Q1 2025 Trimble Inc Earnings Call
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Hello and welcome to Trimble First Court, 2020-25
Financial Resource Conference Call
All and sub you place on mute to prevent any background noise. [inaudible]
Optic Dispigious remarks, there will be a question and answer session. Thank you very much for your time.
Speaker Change: If you would like to ask a question during this time, send a press star followed by the number one on your telephone keypad If you would like to withdraw your question, press star one again As a reminder, this call is being recorded I would now like to turn the call up with Rob Painter, President and CEO Rob, you may begin I would like to ask a question during this time, if you would like to ask a question during this time, send a press star
Speaker Change: Our financial review will focus on year-to-year non-GAAP performance metrics on an organic basis.
Speaker Change: In addition, we will focus on adjusted numbers that we believe more accurately portray the underlying performance of our business. This means we will exclude our divested agriculture and mobility businesses.
Speaker Change: We also adjust for the approximately 50 million of January 1st term license revenue that was recognized in the first quarter of 2024, but not in the first quarter of 2025 because January 1st of 2025 fell into the fiscal fourth quarter of 2024. [inaudible]
Speaker Change: We exited 2024 on a strong footing, strategically, operationally, and financially
Speaker Change: To understand how we are positioned to navigate the uncertainty of the moment is to understand the quality of our performance in the first quarter, which can be expressed in three words, clarity, durability, and momentum.
Speaker Change: Clarity manifests as the simplification and focus we have brought to our business over the last few years.
Speaker Change: Starting with slide four, durability manifests through the quality of our business model, which we intentionally transformed over the last few years.
Speaker Change: Today, we are three quarter software, two thirds aeroar, asset light, and operating with a strong balance sheet. We are in the business of selling productivity and efficiency outcomes to our customers, and our technologies are mission critical. Let's go.
Speaker Change: Well, visibility and predictability into the future is far from perfect. It is definitively higher and better than at any point in our 47-year history.
Speaker Change: In the first quarter, as detailed on slide five, momentum manifested in a beat across the board. Revenue at 841 million was up 3% organically and up 10% after adjusting for the timing of January 1.
Speaker Change: ARR at 2.11 billion was up 17% organically and was ahead of expectations across our segments.
Speaker Change: EPS at 61 cents was also ahead of expectations. Congratulations to our team and our partners.
Speaker Change: Despite the strong start to the year in our current momentum, we are maintaining our guidance for the year, as we feel the prudent move is to inject a degree of conservatism into our outlook. [inaudible]
Speaker Change: Tariffs are modest in our software-centric business and have thus far been offset with pricing. We will all know more in three months and we will recalibrate at that point.
We're not just talking, we are acting. [inaudible]
Speaker Change: Slide 6 provides a framework for how we think about internal and external applications of AI on one axis and delivery of cost efficiencies in revenue growth on the other axis.
This framing helps us allocate capital with intention.
Speaker Change: For example, our product managers are leveraging AI to develop marketing and technical requirements documentation
Speaker Change: Our marketers are beginning to generate sales pipeline with agents mining data from our CRM systems.
Our sellers are leveraging AI for sales coaching.
Speaker Change: Her customer success teams are leveraging AI for case deflection and her software engineers are programming and testing with AI productivity tools.
Speaker Change: We are also releasing AI capabilities into our customer-facing solutions, from natural language prompted design to feature extraction out of 3D point clouds to automating invoices and naming-releasing standalone automation products to connect carriers and shippers.
Speaker Change: We believe we have a natural right to win and an AI forward.
Speaker Change: On an absolute basis, the uncertainty of tariffs and trade policy puts sand in the gears and soaks fears of an economic downturn.
Speaker Change: Despite these fears, the business is resilient and we outperformed in the quarter.
Speaker Change: Week competitors will reduce investment or exit the market, and we have the ability to run cross-sell and upsell plays if new logo generation becomes more difficult.
Speaker Change: At our investor day in December , we talked about $1.4 billion of cross-sell opportunities in the portfolio.
Speaker Change: We also have the balance sheet to continue to take subscription models to market in our software and hardware offerings, thus delivering more affordable access to our technology
Speaker Change: In summary, this leadership team has successfully managed through challenging environments by applying a simple and consistent principle position ourselves to exit periods of challenge on a stronger competitive footing
Your to date the opportunities have outweighed the uncertainties. [inaudible]
Speaker Change: Across end markets and geographies, we see pockets of strength at the same time we see pockets of modest weakness.
