Yahoo Finance Trimble Inc (TRMB) Q1 2024 Earnings Call Transcript Highlights: Strong Growth and Record ...
Annual Recurring Revenue (ARR): $2.03 billion, up 13% organically.
As-Adjusted Revenue Growth: 8% organic growth.
As-Adjusted Gross Margin: Record 67.5%.
As-Adjusted EBITDA Margin: Expanded by 290 basis points to 27.9%.
Free Cash Flow: $227 million, strong performance.
Software, Services, and Recurring Revenue: 77% of total revenue on an as-adjusted basis.
Segment-Specific ARR Growth: AECO segment ARR up 18%, Field Systems ARR grew 14%.
Segment-Specific Revenue Growth: Field Systems revenue grew 1% on an as-adjusted basis.
Operating Margins: AECO expanded by 430 basis points; Field Systems increased by 250 basis points.
Release Date: May 03, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Trimble Inc (NASDAQ:TRMB) reported a solid performance in Q1 with all three segments performing ahead of expectations.
Annual Recurring Revenue (ARR) grew 13% organically, demonstrating strong and consistent growth.
As-adjusted gross margins reached a record 67.5%, indicating improved profitability.
The company successfully divested certain assets and established a joint venture, which simplifies the organization and strengthens the balance sheet.
Trimble Inc (NASDAQ:TRMB) confirmed its full-year guidance despite unfavorable currency movements, showing confidence in its financial stability and future performance.
Negative Points
The company experienced economic weakness in some regions, notably in parts of Europe and Asia Pacific, affecting segments like residential construction.
There was a delay in the 10-Q filing and a need to amend the 10-K due to issues identified with internal controls documentation during an audit review.
Revenue growth in the Field Systems segment was relatively flat, showing minimal growth.
The company noted a cautious outlook on U.S. GDP growth and global interest rate dynamics, which could impact capital purchases and overall business conditions.
Trimble Inc (NASDAQ:TRMB) faces challenges in hardware sales due to ongoing economic pressures, particularly noted in the North American mobility business.
Q & A Highlights
Q: Can you provide more detail on the financial controls issue and its impact on revenue recognition? A: David G. Barnes - Trimble Inc. - CFO & Senior VP: The issue arose from insufficient documentation during an internal control audit by EY, affecting the audit of internal controls but not the financials themselves. Enhanced audit procedures are underway to confirm the numbers, and an amended 10-K will be issued subsequently. This process is expected to take more than a month, but there's no anticipated change to the financial numbers.
Q: Could you provide more details on AECO bookings during the quarter and the take rate on your bundled offering? A: Robert G. Painter - Trimble Inc. - CEO, President & Director: AECO bookings continued strong growth, with ACV bookings over 20% growth in the quarter. Trimble Construction One bookings grew faster, particularly in North America where about 80% of bookings were from this offering, showing nearly double the growth in bookings year-over-year.
Q: How do you differentiate between net new and expansion growth in AECO and TC1? A: Robert G. Painter - Trimble Inc. - CEO, President & Director: The growth breakdown is approximately two-thirds from existing logos and one-third from new logos. This expansion is helping to increase the addressable market and drive growth through customers buying into an ecosystem.
Q: What are the expectations for ARR and total revenue growth convergence? A: Robert G. Painter - Trimble Inc. - CEO, President & Director: Convergence is visible in AECO, with both ARR and revenue growing at 18%. In transportation and logistics, total revenue and ARR growth are aligned. However, field systems, being predominantly hardware, will likely keep ARR and revenue growth rates distinct for some years.
Q: Can you discuss the changes and improvements in Transporeon that drove better results? A: Robert G. Painter - Trimble Inc. - CEO, President & Director: Key factors include successful cross-selling of Transporeon solutions to existing Trimble Transportation customers in North America, selling maps solutions in Europe, and growth in network participants. New product developments like autonomous procurement and quotation also contributed to strong bookings growth.
Q: What is the outlook for 2Q margins given the outstanding performance in 1Q? A: Phil Sawarynski - Trimble Ventures - VP of Treasury, Corporate Development & Co-Lead of Trimble Ventures: The expected margin drop from Q1 to Q2 is largely due to the high-margin term license dynamics being a Q1 factor, along with merit raises and additional OpEx, particularly in AECO for sales, marketing, and R&D.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
