Trimble Inc. (TRMB)
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Earnings Call: Q1 2025

May 7, 2025

Operator

Hello and welcome to Trimble First Quarter 2025 Financial Results Conference Call. All lines have been placed on mute to prevent any background noise. 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 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 over to Rob Painter, President and CEO. Rob, you may begin.

Rob Painter
CEO, Trimble Inc.

Welcome, everyone. Before I get started, our presentation and Safe Harbor Statement are available on our website. Our financial review will focus on year-over-year non-GAAP performance metrics on an organic basis. 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. 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. We exited 2024 on a strong footing, strategically, operationally, and financially. The results of the first quarter of 2025 are further evidence of the strength of our business.

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. Clarity manifests as the simplification and focus we have brought to our business over the last few years. On February 8th, we closed the sale of our transportation mobility business to Platform Science, further solidifying our strategic focus to compete and invest where we have a natural right to win. Starting with slide four, durability manifests through the quality of our business model, which we intentionally transformed over the last few years. Today, we are three-quarter software, two-thirds ARR, 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.

While 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. 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. ARR at $2.11 billion was up 17% organically and was ahead of expectations across our segments. EPS at $0.61 was also ahead of expectations. Congratulations to our team and our partners. Despite the strong start to the year and 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. 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. One area of Trimble where we are not cautious is in our AI journey, where we are moving with a clarity of purpose to better serve our customers while further strengthening our own business operations. We're not just talking; we are acting. In April, we held a virtual internal AI summit with nearly 2,500 internal attendees, where we spent a day reviewing priorities and work in progress. In addition, we have OKRs throughout the company to drive execution and accountability to AI outcomes. Slide six provides a framework for how we think about internal and external applications of AI on one axis and delivery of cost efficiencies and revenue growth on the other axis. This framing helps us allocate capital with intention.

For example, our product managers are leveraging AI to develop marketing and technical requirements documentation. Our marketers are beginning to generate sales pipeline with agents mining data from our CRM systems. Our sellers are leveraging AI for sales coaching. Our customer success teams are leveraging AI for case deflection, and our software engineers are programming and testing with AI productivity tools. 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 even releasing standalone automation products to connect carriers and shippers. We believe we have a natural right to win in an AI forward, emphatically so given the unique scope and scale of Trimble in the physical and digital worlds. With that in mind, let's step back and share our view on the macros. In four words, opportunity coupled with uncertainty.

On an absolute basis, the uncertainty of tariffs and trade policy puts sand in the gears and stokes fears of an economic downturn. Despite these fears, the business is resilient, and we outperformed in the quarter. On a relative basis, we look at how our business is competitively positioned. In this respect, if we hit a downturn, we believe we can outperform and win market share. Weak 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. At our investor day in December, we talked about $1.4 billion of cross-sell opportunities in the portfolio. 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.

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. Year to date, the opportunities have outweighed the uncertainties. Across end markets and geographies, we see pockets of strength at the same time we see pockets of modest weakness. In the last few weeks, I have met in person with dozens of global customers and partners in seven countries. Most of them were level-headed and taking a wait-and-see approach. We have seen modest softness in the public sector in the U.S. and slightly longer sales cycles with enterprise customers. On the other hand, Germany's announcement of infrastructure spend has been a positive. We see global strength in customer segments such as small to mid-sized construction companies and in industry segments such as data centers, renewables, and mining.

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