Speaker Change: In the last few weeks, I have met in person with dozens of global customers and partners in seven countries [inaudible]
Speaker Change: Most of them were level-headed and taking a wait and see approach. We have seen modest softness in the public sector in the US and slightly longer sales cycles with enterprise customers. [inaudible]
Speaker Change: On the other hand, Germany's announcement of infrastructure spend has been a positive. We see global strength and customer segments such as small, to mid-sized construction companies, and in industry segments such as data centers, renewables, and mining.
Speaker Change: With that context, let's talk about each of our segments, starting with AECO and a quote from an engineering customer who said the following [inaudible]
Speaker Change: With all these technologies connecting together with AI and Internet of Things, having all your solutions under one platform just makes sense.
Speaker Change: This sentiment is indicative of the success we are having with Trimble Construction 1 in our cross-selling efforts.
Speaker Change: In the quarter, ARR outperformed, up 19% to a record 1.29 billion. [inaudible]
ACB Bookings remained strong, growing in the mid-teens. [inaudible]
Speaker Change: Indicators, we pay special attention to, include ACD bookings, pipeline, net retention, and the lifetime value to customer acquisition cost ratio. Let's go.
All these indicators are healthy at the moment.
The trouble offering allows me to sleep better at night. [inaudible]
Speaker Change: With the subscription, budgeting equipment costs on bids is easier and it makes us more competitive. I don't have to worry about outdated software or communication between systems or that the technology we just spent thousands of dollars on is now obsolete. That's a subscription advantage that is irreplaceable.
Speaker Change: The business outperformed in the quarter, with particular strength in civil construction and advanced positioning.
Speaker Change: An interesting and important fact is that 50% of our customers who bought machine controls of service in the quarter were new logos, once again affirming that smart business model transformations expand the dressable markets.
Speaker Change: In early April , our field systems team was at the Balmatrade Show in Munich, where our technology was present on more than 20 OEM booths, signifying the importance of Trimble in the ecosystem, and demonstrating our commitment to serve the mixed fleet.
Speaker Change: Moving to transportation, I'll start by quoting a long time customer who said, we are impressed by the high quality of work and expertise that Trimble brings to her digitalization.
Speaker Change: This quote is indicative of the fundamental transformation happening in our served industries, which transcends economic cycles, thus providing context for continued growth in an underlying freight recession.
Speaker Change: The split of revenue in this business is 40%, Europe , Middle East, and Africa, 57% North America, and 3% rest of the world And our systems are mission critical, which we believe provided downside ballast of China, US trade further deteriorates [inaudible]
Speaker Change: With respect to KPIs in the segment, they are the same ones we think about in AECO, including ACV bookings, which exceeded our expectations in the quarter and which we expect to grow double digits this year.
Speaker Change: For Market Health, we look at tender rejection rates along with spot pricing for more real-time market conditions and both are relatively steady.
Speaker Change: In the Transporium business, we can also see pretty clear industry segment trends. For example, in Europe , we can confirm what appears to be somewhat self-evident. The automotive segment is down while retail and construction materials are up.
Speaker Change: In summary, clarity, durability, and momentum in the form of a strong start to the year give us confidence and conviction to stay in the course. Phil, over to you.
Phil: Thanks, Rob. A few items to cover before turning to the slides. On April 25th, we filed our 2024-10K with no changes to the financials that we presented earlier this year.
Speaker Change: In addition, we recently announced a change in our auditors for the 2025 fiscal year. We're excited to welcome KPMG as our new auditor
Speaker Change: We thank E&Y for their service, and I want to offer a particularly large thank you to the Trimble team for all the hard work and dedication throughout, and we are looking forward to successful transition [inaudible]
Speaker Change: Turning to our operations, let's start with tariffs at least and today. [inaudible]
Speaker Change: The total impact adds approximately 10 million per quarter to our host of goods in the field system segment. We've already implemented surcharges to offset this, thus we expect no impact to profitability.
Speaker Change: We are managing discretionary spend and directing capital to the most attractive market opportunities such as data centers and infrastructure, while continuing to invest in the transformation and growth of our core business.
Speaker Change: We bought back 627 million of shares in the first quarter and have the remaining 373 million of authorization available.
Speaker Change: With respect to M&A, we are primarily focused on small tokens with opportunities for fast integration where we can quickly cross sell and upsell to our customer base, yielding a rapid return on investment without deploying significant capital.
