think it's instructive to think about that $1 98 billion.

Robert G. Painter: ARR in the high single digits, operating margins above 20%, and at the deal model level that we had, which means the team is doing a good job working the cost line. The fourth quarter itself was a record bookings in the company's history. At the new product introduction level, we have new products, such as autonomous procurement, which are part of the reason that's driving that bookings growth beyond the value proposition that we have already delivered to the customers. Our global teams are working together to come up with a single, just one single, feature for real-time visibility, bringing the MAPS technology we already had at Trimble into the Transport Ambulance. So those are our... Statistics, Quantitative, and Qualitative Thank you, Ralph.

Robert G. Painter: <unk> that we closed the year weapon by the way that's the way we do that calculation, it's averaged across the fourth quarter. So if you took really the contracted what we ended with that would even be higher so we woke up on January one with that visibility and.

Robert G. Painter: And predictability into the business.

Robert G. Painter: From the bookings that we closed the fourth quarter with and how that helps accelerate that growth coming in so I think it's an important to overlay when we look at the business model I'm on one axis and business models on one axis and.

Robert G. Painter: And then the have the overlay of the geographic and end market segments on the other on the other axis to come to a point of view on that.

Robert G. Painter: The macros that support.

Robert G. Painter: Our view on the guide for the year.

Speaker Change: Excellent and just as a follow up can you maybe help us understand where we are in terms of the distribution partnership realignment and what.

Speaker Change: What does the opportunity look like.

Speaker Change: Just given the divestiture coming up in just the changing nature of your positioning within the space. Thank you.

Robert G. Painter: Your next question comes from a line of Jonathan Ho from William Blair. Your line is open. Hi, good morning. I just wanted to get a little bit more color on your thoughts around, I guess, the macro environment as it relates to your guidance and, you know, the potential impact on, I guess, the organic growth outlook as you start to look to next year. Hi Jonathan. Good morning. It's Rob. On the macro outlook, I'll start with North America. Geographically, North America is the strongest of the overall geographies.

Speaker Change: Jonathan do you, specifically mean agriculture domain distribution realignment across our Trimble.

Jonathan Ho: The agriculture segment of it.

Jonathan Ho: Oh, Okay from so from the realignment on the distribution there's a few.

Jonathan Ho: Leverage there that we work one is with the <unk> aftermarket dealers themselves and we continue to be able to assign those up and thats, what we referred to internally as.

Jonathan Ho: As retail outlets that work alongside our our full line vantage dealers. So they sign ups of the dealers I would say that goes according to plan.

Robert G. Painter: Europe is still a challenge and, I think, will remain a challenge throughout 2024. So those are the two major geographies that impact the overall business, I would say. Asia-Pacific feels a little bit more steady as it goes. Within the vertical markets in construction, it won't surprise you that we overall see strength in subsegments such as infrastructure, renewables, data centers, reshoring, and on-shoring drive positive, Momentum for Bookings. Residential housing remains more challenged on a global level, and worse so.

Jonathan Ho: And then with the Agco realignment come out coming in with that I would say in addition to that that's been part of the integration planning work that we've got with the team and we've got to.

Jonathan Ho: Your line of sight now to how we're going to work with those new partners coming into coming into the mix. So in terms of the planning work I would say.

Jonathan Ho: It's well under way and it's what we need to do to get the business off to the start.

Jonathan Ho: Like to see it get after him.

Jonathan Ho: Okay.

Speaker Change: Great. Thank you.

Speaker Change: Your next question comes from the line of Tami Zakaria from Jpmorgan. Your line is open.

Robert G. Painter: The freight markets, which would impact our transportation business, those remained quite challenged. I'd say, I'd really say globally on that. I commented already on agriculture. Those macro challenges are a little bit more global, as well.

Tami Zakaria: Hi, good morning, Thank you so much.

Tami Zakaria: So.

Tami Zakaria: And the last Investor Day, I think you had a slide that you expected about China.

Tami Zakaria: <unk> <unk>.

Speaker Change: Transacted through the connected digital platform by.

Robert G. Painter: The thing I would overlay on top of that Jonathan, as we think about coming into 2024, is just how structurally different our business is, heard, the Trimble of Old. And so I think it's helpful to think about that $1.98 billion of ARR that we closed the year with. And by the way, that's the way we do that calculation. It's averaged across the fourth quarter.

Speaker Change: And that will go up to 70%.

Speaker Change: 2024.

Speaker Change: And 90% by Tianjin apply I know youre hosting another analyst day, probably this year so.

Speaker Change: Where are you in that journey now.

Speaker Change: Now in terms of getting revenues to that platform.

Speaker Change: Hey, Jamie its David Barnes.

David Barnes: We're up one thing I will say just as context as digital transformations and big processing system.

Robert G. Painter: So if you took really the contracted ARR, what we ended with, that would even be higher. So we woke up on January 1st with that visibility and predictability, and business, and we knew from the bookings that we closed. I think it's an important overlay when we look at the business model on one axis and the models on one axis, and then the overlay of the geographic, https://brewstew.com, the macros that support the guy. Excellent.

David Barnes: Projects are really hard and our experience is no different.

David Barnes: We ended 2023 with about 15% of our revenue going through the new digital platform, that's principally the North American AE CEO software businesses, we have.

David Barnes: Been rethinking the scope and focus of our next phase of digital transformation. We will go from 15 to probably closer to 35% here in early 2024 and that involves bringing more of our businesses so including the.

Robert G. Painter: And just as a follow-up, can you maybe help us understand where we are in terms of the distribution partnership realignment? And what the opportunity looks like, just given the divestiture coming up and just the changing nature of your positioning within the space? Thank you.

David Barnes: E builder and city works suites, and then expanding the ACO.

David Barnes: Effort all over the globe, we're right now in the process of rethinking how our digital platform will interact best with our hardware businesses and with transportation.

