All right. Go ahead and get started. My name is Clarke Jeffries. I am part of the tech research practice here at Piper Sandler. I am very pleased to have Phil Sawarynski, CFO of Trimble. Thanks for coming to Nashville.
Well, thanks. Good to be here again.
Yeah. Fantastic. Well, let us maybe just start with some brief overview of where the Trimble business stands in 2026, and then we will get right into it with some segment questions.
Yeah. Great. So I would characterize 2026 as really a year of continued execution across the business. Maybe to step back and give a little bit of context to that statement, really like where Trimble is, as I think about sort of the growth drivers and the thesis around us, it is around the markets, the strategy, the execution, and the execution by the right management team. So when I think about the markets, large global underserved, under-penetrated markets for Trimble. Our Investor Day, late 2024, we indicated $72 billion of addressable markets. That is only 25% penetrated across Trimble. So that says that there is a lot of ability for us to continue to grow, continue to drive our offerings and our applications, particularly in the world of AI that I will talk about in a little bit. The right strategies.
We started on our Connect and Scale strategy, and this is connecting workflows, connecting data via our ecosystems and our platforms. We have a platform within engineering and construction, which connects both the digital and the physical, which is unique, I think, for Trimble, and also within Transportation and Logistics business . We have the right strategy. We identified over $1.4 billion of cross-sell opportunities with products we have with the customers we have today, and that was actually as of Investor Day in 2024. Since then, we continue to build more capabilities organically and inorganically and be able to continue to have more options to be able to cross-sell those offerings. How does that manifest in 2026? Well, it's the execution of that plan and that strategy in the market. In Q2, for example, the company had a 10% revenue growth.
That was despite about a $14 million headwind due to tariffs. We had some tariff refunds, which were counter-revenue. But we were up 10%. Our ARR has been up 12% in the quarter. Our EPS was 21% growth year-over-year. If I think back to our original guide for the year, we're up $65 million. We've guided now + $65 million on revenue for the year and another $0.13, + $0.13 EPS, which gives us a 17% EPS growth. So continue to execute on the market conditions, continue to execute with our strategy in delivering the results in 2026.
Yeah. Fantastic. Well, let's dive into AECO. Big part of the story, 60% of ARR, trillion dollars of capital project value managed through the platform. But also, a mid-teens grower organically, historically. You've been able to do that mid to high teens ARR growth basis for years. How would you frame how you've been able to do that so durably? Lots of investors sort of try to pattern-match Trimble to the rest of construction software. I don't think that that really is constructive. But maybe let's talk about Trimble Construction One, the bundling effort, and the number one drivers of durable mid-teens organic growth.
Yeah. Great question. Just to put it in context, the Trimble AECO business has grown mid-teens or higher for 28 straight quarters, and we're doing that at scale. We're just under $1.6 billion of ARR coming out of Q2. So this goes back to what I just talked about earlier, which is the market size is there, our capabilities are there. We focus on execution, our go-to-market. We unlock that cross-sell opportunity, which we're seeing in the business. We continue to add more and more capabilities to the business to unlock even more and more cross-sell. I think the market's there, and the business has been executing.
As we think about going forward, some in particular that is probably topical now is AI, which I think we are really, really set up very well as a company to be a leader and continue to be a leader as we think about AI and additional unlock for us as we go forward. When I think about our platform, I mentioned both the AECO and the Transportation platform. What makes Trimble unique and how do I think about our competitive moats and our moats is trusted data. We have trusted data within our ecosystems. The domain context, these are very large and complex industries that we are in. These are complex problems to be solved. We have the domain knowledge. I mentioned the connection to the office and the field from an engineering and construction standpoint.
We have the hardware in the field to be able to move the dirt, build the buildings. That hardware also connects back into the back office where you have the digital twin. We think about a continuum where the digital to physical can move back and forth. I really like that setup. How do we see it in action? Well, we continue to see within our Trimble Connect platform the growing amount of users, project data, and the engagement through the platform. All that lends itself to that opportunity in front of us.