Speaker Change: Let's review the first quarter of 2025 starting on slide 7. As we noted previously, we have approximately 50 million of term license renewals that are recognized on January 1st.
Speaker Change: These happened in the first and fourth quarters of 2024, but not in the first quarter of 2025.
Speaker Change: The right way to look at the business progression is to normalize for this dynamic. Unless otherwise noted, I will be talking about our as-adjusted numbers, which remove the effects of the recent divestitures, which we further adjust for the January 1st Term License Renewals.
Speaker Change: As reported numbers, along with the reconciliation are provided in the appendix
Speaker Change: Organic Revenue was up 10% and error was strong, up 17% to a record 2.11 billion
Speaker Change: Gross margins expanded 180 basis points to 69.9%, which shows our continued model progression and despite the greater hardware mix with the field system's performance.
Speaker Change: which heaves even though margins of 25.9%, which is a 100 basis points expansion year over year.
Reporting Ergens per share was 61 cents for the quarter.
Speaker Change: Our balance sheet is strong with 290 million of cash in a leverage ratio of less than 3.3 times, which is well below our long-term target rate of 2.5 times.
Speaker Change: From a liquidity standpoint, we are asset in working capital life and have the full 1.25 billion of availability on our revolving credit facility.
Speaker Change: Let's shift to a segment review of the numbers before we close with guidance, starting with AETO and Slide 9.
Speaker Change: AECO delivered a record, 1.29 billion of ARR, posting 19% ARR growth for the quarter. Operating an income at 27.3% increased 50 basis points year-to-year
Speaker Change: We continue to expect the segment to expand margins by about 100 basis points for the full year.
Speaker Change: The business continues to operate well above the Rule of 40 and was greater than Rule of 45 in the first quarter.
Speaker Change: Next, Field Systems on Slide 10. Revenue was up 6% and AR growth up 25% for the quarter, where we continue to successfully execute our business model conversions.
Speaker Change: Our civil construction business was particularly strong and ARR was driven by positioning services and sales of subscription offerings.
Speaker Change: Overall, dealer inventories went down for the quarter for our businesses and are sized appropriately for the demand taking into account the uncertainty in the market.
Speaker Change: Operating income at 29.7% increased 280 basis points, driven by the increasing higher margin recurring mix
Finally!
Speaker Change: Transportation and logistics on slide 11. Revenue in ARR were up 6% and 7% respectively for the quarter. The segment is now greater than 90% recurring revenue following the divestiture of the mobility business.
Speaker Change: Operating margins at 21.2% are expected to improve in the next three quarters as we continue to execute the strategy.
Speaker Change: With the macro uncertainty Rob mentioned, we are de-risking our guidance by modestly reducing our organic revenue growth driven mostly by non-ARR revenue and field systems into a lesser extent transportation.
Speaker Change: This is offset by the revenue benefits we see with the change in foreign currency exchange rates along with the first quarter out performance. We will revisit our guidance with second quarter results when we expect to have greater clarity.
Speaker Change: Looking at the calendarization, the fourth quarter of 2025 benefits from January 1st in the quarter, which is expected to bring approximately 60 million of high margin term license revenue. We provide an updated view of this calendarization in the earnings supplement on our investor's site.
Speaker Change: On an as-adjusted basis, our EPS guide implies low to maintains EPS growth year-rear, which is consistent with our long-term model.
Speaker Change: From a cash-glittle perspective, our FOIA review is updated to be 0.9 times net income after adjusting for the 253 million cash tax payment for gain on sale of the AGJV in approximately 35 million in M&A costs.
Speaker Change: Relative to the prior guide, we're expecting higher cash taxes and one-time items.
Speaker Change: We continue to expect that we can deliver free cash flow greater than non-GAAP net income over the long term.
Speaker Change: For the second quarter guidance on slide 14, we expect as reported revenue to be in the 815-845 million range, an EPS of 59 cents to 65 cents, which is consistent with the numbers we provided earlier in the year.
With that, I'll turn it back to Toronto.
Speaker Change: Durability Interbusiness This Happened by Design, Not by Accident [inaudible]
Speaker Change: We are positioned to withstand market headwinds. Momentum, we sell ROI on mission critical applications. Our Connected Skill Strategy works and we will continue to prosecute our strategy. [inaudible]
Speaker Change: Clarity of purpose. We have always managed with a mindset to exit challenging times on a stronger competitive basis than when we entered it. Control what we can control. Embrace our values, follow the money, control our costs, execute our OCR's lead.