Robert G. Painter: Jonathan, do you specifically mean agriculture? Do you mean distribution realignment across all of Trimble? the agriculture segment of it. Okay, from the realignment on the distribution, there's a few, The C&H aftermarket dealers themselves, and we continue to be able to sign those up as what we refer to internally as retail outlets that work alongside our full-line Vantage dealer. So the sign-ups of the dealers, I'd say that goes according to plan. And then, with the Agco realignment coming in with that, I'd say, in addition to that, that's been part of the integration planning work that we've got with the team. And we've got a clear line of sight now to how we're going to work with those new partners coming in, coming into the mix. So in terms of the planning work, I would say it's well underway, and it's what we need to do to get the business off to a good start. We would like to see it.

Speaker Change: I'll be a hold off.

Speaker Change: Giving a forecast on how we go from 35 to more of the business I think we have a more informed and smarter approach now and we're rethinking our priorities and those priorities if I can add to that.

Speaker Change: To build on David's comment is for sure to continue on the software businesses as the as the priority for the for the work, Yes, that's right Rob said in his commentary earlier that the ACO business as the tip of the spirits, where we see the highest most direct early returns.

Speaker Change: Through the digital transformation at TC one at selling bundles, so that's where our focus is at the moment.

Speaker Change: Got it.

Speaker Change: Very helpful. Thanks, David and Rob the second question I have.

Robert G. Painter: Great, thank you. Your next question comes from a line called Tami Zakaria from J.P. Morgan. Your line is open. Hi, good morning. Thank you so much.

Speaker Change: I just wanted to understand the operating margin guidance for this year are better.

Speaker Change: Excluding the JV. It seems like you expect about 80 to 180 basis points of operating margin improvement this year.

Tami Zakaria: So, at the last investor day, I think you had a slide that expected about 20% of revenue transacted through the connected digital platform by 2023, and that would go up to 70% by 2024 and 90% by 2025. I know you're hosting another Analyst Day probably this year. So where are you on that journey now in terms of getting revenues through that platform? Hey, Tami. It's David Barnes.

Speaker Change: What is what are the building blocks of that.

Speaker Change: How do you really get there.

Speaker Change: And also what is the impact of the strictest that week.

Speaker Change: Any at all on that margin guide.

Speaker Change: Jamie I'll start this is Rob I'll start with giving you a perspective and then let's have David build on that.

Robert G. Painter: Start at the structural level of the company.

Robert G. Painter: Ending the year at 64, 7% gross margin compared to 58%.

David Barnes: One thing I'll say just as context is that digital transformations and big process and system projects are really hard, and our experience is no different. We ended 2023 with about 15% of our revenue going through the new digital platform, principally the North American AECO software business.

Robert G. Painter: From just five years ago.

Robert G. Painter: We look at the operating leverage we've driven over that five year timeframe is at 44% and we talked about the bookings progression in Q4 that adds to the IRR in that contracted IRR that we would have ended the year with coming into the year. So at a structural level. The baseline of the business is poised to be able to increase the.

David Barnes: We've been rethinking the scope and focus of our next phase of digital transformation. We'll go from 15% to probably closer to 35% here in early 2024, and that involves bringing more of our businesses, including the eBuilder and City Works suites, and then expanding the AECO effort all over the globe. We're right now in the process of rethinking how our digital platform interacts best with our hardware businesses and with transportation, so I'll hold off on giving a forecast on how we go from 35% to more of the business. I think we have a more informed and smarter approach now, and we're rethinking our priorities. And those priorities, if I can add to that, to build on David's comment, are for sure to continue the software businesses as the priority for the work. Yeah, that's right.

Robert G. Painter: <unk>.

Robert G. Painter: Gross margin as we continue to grow the business and you would see in the web tables that difference between the gross margins at the product level versus at the gross.

Robert G. Painter: Product level versus a subscription and software businesses and just how much higher.

Robert G. Painter: Gross margin is in the <unk> and the software centric businesses. So from a straight mix perspective alone you drive gross margin up and I'm talking about that structural gross margin because that is a primary driver of what can enable us to drive that operating margin expansion. We also talked about the costs.

Robert G. Painter: Management and the in the prepared remarks, which is another side of the equation. David you want to build on that just so as Rob said structurally our recurring revenue businesses are higher gross margin and you can see from the disclosure to that 80% gross margin on the on our recurring revenue streams versus.

Robert G. Painter: Rob said in his commentary earlier that the AECO business is the tip of the sphere. It's where we see the highest, most direct early returns through the digital transformation, TC1 and Selling Bundles. So that's where our focus is. Got it.

Tami Zakaria: That's very helpful. Thanks, David and Rob. The second question I have is, I just wanted to understand the operating margin guidance for this year better. I think, excluding the AGJV, you expect about 80 to 180 basis points of operating margin improvement this year. What are the building blocks of that? How do you really get there?

David Barnes: About 50% on the product stream so.

David Barnes: A lot of the roughly.

David Barnes: 100 to 200 basis point margin improvement, we come flows directly from <unk>.

David Barnes: From the <unk>.

Ongoing mix shift of the business.

David Barnes: With regard to the 50 <unk> week, we quantified that that'll have about an $85 million revenue benefit for the year all in the last quarter. The one thing I will say, though is that's not the only discrete factor that's impacting our business.

Robert G. Painter: And also, what is the impact of this 53rd week if any at all on that margin guide? Amy, I'll start.

Robert G. Painter: This is Rob. I'll start by giving you a perspective and then let's have David build on that. I start at the structural level of the company, ending the year at 64.7% gross margin compared to 58% just five years ago. We look at the operating leverage we've driven over that five-year time frame is at 44%. We talked about the bookings progression in Q4 that adds to the ARR and that contracted ARR that we would have ended the year with coming into the year. So at a structural level, the baseline of the business is poised to be able to increase the level of gross margin as we continue to grow the business, you know, and you would see in the web tables the difference, the gross margins at the product level versus at the gross level, and product level versus subscription and software business, and just how much higher.

David Barnes: As I mentioned in my remarks, our business with Big government customers, particularly the U S. Federal government is lumpy for me.

David Barnes: Year to year, we talked about that as being.

David Barnes: A good factor earlier in 2023, so that will work against US and then we're doing model conversions focused on the software that's bundled with hardware. So if you actually take the.

