Trimble(US:TRMB)2022-08-05 15:56Financial Data and Key Metrics Changes - Annualized recurring revenue (ARR) grew 15% to $1.51 billion, while total revenue increased 6% to $941 million, exceeding expectations [4][23] - Gross margin reached a record level of 59.7%, up 150 basis points year-over-year, driven by a favorable mix shift towards software offerings [4][23] - EBITDA and operating margins for the quarter were 24.2% and 22.4%, respectively, with net income and EPS lower than prior year levels but ahead of expectations [25] Business Line Data and Key Metrics Changes - Buildings & Infrastructure segment saw 13% organic revenue growth and over 20% organic ARR growth, with strong bookings and net retention [30] - Geospatial segment experienced a 5% decline in organic revenue due to tough comparisons and component shortages, but demand for survey offerings remains strong [32] - Resources and Utilities organic revenue grew by 15%, reflecting improved supply chain conditions for agriculture products [32] - Transportation organic revenue decreased by 5%, primarily due to lower hardware sales in North America [33] Market Data and Key Metrics Changes - North America revenue increased by 8%, while Europe grew by 1%, impacted by the loss of business in Russia and Ukraine, which reduced Europe revenue growth by 5 percentage points [27] - Asia Pacific revenue rose by 5%, and the rest of the world saw a 22% increase [27] Company Strategy and Development Direction - The company is focusing on the Trimble Construction One offering, targeting contractors initially, with plans to expand to architects, designers, and owners [5][6] - A capital allocation strategy includes divesting non-core hardware businesses and prioritizing investments back into the business and acquisitions [9][8] - The company aims to simplify its portfolio and enhance digital transformation to increase efficiency and scalability [12][11] Management's Comments on Operating Environment and Future Outlook - Management noted strong market indicators and demand, despite macroeconomic concerns and inflation being top issues [16][18] - The company expects to maintain double-digit organic growth in agriculture, despite challenges in the European market [101] - Management raised guidance for ARR growth to 16% for the year, while projecting total revenue growth of 9% to 11% [35][39] Other Important Information - The company repurchased $200 million of its shares and has a relatively full acquisition pipeline [9] - The backlog stands at $1.6 billion, with hardware backlog reduced by approximately $110 million in the quarter [28] Q&A Session Summary Question: Where is the most traction for the Construction One platform? - The majority of growth is coming from existing customers, with significant opportunities for cross-selling and upselling [46][47] Question: How is the strategic landscape evolving in infrastructure construction? - Customers are looking to integrate multiple technologies into a common data environment, and the company is well-positioned to deliver this [53][54] Question: What is the outlook for ARR growth and pipeline visibility? - The company expects double-digit growth in ARR next year, driven by strong bookings and net retention [76][77] Question: Can you update on the transition from perpetual licenses to subscriptions? - The company has over $450 million in perpetual licenses and plans to move more of that to a recurring basis [78][79] Question: What are the pricing actions in response to inflation and FX pressures? - Pricing actions are approximately 50% price increase and 50% underlying unit volume [92] Question: What is the exposure to the residential market? - The company has minor exposure to residential markets, with no significant inflections in business from residential at this point [107][108]