Operator, let's open the line to questions.
Speaker Change: We will now begin a question-and-answer session. If you would like to ask a question, see the star followed by the number one on your telephone keypad. If you would like to withdraw your question, write star one again. And please, limit yourselves to one question and one follow-up.
Operator: And your first question comes from the line of Kristen Owen with Openheimer. Kristen, please go ahead.
Kristen Owen: Hi, good morning. Thank you for taking the question and congratulations on it on a nice start to be here.
Speaker Change: So, Robert, I want to double click on the field systems business because when I look at the results of some of your large peers, it almost seems like night and day in terms of your relative performance and resilience even against sort of the broader macro uncertainty. [inaudible]
Speaker Change: So I'm wondering if you can walk us through what's working there, and if there are any shifts you're seeing in the competitive environment. Let's go ahead.
Speaker Change: And then I'm going to ask my follow-up now because they're somewhat related. You know, you've reached structure of the CATJV, and since then, you've announced a number of these new OEM and distribution partners on the Civil Construction side. So I'm just hoping you can contextualize those partnerships for us, public understand, go to market strategy, and how to think about that gross contribution to the portfolio over time. Thanks. I know it's a lot there. Thank you.
Hey, Kristen. Thanks for the questions and good morning.
Speaker Change: I'll start with the addressable market view at that level. The market is large, global, underserved, and underpenetrated.
Speaker Change: and a customer lens that demands solutions to serve mixed fleets.
Speaker Change: Global Bealer Channel in the world. At a product level, let's double-click there. For example, look at sight works and our sight works line.
Speaker Change: to progress on the product side, to perform, and to meet the opportunities out there in the market. For example, excavators are the largest machine count in the world, so the better we can serve and penetrate that market, the more we can grow our business. Thank you very much.
Speaker Change: I talked about the business model a little bit in the prepared remarks, that subscription offering. We see that expanding the addressable market, that's something uniquely we can do. We look at workflow. . . .
Speaker Change: They are thinking about linking what we're doing to link our B2W track product so that to what we're doing out in the field and machine control so that we can connect production. Thank you very much.
Speaker Change: up to the workflow. And then I'd be remiss not to congratulate the team Ron and Scott in the team. I've just said really consistent leadership and strategy and deserve a lot of credit for driving the business for really proud of the results. Thank you very much.
Speaker Change: that this team and our partners delivered and have been delivering. You asked about, go to market.
Speaker Change: and where we are on that. Well, the basis of our go-to-market, of course, is the site-tech channel and it will continue to be so into the future at an OEM level.
Speaker Change: We renewed our cap relationship last year, as you know, and big congrats to Jim and Jill in that transition. They've just gone at the CEO level. And the fall we announced a relationship with John Deere and working with their smart grade.
Line of Guidance and Technology, Balmo, we announced Alibare.
Speaker Change: Dozers, and in fact at Falmouth, we had technology on over 20 different boots. And then finally, we have established, and are establishing a set of technology outlets for which I've already been signed up in these technology outlets. [inaudible]
Speaker Change: are meant to expand the reach for OEMs that we're working with, with a vision in mind to increase the adoption and penetration of the technology in the market. So the pieces are really working well together now. Thank you very much.
Speaker Change: and very happy with the results of the business and proud of the team for delivering these results.
Thank you for that color. I'll leave it there.
Thank you [inaudible]
Speaker Change: And your next question comes from the line of Jason Zalino with Giban Capital Markets. Jason, please go ahead.
Speaker Change: Good morning, Rob. Good morning, Phil. This is actually Devon on for Jason Celino this morning. Thanks for taking our questions. I wanted to ask about, you know, kind of what you're hearing from customers within AECO, you know, among.
Speaker Change: Construction owners and engineers know how are you thinking about their business and near-term project outlook? Have you seen any noticeable increase in budget scrutiny or sales cycle elongating in the month of April and have those trends kind of continued into May just any any color that would be helpful.
Rob Painter: Hi, good morning. This is Rob, I'll take the question. Overall in AECO, it's steadies she goes.
Rob Painter: What we've seen into the quarter in the last few weeks is...
Rob Painter: is consistent in support to the guide we have and what do you want to call that for the second quarter or for the rest of the year? Like any at any time there are for sure.
Rob Painter: Pockets of strength and pockets of weakness, and I would say that's true and...