David Barnes: The change in the federal business and the impact of the model conversions added to the 50 <unk> week, they roughly offset each other so my way.

David Barnes: Looking at the underlying growth momentum of the business.

David Barnes: I would say the 50 <unk> week is a positive those other factors.

David Barnes: Offset that positive and they're relatively neutral.

Speaker Change: Got it thank you so much.

Speaker Change: Sure.

Speaker Change: Your next question comes from the line of Jason <unk> from Keybanc capital markets. Your line is open.

Robert G. Painter: Gross margin in the software centers businesses, so from a straight mix perspective alone, you drive gross margin. But I'm talking about that structural gross margin because that is a primary driver of what can enable us to drive that operation. We also talked about the cost, management, and prepared remarks, which is another side. Yeah, just as Rob said, structurally, our recurring revenue businesses are higher gross margin, you can see from the disclosure, it's about 80% gross margin on the recurring revenue streams versus 50% on the product stream.

Speaker Change: Great. Good morning, Rob Good morning, David This is actually Kevin on for Jason today, Thanks for taking my questions.

Kevin: I wanted to start with the construction software business nice to hear bookings growth exiting at more than 30% over the really strong results maybe looking at 2024.

Macro could be improving and TC one really seeing strong traction there how are you kind of thinking about bookings growth trend for 2024, and any additional puts and takes you can kind of give us an audi.

David Barnes: So a lot of the roughly 100 to 200 basis point margin improvement flows directly from the market. Ongoing makeshift. With regard to the 53rd week, we quantified that that'll have about an $85 million revenue benefit for the year all in the last quarter. The one thing I'll say, though, is that's not the only discrete factor that's impacting our business. As I mentioned in my remarks, our business with big government customers, particularly the U.S. federal government, is lumpy from year to year. We talked about that as being, and we're doing model conversions focused on the software that's bundled with hardware. So if you actually take the change in the federal business and the impact of the model conversions, add them to the 53rd week, they roughly offset each other. So my way of looking at the underlying growth momentum of the business, I would say the 53rd week is positive. But those other factors offset that positive, and they're relatively. Thank you so much.

Kevin: Sub product group, which can perform for the year.

Kevin: Devin Good morning. This is Rob let me give you my perspective and thoughts on.

Robert G. Painter: The bookings opportunity we have within the ACO.

Robert G. Painter: Software.

<unk>.

This is a business now that.

Robert G. Painter: It comes into the coming into the year with call. It in the range of a $1 billion.

Robert G. Painter: <unk> to start with so.

Robert G. Painter: The companys call it $2 billion.

Robert G. Painter: So we're talking to some law of large numbers to continue to grow at that double digit clip and we have to continue to be able to book at a healthy level and a court. All of 2023 was evidence of that in an accelerated even into the fourth quarter of.

Robert G. Painter: 2023, so we come in with some momentum and confidence.

Robert G. Painter: Round that the color I'd like to put around that with turbo construction. One is it unlocks the cross sell and up so by putting in place a framework that allows our customers to easily scale with us.

Robert G. Painter: That in turn unlocks our bundles in the end.

Jason Salino: Your next question comes from Jason Salino from KeyBank Capital Markets. Your line is open. Great. Good morning, Rob. Good morning, David. This is Ashley. Devon, on for Jason today.

Robert G. Painter: On the offerings that meet the consumption the customers' needs and so that then creates an environment where inside.

Robert G. Painter: Inside the company, we're working together to help scale, our customers usage of our products with a lot less friction that they would have had in the past and we're seeing faster times to close deals we're seeing a greater share of wallet share captured when a new logo enters our ecosystem and one of the things. We said in the prepared remarks was that our TC one agreement.

Operator: Thanks for taking our questions. I want to start with the construction software business. Nice to hear bookings growth ending at more than 30% over there, a really strong result. Maybe looking at 2024, things like macro could be improving, and TC1, really seeing strong traction there. How are you thinking about bookings growth, the trend for 2024, and any additional, maybe some picks you can give us on how the different sub-product groups would perform for the year? Devin, hey, good morning. This is Rob.

Robert G. Painter: I have now accelerated to make up 50% of the bookings that we had in the fourth quarter and those agreements are the basis that powers that cross sell penetration and that made up 25%.

Robert G. Painter: The fourth quarter bookings that we had.

Robert G. Painter: Coming into 2024 will it continue to expand TC one by rolling it out to more regions. For example in Asia Pacific and we'll roll it out into more of the portfolio. For example, that's the O and the ADC.

Robert G. Painter: Let me give you my perspective and thoughts on the bookings opportunity we have within the AECO software business. And, you know, this is a business now that comes into the year with, call it in the range of a billion dollars of ARR to start with. So of the companies, call it two billion. Transcription by Rev.com, around that.

Robert G. Painter: So we play those factors forward.

Speaker Change: We have got.

Speaker Change: I belief set that we can continue to grow.

Speaker Change: Bookings in the ACO space.

Speaker Change: Quite healthy double digit level.

Speaker Change: Okay.

Speaker Change: Got it no. That's very helpful color and then just a quick follow up on <unk> It seems like.

Speaker Change: Things are really picking up over there.

Speaker Change: I want to ask are you still mainly.

Robert G. Painter: The color I'd like to put around that with Trimble Construction 1 is that it unlocks cross-sell and up-sell by putting in place a framework that allows our customers to easily scale with us. That, in turn, unlocks our bundles and the offerings that meet the customers' needs. And so that then creates an environment where, inside the company, we're working together to help scale a customer's usage of our products with a lot less friction than they would have had in the past. And we're seeing faster times to close deals; we're seeing a greater share of wallet share captured when a new logo enters our ecosystem. And one of the things we said in the prepared remarks was that our TC1 agreements have now accelerated to make up 50% of the bookings that we had in the fourth quarter.

Speaker Change: <unk> adoption among existing customers that are opting for TC one how are you.

Speaker Change: The more new customers adopting that product and then in terms of kind of the.

The ASC opportunity are you still kind of seeing the two to three times uplift that you've kind of highlighted at your analyst day from.

