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Transportation
trabsportation -- challenging , trabsporeon may have bottoimoed
Transcript
2023 Q2
9 Aug 23
While revenue was down as expected, ARR grew at a double-digit rate.
r & u arr up DD
Transcript
2023 Q2
9 Aug 23
Resources and Utilities
resources and utilities
Transcript
2023 Q2
9 Aug 23
geospatial
geospatial
Transcript
2023 Q2
9 Aug 23
ARR grew over 20%.
b & i arr up 20%
Transcript
2023 Q2
9 Aug 23
Buildings & Infrastructure.
buildings/infra
Transcript
2023 Q2
9 Aug 23
For perspective, gross margin was 56.8% in 2015 and 58% in 2018. EPS at $0.64 and year-to-date free cash flow conversion rate to net income of nearly 100% demonstrates the power and potential of our asset-light business model.
asset-light businss modelk
Transcript
2023 Q2
9 Aug 23
achieved 14% organic growth in the quarter, beating our internal expectations by 100 basis points. We now stand at a record $1.88 billion of ARR, which compares to $1.2 billion when we began our Connect and Scale journey in 2020.
ARR has doubled since 2018 and tripled since 2015.
We are on track to achieve $2 billion of ARR by the end of the year, a remarkable figure made possible by the Trimble team who continues to work incredibly hard to execute on our customer-driven systems, process and business model transformation.
arr 14% grwth- on track for 2bn
Transcript
2023 Q2
9 Aug 23
Sure. So, actually I'll start in Europe.
So, we had prior to the acquisition, we had a relatively small carrier business.
So, mobility business for carriers.
We will combine that business with Transporeon. That will make sense. One, because Transporeon obviously works with shippers and carriers, we think we can get a stronger European carrier business if those businesses are working together.
Within Europe, we have underlying technology that we can replace third parties with Trimble technology and bring a modest amount of cost synergy to the business within Europe. And within Europe, it's been really interesting to see some of the phone calls that we've got, some of which may have been positive surprises from forestry companies saying, Hey, actually, I need help because they're already working with us in forestry.
We need help with the transportation and logistics, how can we connect this with forestry. We've heard the same thing with building construction where you're looking for visibility to understand when that construction supply chain components are going to show up to a job site.
So, we're encouraged that some early inquiry that we've received within Europe.
Now, let's go outside of Europe and North America would be the obvious place to go given the centricity of revenue that we already have in North America.
And so, the teams are actively working together to bring I'd say, a couple of aspects of Transporeon technology around automated procurement or autonomous procurement into the U.S. market or North American market this year, some of those quick win-type opportunities.
I was in Brazil in January. And what we discovered there is, we have – our Trimble already has a telematics business or mobility business in Brazil, Transporeon has a small operation in Brazil doing freight audit, that becomes something that we can connect together given the geography we're already in.
So, where we're already in, geographies that's an easier play to bring capabilities together. I'd say the new, new geography, those tend to be slower and harder and would not, in this environment, be my first priority, where to allocate capital.
transporeon colour in Europe and U.S, opportunity
Transcript
2023 Q1
7 May 23
Hey, guys. Thanks for squeezing me in here. I just want to step back for a second. Can you maybe just help us understand why in-light of the [current macro] [ph], you're only reducing Transporeon revenue expectations, but you're reiterating the guidance for the rest of the business? Can you maybe just talk to the visibility that you have for the rest of the year? And what gives you confidence in hitting the back half numbers?
David Barnes
Hey, Josh, David Barnes. I'll start.
So the Transporeon business model, as Rob mentioned, is transaction-based, principally not a subscription.
So, our software offerings, as Rob discussed earlier, are mission-critical for our customers and are much less susceptible to any short-term trend in the end customers ongoing transaction or ongoing level of business.
Our view is that there's some puts and takes, but the aggregate demand we see for our business has not changed over the last 90 days.
We do see some signs that in a few of our end markets, actually, the overall macro outlook is improving. I look at Geospatial, for instance, we assess our dealers for their sentiment. We talked to some of their customers in the survey business. They're feeling a little better than they were. Input costs are abating.
So, overall, we're very confident with the outlook for the rest of the business that we articulated a quarter ago. Transporeon is impacted by the particular macros of Europe and the end markets they serve.
why cut transporeon guidance but not rest of country
Transcript
2023 Q1
7 May 23
Yes. Tami, it's David. There is some seasonality in the business. Historically, it's strongest in the fourth quarter. There's a lot of goods that flow closer to the holiday season. But I don't – there's also some underlying growth.
So, the way I would suggest you look at it the way we look at it is of the 135 million, we'll have roughly 30% in Q2, a third in Q3 and a little more than a third of Q4.
more transpreon breakiout
Transcript
2023 Q1
7 May 23
Okay, perfect. And then on second quarter specifically, I think, any way to clarifying how much Transporeon is contributing? I realized that the full year is 135 million, but anything that we should know about seasonality or how that might ramp through the year? Thanks.
David Barnes
Yes.