Rob Painter: really in any market. So for sure the market is dynamic and there's a bit of heightened uncertainty. We've seen a little longer sales cycles from the largest customers. We have a kind of call that that enterprise level of customer. They're not. We have a scene. [inaudible]
Rob Painter: Companies changing decisions, we've seen them take longer to make decisions to make decisions.
Rob Painter: But nothing that fundamentally moves the needle on our business when I say that. On the flip side of that, we continue to see pockets of strength, whether it's data centers, renewables, you go over to Europe and...
Rob Painter: You've got a different dynamic than what you have in the U.S. and with Germany announcing a potential. [inaudible]
Rob Painter: Happy Trilling Dollar Infrastructure Bill, that's put some wind in the sails of confidence out there in the market. So a little bit of, I'd see some signals on both sides of it, but it nets positive and we see opportunity through that.
Rob Painter: Uncertainty and what we've seen quarter-to-date of supports, the outlook we have for the quarter-to-year.
Speaker Change: That's really helpful contact and then just a quick follow-up, I know you called out really healthy metrics to do seeing across the business organic air growth accelerated by a point in the quarter. Thank you very much.
Speaker Change: Have you seen any deals that have gone pulled forward just because of the geopolitical challenges and concerns, but any deals may have shifted more or the other to draw the strength in the quarter. Thanks.
Speaker Change: If there's such a thing as a pull forward on a software sale, I'll take it all day long, but I don't actually think that that happened because we haven't changed pricing of a software that would make that happen.
Speaker Change: So it's a really more of a relevant question on the hardware business, which is...
Speaker Change: A less than 25% of the revenue we have in the company now. We think that there may have been a few million, like maybe less than 5 million, or forward and in the quarter. At the same time though, it's really important.
Speaker Change: and the quarter. So the retail sales therefore outpaced even the wholesale sales that we had to our channel. Just to make sure that clarifying that, we sell our hardware predominantly through the dealer channels today on the software that we sell direct. . .
Speaker Change: Thank you so much for the color and for taking my questions. [inaudible]
Thank you [inaudible]
Speaker Change: And your next question comes from the line of Tami Zakaria with JB Morgan, Tami, please go ahead.
Tami Zacharia: Hey, good morning to team Trimble and converts on the strong start to the year. My first question is on the 10 million tariff impact.
I'm assuming you're taking pricing to offset that [inaudible]
Tami Zacharia: Is that 10 million coming from mainly China? I'm basically trying to understand what the 10 million impact per quarter could look like.
Tami Zacharia: Hey, Tami, it's Phil. Thanks for the question. So the $10 million is really the product that comes into the US, and it's mainly more the Canada and Mexico products that aren't USMCA compliant.
Tami Zacharia: items that are driving that 10 million are coming from Canada, Mexico into the US and the USMTA compliant.
Tami Zacharia: Understood, that's clear. Thank you so much. And then my other question is, can you remind us what revenue exposure you have to federal sources and whether we should expect an impact from any dose related cost cuts in the coming quarters? Very good.
Tami Zacharia: We've actually removed a little bit more in the current guide as well, so our exposure is very small for the rest of the year in the, call it single-digit millions .
Perfect, thank you [inaudible]
Speaker Change: And your next question comes from the line of Jonathan Ho with William Blair, Jonathan, please go ahead.
Jonathan Hawk: Hi, good morning. I just wanted to understand a little bit better your comments around AI. Could you talk a little bit about what you're seeing in terms of the potential here for customers to maybe re-evaluate the solutions and how you made this benefit Trimble from the competitive stance? Thanks.
Hey Jonathan, good morning, it's Rob, I'll take the question [inaudible]
Jonathan Hawk: A from a competitive stance and a strategy view, the thing that is so unique about Trimble is the scope and scale of the data.
Jonathan Hawk: That we see across the industry life cycle continues whether that's in transportation connecting the carriers and shippers Over that plan procure execute life cycle or it's in construction Connecting the architects engineers contractors and owners across the life cycle from plan design to build
Jonathan Hawk: to operate. So that scope and scale is unique. And we talk about it in forms of trillions, billions, millions and thousands. We manage it for a trillion dollars of construction. Through Trimble, we manage tens of billions of freight. Through Trimble, we have millions. Through Trimble, we have millions. Through Trimble, we have millions.
Jonathan Hawk: Hughes, and Operate on Trimble Technology. So there's something that's really unique with respect to the Corpus.