Speaker Change: From <unk>.

Speaker Change: Yes, good question Kevin.

Kevin: So theres a bulk of it to the existing customers and new customers at the existing customers.

Speaker Change: For sure.

Speaker Change: And the construction ERP space those are uplifts that we've continued to drive that conversions from from on Prem to the cloud and as you make that transition from on Prem to the cloud I'm doing more than just a lift and shift actually changing the nature of the offering and it's not just a pricing mechanism. It's a van.

Robert G. Painter: And those agreements are the basis that powers that cross-sell penetration, and that made up 25% of the fourth quarter bookings that we had. Coming into 2024, we'll continue to expand TC1 by rolling it out to more regions, for example, Asia-Pacific. And we'll roll it out into more of the portfolio. For example, that's the O. Oh. So we play those factors forward, you know, we've got a belief set that we can continue to grow those bookings in the AECO space at quite a healthy double. God, I know that's a very helpful color.

Aliyu based mechanism because then you can get access to.

Speaker Change: To the broader array of what.

Speaker Change: We have to offer our customers we do continue to continue to see.

Speaker Change: Healthy uplift when we make those conversions above.

Speaker Change: Above a two X right and then on the new logos, who actually within sort of a blur between existing customers and new customers. What we can see from the cross sell data is that the customers, who still predominantly or buying one or two solutions from us are picking up that third fourth fifth depending on the nature of the exact bundle.

Speaker Change: That that they are buying from us and then on a straight new logo basis, we're certainly continuing to see wins from from new customers. So really it's all of the above.

Robert G. Painter: And then just a quick follow up on PC1. You know, it seems like things are really picking up over there. I want to ask, are you still mainly?

Robert G. Painter: being adoptions among existing customers that are opting for TC1, or are you seeing more new customers adopting that product? And in terms of the ASP opportunity, are you still seeing the 2 to 3 times uplift that you kind of highlighted at your analyst day? Yeah, good question, Devin. So there's both.

Answer when you have new customers of course, theres not an uplift in the equation thats all straight new revenue.

Speaker Change: Yeah.

Great. Thanks for all the detail.

Speaker Change: Your next question comes from the line of Chad Dillard from Bernstein. Your line is open.

Chad Dillard: Hi, good.

Chad Dillard: Hi, guys.

So I wanted to go back to your.

Robert G. Painter: It's existing customers and new customers. At the existing customers, for sure, and call it in the construction ERP space, those are uplifts that we've continued to drive, the conversions from on-prem to the cloud. And as you make that transition from on-prem to the cloud, doing more than just a lift and shift, actually changing the nature of the offering. And it's not just a pricing mechanism.

Chad Dillard: A question about the adjusted operating margins and was hoping you could bridge from 'twenty three 'twenty four.

Chad Dillard: Trying to understand like the moving parts of cost savings mix operating leverage and more specifically the impact of the ads divestiture.

Speaker Change: Okay, Let me start with the last point, so we when we announced the AG deal, we said that the <unk>.

Robert G. Painter: It's a value-based mechanism because then you can get access to a broader array of what we have to offer our customers. We do continue to see a healthy uplift when we make those conversions above a 2x rate. And then on the new logos – well, actually, within – it's sort of a blur between existing customers and new customers.

Speaker Change: Impact on a 23 pro forma basis of the divestiture of AG was about 70 basis points negative.

Speaker Change: To operating margins. So that's that's where we started and you can see the the.

Speaker Change: 24 outlook in our as adjusted table.

Robert G. Painter: What we can see from the cross-sell data is that, you know, the customers who are still predominantly buying one or two solutions from us are picking up that third, fourth, fifth, depending on the nature of the exact bundle that they're buying. And then, on a straight new logo basis, we are certainly continuing to see wins from new customers. So really, it's all of the above. When you have new customers, of course, there's not an uplift in the equation; it's all straight. Great, thanks for all the details. Your next question comes from the line of Chad Diller from Bernstein. Your line is open.

Speaker Change: The principal drivers.

Speaker Change: From there as I mentioned earlier.

Speaker Change: Planning on on an as adjusted basis without the agg.

Speaker Change: Business.

Speaker Change: In the base of 100 to 200 basis points of margin improvement one way to think of that Chad is essentially all of it is.

As in the gross margin improvement, which is natural impact of of mix. If you drill down a little more we.

Speaker Change: We do have the benefit of cost reduction.

Speaker Change: But we are adding resources, where where it's driving growth in fact, all or slightly more than all of our year on year Opex is in our ACO business, where we had over 30% bookings growth and we have.

Chad Diller: Hi, good morning, guys. So I wanted to go back to your question about the adjusted operating margins and was hoping you could bridge from 23 to 24. I'm just trying to understand the moving parts of cost savings, mixed operating leverage, and more specifically, the impact of the ad. Okay, let me start with the last point. So, when we announced the ag deal, we said that the impact, on a 23 pro forma basis of the divestiture of ag, was about 70 basis points negative. That's where we started. You can see the 24 Outlook in our as-adjusted table. The principal drivers from there, as I mentioned earlier, we're planning on an as-adjusted basis, i.e., without the ag.

Speaker Change: About 20% IRR growth, we're really allocating our operating capital to part of the call on that.

Speaker Change: On that business. So you can think of it as taking the cost reductions, we've taken and reallocating it to the highest return highest growth business.

Speaker Change: And if I can build on David's comment, which is exactly exactly right in that capital allocation cost to capital allocation call within the P&L to continue to put that go to market opex into the ACO space.

Speaker Change: Because I should have said in the response to one of <unk> questions was when we look at the net retention ratio, we're near a 110%.

David Barnes: ,. .. .. .. .. ...

David Barnes: , is in the gross margin improvement, which is the natural impact of mix. If you drill down a little more, we do have the benefit of cost reduction, but we are adding resources where it's driving growth. In fact, all or slightly more than all of our year-on-year OPEX is in our AECO business, where we've had over 30% bookings growth, and we have about 20% ARR growth. We are really allocating our operating capital to fuel that business.