Yeah. Well, certainly it was many years ago, it was an acquisition-driven portfolio in AECO. We have now gotten to the point where it is very much distanced from inorganic contributions. The first largest acquisition since 2023 came with Document Crunch. There might be a little bit of a change here with what AI can do in terms of creating new opportunities in the segment. What is interesting about the Document Crunch business, what drove you to bring that capability in-house and, when you think about, have we gotten to the point where a lot of the bundling efforts, it is an execution game from now on, and you can maybe go back to thinking about expansion of the portfolio, whether AI is the catalyst or not?
Well, I think it is both to your last statement. We want to continue to add capabilities both organically and inorganically, and we think about that regularly. We have done a lot of the tuck-ins. We like that play. We quickly can take capabilities and integrate them into our systems and put them in the hands of our sellers to be able to have more cross-sell and up-sell opportunities with customers. We really like that play. Document Crunch is, really pleased the business is at or ahead of the models that we put out. It is an AI-forward risk management solution, which is one of the biggest concerns within construction. I think the average disputes in construction are close to $60 million now, so it is a big number.
It takes, I think, north of 12 months to resolve these, so it takes a lot of time and effort from our customers. How do we get more proactive with our customers in risk managing their construction projects to get in front of these types of disputes to save time, save money and action upon them proactively versus reactively. I really like the business. I really like the people on the team that has come along with the business. They are an AI-forward team and are really helping us as we continue to move forward in this age of AI and continue to up our game and those opportunities to deliver the products and the capabilities to our customers.
One thing that was interesting to me was this launch of Trimble Financials. I am very curious, what was the opportunity to do that now and why a standalone subscription? I think a lot of investors would think about construction software as you are chasing the ENR 400, and you are chasing them with everything you can possibly sell. It is interesting to see maybe taking that ERP heritage around the longstanding brands that you have on the financial management side, and then kind of going after some smaller entities. Maybe we could talk a little bit about that solution, and then do you see them as customers that can actively transition to the existing products in the portfolio when they get past $10 million of revenue?
Yeah. It is a great question. I am really excited about this product. As we think about that, where is that addressable market that is not adopting technology? We see that in a lot of the smaller customers or mid-size customers. Maybe they are still using Spreadsheet, or they do not have bespoke accounting people or job costing capabilities, and they are doing everything manual. Trimble Financials is a way to tap into that market. Number one is get more customers that are not in the Trimble ecosystem into the Trimble ecosystem, continue to create that network density within our platforms. But as they grow, is grow with Trimble.
Number one is, as they get bigger, moving into more sophisticated products, if it is in our ERP, for example, that we have within our Viewpoint products and moving them up to higher and more capable products. That is one path. The other path is continuing to build a customer base, that we can have other relevant products that we can bring into from the cross-sell opportunity that I mentioned before. We are really excited about that. We actually did, a year or so ago, a free version of our ProjectSight, which is again, a similar type of approach, where we can go into a market with a free version that has some limited projects, to be able to access and bring more and more Trimble customers into our ecosystem.
And, just rounding out AECO, biggest obvious opportunities in AI that you think could be the most material use cases, whether that be 12 - 24 months.
Yeah, it's a really great question. What I really like is the team has been leaning really heavily into AI when we think about our product development. I'd say broadly speaking, across Trimble, it's not just a product development, it's back office and others, when I think about those opportunities. But again, I go back to, I think that AI is really, it can increase our platform value. The more folks that are in the platform, the density. This is where people go to work. They go to collaborate within our platforms.
Having more AI capabilities only makes our customers do the work better, more productive. In some ways, if they're having a hard time finding labor or people, for example, can they augment and their own processes to be able to move faster and be able to get more done with less. I think that, again, Trimble's core capabilities, that platform play, the data density and the context that we have within very complex industries, I think it lends itself really well to applying AI and enhancing the value we can provide to customers.
Yeah. Let's transition to field systems. This is probably the perfect example of a model transition story in terms of historically a hardware-driven business, various methods of go-to-market, 30%+ margins, I'll say, even though it's a hardware business. But that was because you disaggregated software and hardware, and you were still selling software attached to the hardware, and in a lot of instances, now it's moving to hardware as service. Maybe we could talk about where growth comes from in that industry. I think you've talked about it as being 50% from existing solutions, 50% from model conversions. Is that largely still true? And, how do you expect that mix and model conversions versus existing to trend from here?