Jonathan Hawk: problems, thinking about workflow and ecosystems, not just tasks or products. So in an AI sense, I think this is a great setup for our company and the value that we can provide to our customers and increasingly in the customer conversations I have. [inaudible]
Jonathan Hawk: They start an end by talking about data and how can they unlock more of their data and get more insights?
out of it. [inaudible]
Jonathan Hawk: of the work. So with that all as a backdrop, I'm really bullish about the work that our teams are doing in the AI realm and there's a whole aspect of what we're doing internally. You're asking more of an external customer facing. [inaudible]
Jonathan Hawk: question, and so we are already are delivering capabilities that are AI driven capabilities to our customers, whether it's...
Jonathan Hawk: and Natural Language based design to AI-based rendering and then design packages, whether it's feature extraction out of 3D point clouds and geospatial context or automating. [inaudible]
The connection between procurement and procurement.
Jonathan Hawk: and Inputation between Shippers and Carrier. So to me, I'm really pleased with the work that the team is doing and we are still so early in our journey. So I think it's a great setup here for the path ahead of us.
Speaker Change: That makes a ton of sense. Can you also give us a bit more detail on the machine control as a service and how much of new businesses may be coming in through this? Are there any potentials to flip existing hardware customers? Any color would be appreciated. Thank you. Thank you.
Speaker Change: Yeah, on that one, what we saw on the quarter is really interesting and actually it's not just the quarter we've seen it over the last few years we've been doing this.
Speaker Change: The business does continue to grow, so the team at a record level of bookings that we call Works Plus is the offering. And the new logo is that we won.
that's
Speaker Change: Super interesting and compelling to me, to me it asked him demonstrable evidence that the business model can expand the size of the address of the market. And we've seen that in every single software.
Speaker Change: Product World, we've made these transitions, as we've seen the unit counts. [inaudible]
Speaker Change: Go Up as it becomes more accessible. What's also interesting, and it links to the back half of your question, is that we've seen it used to be used to in competitive swap out. And there's really a, I see an increasing level of...
Speaker Change: and competitive competitors that we are able to swap out and this business model contributes to, I mean, overall strategy does as well, the business model makes it more affordable for the customers to make these fleet swaps to move to Trimble. Also,
Speaker Change: And then what you should expect to see and hear from us over time is with that basis of the subscription offering, think about the land and expand players to be able to deliver more value in the form of additional software and workflow that we can put on top of that base.
Thank you.
Thank you [inaudible]
Speaker Change: And your next question comes from the line of Rob Wertheimer with Melis Research. Rob, please go ahead.
Rob Wertheimer: I'm wondering if you had any expanded comments on what you were thinking might struggle in the software ecosystem if it's a downturn comes if it's a moment for, you know, things to flock to the bigger platforms, maybe just talk about what you're thinking about there and I'll stop, thank you
Rob Wertheimer: Hey, people, Rob, thanks for the questions. Hey, I'm sticking out of the software. I think the best place I can start would be an AECO comment or the net retention. Thank you very much.
Rob Wertheimer: Studies, that's the best evidence I can give in terms of gross retention and continuing to upsell and crosssell in the portfolio.
Rob Wertheimer: The US about smaller customers in turn. Actually, we've seen more growth in the smaller customer base in the small mid-size customer base in the construction realm anyway. Thank you very much.
Rob Wertheimer: because that we see as a very untapped market. So actually quite bullish about the ability to increase the level of penetration in that market. At the same time, I understand it's logical. I'm going to go on.
compared to the larger ones. [inaudible]
Rob Wertheimer: to say that there's a healthy amount of backlog, so it's not the first thing we think about is liquidity, balance sheet liquidity of our smaller customers. So they're doing well and we see actually quite a lot of growth there. You asked about gaining share. Thank you very much.
Rob Wertheimer: and a downturn to put a little more color on that. So hey, the construction ecosystem, technology ecosystem, it's a vibrant ecosystem. There's a lot of really interesting.
Rob Wertheimer: Companies out there. We have a venture capital arm, or we've invested in a few companies. You know, I think if you step back and look at that ecosystem
Rob Wertheimer: Like most startups, most won't make it. That's the nature of the game. Those that do, I think many of them turn out to be features as opposed to businesses. That's the nature of the game.
Rob Wertheimer: that to get to that, you know, there's one thing to get to the first one that's a five million of revenue. What tends to get to a lot of those companies is go to market from getting the ten million or getting to the hundred million.
as two examples. We've significantly accelerated.