Speaker Change: And the ACO part of the business isn't a terrific terrific.

Speaker Change: <unk> that the team is driving we look for what's an instructive measurement for US is looking at the customer lifetime value divided by the customer acquisition costs.

And what that data is telling us is that were well above.

Speaker Change: Three on that is that that tells us that is a place to continue to put opex into you don't get an ROI on that Opex in year. One. So there is a call. It a trade off there is that we're playing the long term game to continue to fuel that bookings growth, which will generate long term sustainable growth and of course overall.

David Barnes: You can think of it as taking the cost reductions we've taken and reallocating them to the highest return, highest growth. And I can build on David's comment, which is exactly right, in that capital allocation call. So it's a capital allocation call within the P&L to continue to put that go-to-market strategy into the AECO space. One of the things I should have said in the response to one of Devin's questions was when we look at the net retention ratio, we're near 110% in the. The Bulletproof Executive 2013, It's a terrific, terrific outcome.

Speaker Change: Revenue growth.

Speaker Change: That's helpful. And then just on the second regard can you talk about the impact on your distribution and go to market I'm, just trying to understand like the operational changes here.

Speaker Change: I guess like what you can do better now versus before under the old structure.

Speaker Change: Yeah, Chad I am glad you asked that.

David Barnes: We look for what's an instructive measurement for us is looking at the customer lifetime value divided by the customer acquisition cost. And what that data is telling us is that we're well above. The Bulletproof Executive 2013, You don't get an ROI on that outback. So there's a, you know, call it a trade-off there that we're playing, fuel that bookings growth, which will generate. Oh, that's helpful.

Good question and let's take the <unk>.

Our calling field systems now so think of that as the and the old segmentation. The geospatial businesses that we have predominantly the one youll know the best a survey.

Speaker Change: And then we have the.

Speaker Change: The machine control business that distributes through our site tech that traditionally have gone through the P&I segment. So those come together under field systems around <unk> looking after that I'll give you a demonstrable evidence of <unk>.

Chad Diller: And just on the secondary org, can you talk about the impact on your distribution and go to market? Just trying to understand the operational changes here. I guess like what you can do better now versus before under the old structure. Yeah, Chad, I'm glad you asked that.

Speaker Change: Change that we already made.

Speaker Change: We have one person responsible for sale.

Speaker Change: Sales now for all our field systems.

Speaker Change: One in APAC one in.

Speaker Change: The Americas.

Robert G. Painter: That's a good question. And let's take the, what we're calling field systems now. So think of that as, in the old segmentation, the geospatial businesses that we have, predominantly the one you'll know the best is Survey, and then we have... and Alan Levick. We have one person responsible for sales now for all the field systems. 1 and APAC 1. America, and one in Europe.

Speaker Change: One on Europe Middle East Africa.

Speaker Change: So one person.

Speaker Change: And each so call that three and that would have been six people because we would've had that duplicated.

Speaker Change: Just a few months ago.

Speaker Change: What that does of beyond just driving some.

Speaker Change: Just efficiencies that you can expect that actually also allows us to rethink the allocation of how we use resources diagnosis that frees up some capability for us too.

Robert G. Painter: So, one person in each, so call that three, and that would have been six people. Have that. Thank you. Thank you for what that does beyond just driving some efficiency. It actually allows us to rethink the allocation of how we use resources. That frees up some capability for us to put time and effort and money and people into ongoing dealer development. So beyond the chase for the short- to mid-term numbers, actually having resources that can help our dealers think about a long-term plan. In some cases, Chad, we have dealers who cover multiple businesses. Some people do both.

Put time and effort and money and people into ongoing dealer development so beyond the chase.

Speaker Change: The short to midterm numbers is actually having resources that can help our dealers think about our long term business in some cases, Chad we have dealers who cover multiple businesses for terminal some do both.

Speaker Change: <unk> survey some too.

Speaker Change: Again, and survey subdue Aegean survey and simple and with one.

Robert G. Painter: Civil and Survey Summits, and Survey. Some do Ag and Survey and Civil. One set of eyes or one set of accountability over all of those is that we can make more cogent decisions about how we make natural trade-offs that will happen. If I look at the product, that's the go-to market. If I look at the product side, what it unlocks is, I'd say, more efficiency in how we think about measuring the hardware skews that we have. You know, over the last few years... by 10%.

Speaker Change: Let's say one set of eyes or one set of accountability.

Speaker Change: Over all of those as we can make a more cogent decisions about how we make natural tradeoffs that will that will happen between the portfolios. If I looked at the product that is the go to market if I look at the product side.

Speaker Change: What it unlocks is.

Speaker Change: I would say more efficiency in how we think about measuring the hardware skus that we have over the last few years, we have reduced the skus by 10% and the company that drive simplification and underlying systems.

Speaker Change: Have one view on our GSS portfolio for example that goes across the business. One one point of view now on the total stations and the scanners that can be used across multiple parts of the portfolio. So I think it drives a lot sharper portfolio thinking.

Robert G. Painter: That drives simplification. We have one view of our GNSS portfolio. The Bulletproof Executive 2013, That's one point of view now, and the Total Station, scanners. So I think it drives just a lot sharper the portfolio at it at the product lens. So we put that product lens together with a go-to mark. And I think that position as well. I think this is, I think it was time to do it.

Speaker Change: We look at it at the product level. So we put that product lines together with our go to market lens.

Speaker Change: I think that positions us well I think this is I think it was time to do it in.

Speaker Change: <unk>.

Speaker Change: The announcement of the JV gave us.

Robert G. Painter: The announcement of the JV gave us a reason to really rethink how we did things and to move fast, doing all the planning work in the fourth quarter, and they've come out, as an Everteam, as an aligned K.R.'s objectives and key results. Great, thank you. Your next question comes from a line Joshua Tilson from Wolf Research. Your line is open.

Speaker Change: A reason to really rethink how we did things in the move fast to put it in place and the teams did all the planning work in the fourth quarter and they've come out of the gate I'd say.

Speaker Change: Quite strong here.