Yeah. You're talking specifically about the ARR, and the conversions from our perpetual licenses into more subscriptions and term licenses. We've been on a journey in that business for a few years now, and said at Investor Day, it was 200 to 300 basis points of headwind to revenue in that business as we convert more and more. There's still an opportunity as we go forward to continue to convert in that business. It's been performing very well. I think we were at 20% the last two years of ARR. There are some specific attach. We were attaching our Trimble RTX product, which is a subscription product, and that created a tailwind for the last two years. We knew coming into this year that it would moderate a bit, which we expected, and it's showing that trend for the ARR growth this year.
What I find really interesting and exciting as well in that business is we've been bundling hardware and software into an offering that's a subscription offering and been doing very well there. What's even more exciting to me is that it's actually unlocking additional TAM for us that we're seeing, and some of the numbers are around 50% of our new bookings in that product are with new logos and new customers, right? We're able to unlock, again, some more addressable market by having a subscription offering with the hardware and the software. We really like the progress of that and have good optimism as we go forward.
Is that the sensitivity to capital purchasing versus a sort of a more lower run rate OpEx purchase? Or is that by nature of combining them and being able to deliver the software product, there is opportunity to tack on another software product without it being a whole new selling motion?
Yeah, I think part of it could be how you make the decisions within your firm on CapEx versus OpEx. So that is a good point. The other thing is it's a compelling offering. We have what's called a technology assurance on that. If you're on the subscription and Trimble happens to come out with new hardware that's a like for like, you get the new hardware. You don't have to worry about staying current on the technology. As long as you're on the subscription, we can keep you current. That's really attractive for our customers because they don't have to constantly go out and look at what they need to procure to stay at the leading edge of the technology. They can just get that with the technology assurance.
Yeah. One of the strategies here is as more on the civil construction side has been the technology outlets. Could you maybe talk about mixed fleets and where you think the industry is at in terms of it feels like doing the best that they can. There are some customers that might be able to buy first OEM. There might be some customers that can buy first party all the way through OEM, but there's a lot of the market that can't. When you're talking about an organization that wants to embed more autonomy, how does mixed fleets present a pretty big challenge for them?
Yeah. It's a great question, and our customers, actually, a lot of them are mixed fleets. They have different types of machine. What they really want to standardize is on the technology and the workflows. This really comes from a customer-first perspective of, for that customer that wants to standardize on Trimble, how do we give them access to Trimble, regardless of the machine type or the brand? The Trimble Technology Labs is a natural evolution. Prior to, I think it was late last year, or sorry, the year before, we were selling most of our products through SITECH, and these are extensions of Cat dealerships. What we're now doing is, we're selling what's called these Trimble Technology Labs, and it enables us to access more of the market from different types of brands and machines.
Again, this is really centered around the customers, and whether that customer buys it factory fit or whether the customer buys it aftermarket, which is really where we sell to. They want to standardize on Trimble and Trimble's technologies and Trimble's workflows, and this just gets them more access to more points of sale and more points of service to be able to standardize on the Trimble products.
Before continuing on, any questions from the room? All right. T&L is probably the topic du jour. I think the way to frame it is you've got incredible inbound interest on that segment. There's a responsibility to shareholders to do a strategic review. Let's just talk about broader picture around rationale and portfolio management. What do you still like about the Transportation and Logistics business , such that if a few months from now nothing happens, there's no transaction, what will you be focusing on, and what do you think are the long-term opportunities of T&L? Then I'd love to just understand, maybe if that transaction does happen, what priorities might change.
Sure. I really like the T&L business. We have had it for a while. It is several segments, the main being our enterprise business, which is our TMS, our Maps business, U.S., and our Transporeon business. Also within there is a forestry business, so those are the four parts to it. But we really like it. I started with the conversation around attractive markets that are under-penetrated, underserved with technology. Supply chain in particular, Transportation and Logistics is one of those markets. We see a real big opportunity in that business.