Rob Wertheimer: The smaller companies to raise money and to have the balance sheets to withstand storms if they come, maybe they won't come but if they come I think we're in a position to do quite well in the game share in a downturn. [inaudible]
Perfect, thank you [inaudible]
Speaker Change: And your next question comes from the line of Chad Dillard with Bernstein. Chad, please go ahead.
Hey, good morning, guys.
Speaker Change: So what are you messaging to distributors about the tariff driven pricing actions? How much are you raising price?
Speaker Change: You know, when does this hit? Is this search or is it a formal price rate raise? And then for the $10 million that you call out, is that the, do you expect to pass that entirely on or is there some sharing between yourself, the distributor, the customer is trying to think through that?
Speaker Change: H. Had a good morning, and thanks for the question, it's Rob. It's a pretty easy answer. It's North America only. It's a surcharge.
Speaker Change: Good, so blown off. And then just on transport, and can you just deal with a little bit color on what you saw on the market and how you're thinking about that business for the balance of the earth? [inaudible]
Speaker Change: I grew a high single digit on a year-over-year basis. When we look forward to the rest forward into 2025, we still believe we've got the pipeline to drive double digit.
Growth and the bookings of the business. Yes.
Capabilities.
Speaker Change: that we have been doing more things together, the organization is mostly moved actually already to a functional organization. So as we go to market, we can take the full set of capabilities in a more coherent way.
Speaker Change: that they're moving. And so in the prepared remarks, when I mentioned that we can see automotive units down, that's because there's less automotive transports happening on the Transporeon platform.
Speaker Change: Conversely, we can see in retail and consumer products, you know, we can see the units, the transports [inaudible]
Speaker Change: units continuing to grow on a year-over-year basis. So that insight can shape how we allocate capital internally for which and markets to go after and which geographies to go after. And the Transporian, as you know, is also majority. The Transpority.
Speaker Change: European, based today, and that gives us, you know, actually probably a little bit incremental level of. [inaudible]
Speaker Change: Confidence for that business as compared to North America. I mean, both markets are in a free recession, but at the moment, I like some of the setup of Europe and especially if you know Germany to the infrastructure bill. [inaudible]
That's all for me. Thank you.
Robert Mason: And your next question comes from the line of Robert Mason with Beard. Robert, please go ahead.
Robert Mason: Yes, good morning. You know, the field system is 25%
Robert Mason: ARR Growth, kind of steps off the page. It's pretty impressive. It's going to see if you could drill down a little further into that. You call that both on the positioning service as well as, you know, the civil construction side. How did the growth shake out there and I'm just...
Robert Mason: We work in office smaller base and some of the newer offerings driving the organic growth to that 25% level. And part of the reason I ask is it seems like, you know, we should expect some moderation through the year just based on the guidance and how we should think about catering there as well. [inaudible]
Hey Rob, thanks for the question.
Speaker Change: The shift to ARR in the business has been very intentional, so it's for sure not by accident. The teams have done a lot of work to transition business models. You know, we stand at 358 million.
Guidance, offering we continue to grow there and our survey business.
Speaker Change: We have a product or solution called DA2, or also called catalyst for the rest of the world.
Speaker Change: sites. That's been a great business for us for a long time. We've expanded this capabilities in the automotive market and so we see growth there in that automotive and market. Think about lane detection and safety systems there on on paths towards automation. And then even that we've got examples in our survey business. [inaudible]
Speaker Change: Hardware and I think we're pretty well ahead of the curve and the competitive environment with the way we're approaching this market and they are the results speak for themselves at the moment.
Speaker Change: Yes, that's great. Rob, you referenced Germany in particular, as we'll see how their plan plays out. But could you just speak to how you think your position there? I know some of your bundles vary by region, but just in that region in particular, when you would expect to potentially see some uplift. [inaudible]
around what they're talking about. [inaudible]
Speaker Change: Yeah, so, hey, I was just in Germany at Balma, and actually was there again about a week ago. At Balma, I'd really give a shout out, not only to our team, but our partners at Citech, Deutsche Land.
Speaker Change: We were just doing a terrific job executing. The site tech team operates at scale. It's the largest competitor in the market.
Speaker Change: And that relative market share I think matters, you know, they were able to pull off.
and Jobsite in NS.
Speaker Change: Like that goes so far in terms of driving business, in fact they did drive millions of bureaus [inaudible]
Speaker Change: Ability to Support Telepuckets, which is very much a European need, including in Germany, so giving them additional products and capabilities.