Speaker Change: The team has an aligned team with a defined set of <unk>.

Speaker Change: <unk> objectives and key results defined by each of these major businesses.

Speaker Change: Great. Thank you.

Speaker Change: Your next question comes from the line of Joshua Tilton from Wolfe Research. Your line is open.

Joshua Tilson: Hey guys, thanks for taking my questions here. In the repair remarks, you guys talked about being open to continuing to divest certain aspects of the business. When you look across, you know, your three new reporting segments, where do you see the most opportunity to maybe divest over the next 12 months and continue to simplify the portfolio? Well, good morning. Hey, thanks for the question. This is Rob. I'll give you a lens I have on it.

Hey, guys. Thanks for taking my questions here.

Joshua Tilton: In the prepared remarks, you guys talked about being open to continuing to divest certain aspects of the business. When you look across your three new reporting segments, where do you see the most opportunity to maybe divest over the next 12 months and continue to simplify the portfolio.

Joshua Tilton: Well good morning, Hey, Thanks for the question. This is Rob I'll give you a.

Robert G. Painter: The lens I have on it.

Robert G. Painter: I think about two axes on this one. One axis is the. The financial profile of the business caught this. Yes, there's a short-term view of the profile, and then there's a long-term view of the business and can it meet the... expectations that we have, whether it's return on invested capital or accretion at an ARR growth rate or at an EBITDA level. On the other axis, we'll look at the strategic attractiveness of that, which could involve the competitive position. But it also looks a lot at individual businesses or products, let's say, capability to make the whole. And if something sits on its own and isn't making the whole of the business stronger, so it doesn't contribute to a stronger, The Bulletproof Executive 2013. Then it's not in the...

Robert G. Painter: I think about.

Robert G. Painter: Two axes on this one one accesses the fin.

Robert G. Painter: <unk> financial profile of the business call. It so.

Robert G. Painter: There's a short term view on the profile and then there is a long term.

Robert G. Painter: Profile with you on our business and cannot meet the expectation of returns that we have at every whether it's return on invested capital or accretion.

Robert G. Painter: Growth at an EBITDA level on the other axis will look at the strategic attractiveness of that that could involve the competitive position.

Robert G. Painter: But it also looks a lot at an.

Robert G. Painter: And individual businesses or product, let's say capability to make the whole stronger.

And if something fits on its own isn't making the whole of the business stronger so it doesn't contribute to a stronger transportation business are stronger.

Robert G. Painter: Construction business then its not in the let's say on the favorable side that's on a.

Robert G. Painter: I'm on the favorable side, it's on a less favorable side of my.. and the financial one speaks for itself. Itself on that on that. So if I look at and apply it against the portfolio, one of the things, if I take field systems as an example, within that. Going back to the financial crisis back in 2008, there was a time when we had to step in and be the ballast for some of the, The Bulletproof Executive, 2013. But we're not, ultimately, the best owners of a company. I really think that with entrepreneurs out in the field, very, very local, very, very low. So that would have been an example of the divestiture we talked about. I'm here in just actually the last, as an example.

Robert G. Painter: Less favorable side of <unk>.

Robert G. Painter: Mike.

Robert G. Painter: I'm laying out in the financial one speaks for.

Robert G. Painter: Itself on that on that two by two so if I look at and apply it against the portfolio one of the things if I take field systems as an example within within that.

Robert G. Painter: Back to the financial crisis back in 2008, there was a time when we had to step in and be the ballast for some of the dealers.

Robert G. Painter: At the company and we came in and we acquired a few of the dealers.

Robert G. Painter: But we're not ultimately long term the best owners.

Robert G. Painter: Distribution business, what we really think that belongs with the entrepreneur is out in the field very very local very very local businesses.

Robert G. Painter: So that would have been an example of the divestiture we talked about.

Robert G. Painter: I'm here and just actually the last few weeks as an example, so we would look for parts of the business like that that really we don't see ourselves as the as the.

Robert G. Painter: So we would look for parts of the business like that where we don't see ourselves as the best owners. So I'll comment there as opposed to specifics. I think we can demonstrably say that we've had the courage to take a look in the mirror, as evidenced by... Drive and Assembly, focus because we think that that drives... Thank you. Thank you.

Robert G. Painter: Best owner, so I'll comment there as opposed to specifics within each of the businesses, but I think we can demonstrably say that we have had the courage to take a look in the mirror as evidenced by 'twenty one of the divestitures in the last few years driving a simplification.

Robert G. Painter: And Thats a focus because we think that that drives the efficiency and output and the outcomes for the company.

Robert G. Painter: Very helpful. And then it also sounds like we're going to get a little more color around the 24 guidance and context of these new reporting segments when you give us that additional disclosure. But maybe if I just step back and take a little bit longer view, like, how do you guys think or what should investors think about the different growth rates across those three segments over the next call of three to five years? I'm going to stay pretty high level on that because I think it will be more appropriate to take that view when we do the next Investor Day on the slide, I think it's slide five, the presentation that is attached to the prepared remarks. We did give a size of AECO field systems and transportation and logistics, sized from a number of you, and it's plus or minus on the revenue for 2024, and maybe more instructively, with the software breakdown and the recurring revenue breakdown in each of those segments that we'll have.

Speaker Change: Very helpful and then.

Speaker Change: It also sounds like we're going to get a little more color around the 24 guidance in context of these new reporting segments. When you give us that additional disclosure but.

Speaker Change: But maybe if I just step back and take a little bit longer view like how do you guys think or how should investors think about the different growth rates across those three segments over the next call. It three years to five years.

Speaker Change: Yes, so I'm going to stay pretty high level on that because I think it would be more appropriate to take that view.

Speaker Change: When we do the next Investor day.

Speaker Change: On the slide I think it's slide five and the <unk>.

Speaker Change: In the presentation that is attached to the prepared remarks, we did give a sizing of ACO field systems, and transportation and logistics sizing from a.

Speaker Change: Our view is plus or minus on the revenue for 2024, and maybe more constructively at.

Speaker Change: With the software breakdown in the recurring revenue breakdown.

Speaker Change: Within each of those.