So it's $135 million for the three quarters, a little less than a third of that. Around 30% will be in Q2 and corresponding you'll have a little more than a third in Q4.
transporeon breakout revenue
Transcript
2023 Q1
7 May 23
Our churn varies by business and most of our recurring businesses the churn is very low in the low to mid-single digits. SketchUp is structurally higher than that, but we generate the positive net retention pushing at high-single-digits through low churn and upsell and cross-sell of new offerings.
lsd to msd churn
Transcript
2023 Q1
7 May 23
The first is the overall level of transactions has gone down in Europe. And when we look at the end markets, markets like CPG, retail, chemicals or three relatively big markets for the business.
The transaction volume slowed more than we expected. CPG, I look at that one is one that people are still going to eat.
So, I don't lose a conviction that this is a temporary phenomenon in the business.
The second aspect, which really probably also relates to the third is the spot prices have come down and the business differentially monetizes when spot rates are higher.
So, spot rates will come down if transaction volume comes down.
The third piece, which connects actually though, back to spot prices, is that truck capacity went up in Europe and so if you follow new unit trucks hitting the market in Europe, that capacity increased at the same time as the transaction slowed further pressuring spot prices.
So, those would be the three factors. But now let me not end on that note, let me end on the note that we expect to see 30% bookings growth in the business this year.
3 factors ehy trabsporeon guidancde was cut
Transcript
2023 Q1
7 May 23
And I start with the corpus of data at Trimble and construction, we manage over $1 trillion of construction projects and ag, we manage over technology and over 180 million acres of farmland and transportation. We manage a couple of million vehicles on the road, and that's even pre-Transporeon, and our geospatial business fundamentally is about creating a digital model of the physical earth.
So there's, I'd say, a profound corpus of data opportunities.
Our digital transformation, a big part of that is unlocking that data, getting it into the cloud. Once you've got it in a cloud, I have the opportunity to take data into information. And then when we're thinking about artificial intelligence, we've been playing in this arena for a while, it's quite exciting. It's actually also quite fun.
We're already developing predictive and generative AI-based solutions covering all of our end markets and covering a number of workflows within that. And I will still say, we are very, very early in the journey.
So, if you take a market like agriculture, with the Bilberry acquisition that we did on selective spring, we're applying deep learning technology to be able to identify [weeds] [ph] and enable spraying at the plant level instead of at the field level in our Viewpoint business and construction, we're applying natural language processing to automate invoicing processing workflows.
In the Geospatial business, we're working on already point cloud semantic segmentation so then you can automatically extract and classify assets from large data sets and in our transportation business.
We have video intelligence solutions that can detect fatigue and driver distraction and therefore, improve the safety, and we're just at the beginning of this.
digital data strategy
Transcript
2023 Q1
7 May 23
guess my question is, is there anything we should think about is that having taken a step function up and you reinvest it in R&D? Or is it really more of a shifting mix of business?
David Barnes
Yes. There's two big factors that drove gross margin up significantly in the quarter. One is, as you said, the mix shift is very favorable because our hardware business was down and the software business was up, but an equally important factor is that we're way past the hump of our inflationary cycle in our hardware businesses
GM good, but mainly brecaues hardware declined more than software
Transcript
2023 Q1
7 May 23
hat it was a 10% decline in the revenue expectations because just three quarters of the full-year revenue run rate, that does seem to be a touch higher than the revenue guidance for Transporeon that we're seeing here?
David Barnes
Yes.
So first, the 10% refers to will have – we project 10% less revenue than you could have extrapolated from the directional indication we gave in December. It's still growing. It's just growing a little more slowly than we'd expect. From a margin perspective, we indicated that EBITDA margins would be about 30%. I still think that's the long-term trend, but we've lost a little bit of fixed cost leverage.
transporeom rev expectations taken down, and some fixed cost leverage lost
Transcript
2023 Q1
7 May 23
t happens to be the case that in the first quarter, that's when the term licenses renew.
And so, if you're going to have churn, that's when you have it. And that factor will abate and we expect to end the year actually a little north of 20% for Buildings and Infrastructure ARR.
First Q is when licensse renew
Transcript
2023 Q1
7 May 23
Buildings and Infrastructure will remain our fastest-growing segment as we expect our recurring software businesses to sustain solid performance while our civil hardware business improves with more normalized dealer inventories.
We expect our geospatial segment to return to positive organic growth in the second half of the year, but remain modestly down for the full-year.
We expect resources and utilities to return to growth late in the second half of the year, driven by an expected pickup in our aftermarket channels.
end market guideline
Transcript
2023 Q1
7 May 23
Looking at the back half of the year, we expect higher rates of ARR and revenue growth.
We expect revenue to increase sequentially from the second quarter through the fourth quarter. We project that the fourth quarter will be our best of the year across the key metrics of financial performance, including total revenue, ARR growth, organic revenue growth, and operating margins.
Q4 to be the best Q of the year -- back end loaded, so risk here
Transcript
2023 Q1
7 May 23