Speaker Change: drives optimism in the market. Now, some of that optimism in paradise can be coming off of, you know, low lows. So, I'll take that, though, or if, you know, to the extent that any optimism there is a good thing. And, you know, it speaks for itself, probably in a civil business that's going to correlate to infrastructure, any sign of support. [inaudible]
Speaker Change: For that, regardless of the package, you know, you're right, it hasn't happened yet. But just the talk of it is a new kind of conversation in the country and has provided a level of optimism. On the software side of the business, I'd say the market continues to be healthy and think about vertical construction. Thank you very much.
Speaker Change: Centric, and there, the team really just think they do a nice job of...
Speaker Change: of controlling the things they can control, and that includes how we go to market, how we transform that, and how we package our offerings through the TC-1 bundle on. And they all seem to be working at the moment.
Very good. Thank you
[inaudible]
You're sorry, good morning everyone.
Speaker Change: Hi, Jerry. Rob, we just go back to a co-really outstanding ARR Organic
Speaker Change: You know, somewhere to the mid teams in the second quarter, based on what you're saying, can we just put a finer point on just quantifying what that longer sales cycle means in your prepared remarks? Thanks.
Speaker Change: Hey, Jerry, thanks for the question. Okay, so, yeah, ARR in the first quarter, up 19% ACV bookings in the high teens. If we look at this ACV bookings and double click, about two thirds of those bookings are TC1.
Speaker Change: Bookings. So, TC-1 now is the majority of the bookings that we have. TC-1 itself is a commercial framework for how we do business.
Speaker Change: and in some cases, you could be on a TC1 framework and still buying an individual solution. [inaudible]
The good news within that would be that...
Speaker Change: gives us an easier way to cross-sell and upsell to that customer because they already have the basis of foundational basis of the contract.
Speaker Change: and how important this is to us and how good this has been for our efforts to go after that cross on upsell, which is an investor day we want to buy it is about a billion dollar opportunity.
so there's a lot to like with them.
Speaker Change: with Trimble and these are workflows that we can uniquely deliver. So expect to see more connections of TC-1 bundles into the civil market here this year and beyond. Okay, then you asked about sales cycles. Thank you very much.
Speaker Change: Construction ERP, if you delay your decision by some weeks, you haven't fundamentally altered your ability to deliver value. And so it kind of doesn't surprise me that we've seen a little bit of hesitation. It's important.
Speaker Change: in terms of, and that's at the largest end of the market. And so when we see things like that happen and we are pretty good about moving the motions to other parts that are moving faster. So we've seen more growth in small to mid-size. Thank you guys.
So, feel good about the business that we have.
in front of us in the trajectory of that. I'd say in the public sector as well, like that one.
Speaker Change: By the way, Phil commented on the business of the federal government, we also sell the state and the local [inaudible]
Speaker Change: and some of those have been a little bit slower, but they've been offset by where we've seen the pockets of strength, whether that's in industry segments, or it's a customer-sized segment.
So hope that helps Jerry give you some color.
Speaker Change: Obviously, you've got a transition going on with the day messenger. Can you just talk about where the quarter is?
Speaker Change: came in relative to your plan. It looks like maybe there's some work to do to get to the full-year guide that's better than normal seasonality, can you just expand on the timing of when those trended costs go away and how it's playing out versus your plan?
Speaker Change: Yeah, thanks, Jerry. So as we think about it, as you said, with the mobility divestiture, we do have some stranded costs this year, and so that we're going to start out the year.
Speaker Change: I think around that 21% and then our guide is still at that 24% for the year and so we continue to see the margin improvement so think about Transporian and the bookings and strength that we had over the last year. Thank you very much.
Speaker Change: As we talked about that, bookings takes a while to manifest because of the ramp time So we start to see the inflections sort of as we progress throughout the year and so that helps with the margin expansion again.
Speaker Change: as we continue to move throughout the year with that. As far as the stranded costs, as you know, some of that...
Speaker Change: is around software constructs and other things that are hard to get out of immediately, so that will take a little bit of time. So we do expect that to still be a headwind in 2025, but as we start to move into 2026, along with some of the actions and things like that, we're taking, we think it'll be neutral as we go forward after 2025.
The downtown of the software contracts. Thank you.
Speaker Change: All right, well, we appear to have lost our moderator here for the call. This is Rob Painter. I just want to thank everybody for attending today's call. And with that, we will hang up.
for joining us. Thank you.
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