Speaker Change: <unk> that will have.

Robert G. Painter: What I can say on top of that at company level and what we talked about in the past is we think we can continue to drive the double-digit level of growth of annualized recurring revenue, number one or two on the Top Street Strategic Priority. I've got for the company field systems, you know, which makes up the hardware businesses, you know, that's one. I think it's instructive to look back to 2019, and if you look at that... Longitude.

Speaker Change: What I can say on top of that accompanying level and what we've talked about in the past is we think we can continue to drive the double digit level of growth of the annualized recurring revenue and so that's it.

Speaker Change: That's a number one or two on the top strategic priorities.

Speaker Change: Got for the company field systems makes up the hardware businesses.

Speaker Change: I think it's instructive to look back to 2019, and if you look at that.

Speaker Change: Longitudinal.

Robert G. Painter: The growth of the Kegger over that time frame is in the range of what we have put forward for prior investments, call it four to six percent, depending on which part of the business, servant level, some of the other hardware being a little bit higher. But that's what compromises that. So you could look at that past data, and I think that's, for the most part, fits within the range. We've got that, and obviously, it's, up or down as the standard deviation, a bit high within a quarter-to-quarter view. That's why we think it's instructive to look at them.

Speaker Change: Growth CAGR over that time frame.

Speaker Change: It is in the range of what we have put forward a prior investor days in terms of the <unk>.

Speaker Change: Call it a 4% to 6% depending on which part of the business.

Speaker Change: The survey business, we've historically talked about at 4% to 6% level.

Speaker Change: With some of the other hardware being a little bit higher but thats, what compromises that so you could look at that past data and I think that 2019 to 2023 or you could extended into 2024 Q fits.

<unk> fits within that range, we've got that and obviously it's been.

Speaker Change: Up or down in <unk>.

Speaker Change: The standard deviations.

Speaker Change: Hi, within a quarter to quarter view and Thats why we think it's instructive to look at a long baseline.

Robert G. Painter: And then you'd come to the transportation business, and what's new, of course. Time we would've, The Bulletproof Executive 2013 would have been the addition of Transporion. The Bulletproof Executive 2013, So I'll give you that view to start with and, you know, and let's stay tuned. But, you know, maybe one thing that's an additional thing I'll say that could be interesting is, you know, and when we last did the Investor Day, we said by 20, if you did the math, by 2027, that we would be 60%. www.thevenusproject.com. Very helpful, thank you Your final question comes from the line of Rob Wertheimer from Melius Research. Your line is open.

Speaker Change: And then you'd come to the.

Speaker Change: The transportation business and what's new of course since the last time, we would've done an analyst model our Investor day.

Speaker Change: Would have been the addition of transport.

Speaker Change: And to the portfolio. So I'll give you that view to to start with and.

Speaker Change: And let's.

Speaker Change: Stay tuned, but maybe one thing thats.

Speaker Change: Additional thing I'll say that could be interesting is it.

Speaker Change: And when we last did the Investor day, we said by 2000 and if you did the math by 2027 that we would be a 60% recurring revenue business and if you take that.

Speaker Change: David's prepared remarks and guide at a pro forma level, we think we'll be there in 2024 and I'll leave you with that.

Speaker Change: Yeah.

Speaker Change: Super helpful. Thank you.

Your final question comes from the line of Rob Wertheimer from Melius Research. Your line is open.

Rob Wertheimer: Yes, hi. So I wanted to ask you two questions on the transportation market, if I may, and you touched on this earlier, Rob, on Transporium, where you had a good bookings quarter in the midst of, I assume, a pretty weak European market. So any further commentary on what you changed there or if anything changed to drive that growth? And given that that business is levered to spot, Transactions, and Rates, any insight as to what sustainable growth might be when that market comes back? And then, just so you know, the second question will be simply about the idea of deemphasizing hardware sales, OEMs, and transportation and focusing on the flow of data. Is there any strategic link there? Do you get less flow of data if you don't have as many in the field of devices? And could you just talk around that issue?

Rob Wertheimer: Yes, hi, so I wanted to ask two on the transportation market, if I may and you touched on this earlier, Rob on transport, we had a good bookings quarter in the midst of I assume a pretty weak European market. So any further commentary on what you changed there or if anything changed to drive that growth.

Rob Wertheimer: And given that that business is levered to spot.

Transactions in rates.

Rob Wertheimer: Any insight as to what the sustainable growth might be when that market comes back.

Rob Wertheimer: And then just the second question will be simply on the idea of deemphasizing.

Rob Wertheimer: <unk> hardware sales to Oems and transportation and focusing on the flow of data is there any strategic link there do you get less flow of data. If you don't have as much in the field on devices and could you just talk around that issue. Thank you.

Robert G. Painter: Yeah, Rob, thanks for the question. So let's take them in order with the bookings, growth in the fourth quarter in what is still a difficult market overlay. I think it demonstrates the value proposition that the technology provides.

Speaker Change: Yeah, Rob Thanks for the question, so let's take them in order with the bookings.

Speaker Change: Growth in the fourth quarter, and what is still a difficult market overlay I think it demonstrates the value proposition that the technology provides and I had a chance to go to.

Speaker Change: Our.

<unk> conference.

Robert G. Painter: Barcelona in September, and you know what you see in a room like that, and what you can see on the PowerPoint slides are some of the very largest logos, and The World, are transporting on technology. It's really quite impressive, whether it's a retail or CPG company. Packaging or building construction materials, excuse me, look through the different verticals. It's really an impressive array and a difficult market environment, and Be Reluctant to spend the money or to spend the organizational effort to make a change. The fact of the matter is that, you know, we can drive efficiencies and productivity. Timothy, you see that our win rates are as high as they've ever been, and to us, that's an important market. The Bulletproof Executive 2013, https://www.youtube.com or the link in the description below. You know, while they're less than we would like on an overall annualized basis, I think it's pretty clear on that, within what we've got, that they are showing that we're holding, it's not gaining share. I do have.

Speaker Change: Barcelona in September and what you see in a room like that and what you can see on the Powerpoint slides are some of the very largest logos.