The market has been down. We have been in a freight recession for several years now, and I am really excited about the opportunity when the market does turn around because we are setting ourselves up very well. The business continues to grow even in a challenging market, and we have seen that. We see the margin expansion within the business, so demonstrating the execution on that. I really like the business, and as you said, what we look with all of these is through the lenses of what is best for our shareholders, what is best for our customers, what is best for our employees. As we make decisions, those are the lenses that we look through.
Yeah. Well, last time you did a sort of a major divestiture, it was a time period where that kind of money was transitioned to an accelerated share repurchase. It was a certain time period in the history, but I am just curious if you were thinking about tomorrow having the proceeds, where do you think sorts out as a top priority and, in the evolution of the portfolio, you have been doing a lot more tuck-in kind of activity. When does it start to make sense to do strategic transactions again?
Yeah. Let me take a Here is how I think about capital allocation in general. First and foremost, we put our money and P&L money into the growth of the business. That is first and foremost when we talk about efficiencies in AI and back office and how we can pivot more capital into growth opportunities for the business. That is first and foremost along the line. Now, if I look at Trimble's balance sheet, I really like the balance sheet of the financial health of the company. We are below our 2.5 x long-term target from a leverage ratio. We are closer to 1.1x. We have got a lot of flexibility on the balance sheet to do things. I look at, so where are those opportunities then from a capital standpoint, not being in a high leverage situation.
You look at M&A, and we've talked about sort of the tuck-ins and buying capabilities that we can then cross-sell and upsell. We've been doing that. We like that motion, continue that. If there are opportunities for larger M&A, we definitely look at that through, again, a strategic lens, and does it make sense from either another anchor tenant that we can cross-sell or run the cross-sell play into, just like the Viewpoint opportunity that we've seen very successful over the years.
Then beyond that, we look at share repurchases, and I committed at Investor Day to at least 1/3 of the free cash flow going to share repurchases, and I think you've seen our track record over history that we're also opportunistic on the share buybacks. I think if you go back to the beginning of 2023, we've actually bought back close to $1.2 billion worth of shares in that timeframe. So we're willing to be opportunistic as well on the share repurchases.
All right. Well, last question. We'll take it to wrap it up, and it's just what have you learned from the CFO seat about investing in AI through the development effort and maybe even how the development organization has changed as a second derivative of AI investment? Because you've talked a little bit about accelerating practical AI releases, and you haven't even given a target of how much of the development resources might go to AI. So I think that's a very much more explicit messaging around that effort. And it didn't exist five years ago, probably as a concerted effort within the organization. So from your perspective, are you pleased with being able to ship code faster? What's required that might be like kind of a hump that you think will have more leverage over time as you kind of grow into it? Any kind of CFO takeaways from AI investments?
Yeah. It's a great question. I'm sure a lot of CFOs are looking at it in similar ways as I am. Maybe if I just bifurcate it a little bit, it's can we bring product to market faster, right? As I think about where are places that we have opportunities for us to grow our revenue, our ARR, well, okay, is it bringing more products to the market faster and leveraging the speed and time to market of that? We are seeing code generation and improvements there to be able to do that as we go forward. I also think about internal use and how we can be more effective and efficient, within not just product development, but across the board in a lot of the groups that I manage. We're definitely, the teams are leaning in, and we're finding opportunities to do that.
I really like where we're going. Again, it comes back to our capital allocation of saying where we can get more efficient, how can we then pivot that to areas of growth? I also think about it as an and. Again, if you look at the numbers this year for Trimble, we're delivering the expansion on the margins. At Investor Day, I talked about a 30% EBITDA margin for 2027, and we're very close to that, pretty much at that for our guide this year already, so a full year early on the margin expansion. So I see us as sort of an and where we're able to move faster, focus to the growth, allocate capital to the best growth and the best return, and deliver the margin expansion.
Perfect. Have you got an Investor Day coming up in the future, refresh on all of these?
Yeah. Right now we're talking about potentially, because we put targets out to 2027, so you can naturally expect that sometime in 2027, we'll do a refresh and more to come.
All right. Well, Phil, thank you so much for coming to Nashville.
Thank you.