Speaker Change: In the world.

Use.

Speaker Change: Transport on technology, it's really quite impressive, whether it's retail or CPG or packaging or building construction materials externally look through the different verticals, it's really an impressive.

Speaker Change: Array of companies in a difficult market environment, while companies can be reluctant to.

Speaker Change: Their spend the money or to spend the organizational effort to make a change to do something.

Speaker Change: The fact of the matter is is that we can drive efficiencies and productivity.

Speaker Change: Activity into our customers what we see is that our our win rates are as high as they've.

Speaker Change: Ever been to us that's an important.

Speaker Change: Factor in how we think about the business and the controlling what you can control.

Speaker Change: Losing market share.

Speaker Change: As an important is an important metric and we think that the bookings.

Speaker Change: While they are less than we would like on an overall annualized basis I'll be clear on that within what we've got that they are showing that we are holding if not gaining share in the market. So.

Speaker Change: I do have my.

Robert G. Painter: Gratitude is delivered, fighting it out every day. And you asked about the spot contract mix and what that could look like on the other side.

Speaker Change: Gratitude to the team for delivering that and fighting it out every day and you asked about the spot contract mix and what could that look like on the other side.

Robert G. Painter: Well, you know, I heard... Jamie Dimon, when asked what the definition of a recession is, said it's something that happens every seven years. So take some version of that quote, if it's, if it was actually true, take some version of that quote, as we know that the freight markets go. So the market will, and it does show signs of having stabilized, but stabilized is different. What we can see over a long baseline is that the business out of the freight recession has accelerated strongly out of them, and it makes, based on models that we would expect. I'm not making a call that this will inflect.

Speaker Change: I heard Doug.

Speaker Change: Jamie Diamond when asked what is the definition of a recession said, it's something that happens every seven years. So take some version of that.

Speaker Change: Quote if it's if it was actually true take some version of that quote.

Speaker Change: Note that the freight markets go up and down so the market and it does show signs of having stabilized stabilized is different from increasing what we can see over a long baseline. So that the business out of freight recessions has accelerated strongly coming out of them and it makes sense and it's a consumption based.

Speaker Change: Model is that we would expect.

Speaker Change: The market in flex and I'm, not making a call that it will inflect in 2020, Florida to be clear.

Robert G. Painter: The Bulletproof Executive 2013, As it inflects, the business just naturally... significantly increases the level of revenue, through, and I'd say at a strong level is what I would expect that. And then last you asked about at the OEM level and the de-emphasizing of the hardware. I'd say the hardware and the transportation segment is quite different than the hardware around the rest. Trimble.

Speaker Change: Is it in flex the business just naturally.

Can significantly increase the level of revenue that comes it comes through.

Speaker Change: Hey at a strong double digit level as what I would expect that to move.

Speaker Change: And then last you asked about the at the OEM level and the deemphasizing of the.

Speaker Change: Hardware I would say the hardware in the transportation segment is quite different.

Speaker Change: Hardware around the rest of Trimble and there is less differentiation and that onboard compute and these days either.

Robert G. Painter: There is less differentiation in on-board compute these days, more of our own. In-cab hardware devices are close to commercial off-the-shelf tablets. So making our own hardware years ago was a unique difference integrated into our full software offering, and you know, I went through to choke offer. As that technology landscape changed, it's really... not a great place to be, you know. We refer to it internally as the lower Cal, low-calorie revenue because they're just... Attractive Margin, margin, with all of the hardware, not all of the hardware. But at that OEM level, you know, if OEM wants to value engineer the lowest cost hardware, It's just not a place I think we're ever going to be the best at doing that at some kind of global scale.

Speaker Change: More of our own.

Speaker Change: Column in cab hardware devices are close to commercial off the shelf.

Speaker Change: Tablets, so making our own hardware years ago was a unique differentiated.

Speaker Change: Factor and it seamlessly integrated into our full software offering any archive one throat to choke off for the fall.

Speaker Change: Solution as that technology landscape changed it's really just it's just not a great place to be we refer to it internally is the lower calorie.

Low calorie revenue because theres, just not attractive margins.

Speaker Change: Margin.

Speaker Change: With with all of the hardware not all of the hardware is equal but at that OEM level OEM wants to value engineer the lowest cost hardware just not a place I think we're going to ever be the best doing that at some kind of global global scale. Thus im looking at the data integration when you look at the data Oems.

Robert G. Painter: Thus, looking at data integration. When we look at the data, OEMs have one set of data that they're interested in, which is frankly different than what customers are interested in, to run their businesses. That is to say, you know, that data is extraordinarily valuable. And by the way, it is important to customers, but it usually comes in the form of... Service Agreements, whereas customers operate mixed fleets of equipment, and the customers are trying to drive their own product, www.youtube.com.uk of Technology that they've got. We think that data feeds will continue to be necessary, both at the OEM level, but also you need to be able to provide a gateway to be able to bring the customers And by the way, whether that's Trimble or Trimble Solutions.

Speaker Change: One set of data that they're interested in which is frankly different than what customers are interested in.

To run their businesses that is to say.

Speaker Change: Data on machine health is extraordinarily valuable to the OEM didn't by the way it is important to customers, but it's usually it comes in the form of the customer service agreements, whereas customers operate mixed fleets.

Equipment and the customers are trying to drive their own productivity and efficiency and safety and visibility and to operate within whatever installed base of <unk>.

Speaker Change: Technology that they've got and so we think that data feed will continue to be necessary. Both for the OEM level, but also you need to be able to provide in our gateway so to speak to be able to bring the customers onto a more fully functional.

Speaker Change: In this case telematic solution and by the way, whether that's trimble or not terminal solutions I think that would be true for the market to have that flex flex ability. So Rob I hope that helps provide some color.

Speaker Change: And this concludes today's conference call. We thank you for joining US today you may now disconnect.

Speaker Change: [music].

Robert G. Painter: I think that would be true for the market to have that flexibility. So, Rob, I hope that... And this concludes today's conference call. We thank you for joining us today. You may now disconnect.