Trimble Inc.

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. And if you would like to withdraw that question, again, press star one. Thank you. And I will now like to turn the conference over to Rob Painter, President and CEO. Rob, you may begin.

Welcome, everyone. Before I get started, our presentation is available on our website, and please refer to the Safe Harbor Statement. Our financial commentary will reflect non-GAAP performance metrics, including organic growth comparisons, which refer to the corresponding period of the prior year, unless otherwise noted. In addition, our P&L commentary will emphasize comparables on an as-adjusted basis, which excludes our agriculture business, our recently divested mobility business, and the extra week that we had in the fourth quarter of 2024. Starting on slide four, we ended the year on an emphatically strong note. As reported, fourth quarter revenue at $983 million, ARR at $2.26 billion, and EPS at $0.89 were all above the midpoint of our guidance. On an as-adjusted basis, revenue was up 9% for the quarter and 6% for the year, with ARR up 16%. Gross margins at 71.7% represent the first time that we have crossed the 70% level. Kudos to our global colleagues and partners. Phil will walk us through additional details of as-adjusted performance in his commentary, which is necessary to set the correct baseline for fiscal 2025. Moving to slide five, our performance in the fourth quarter capped a transformative year for Trimble. For those newer to the Trimble story, we call our strategy Connect and Scale. Our technology is digitizing and transforming work in the construction, geospatial, and transportation industries. These markets are large, global, underserved, and underpenetrated with a combined addressable market of over $70 billion. By executing our strategy, we have simplified, focused, and strengthened Trimble. We now report under three segments with leadership perfectly aligned to this structure. We have also transformed our business model in the process. delivering compelling and compounding financial returns. On an as-reported basis, between 2019 and 2024, ARR increased from $1.2 billion to over $2.26 billion. Recurring revenue doubled as a percent of overall revenue to 62%, and overall software and services increased to 76% of revenue. Gross margins in 2024 at 68.2% have increased over 1,000 basis points, All of this has translated into over 400 basis points of EBITDA improvement, with 2024 ending at 27.2%. At our investor day in December, we outlined the progression and direction of our strategy, detailing our right to win at the intersection of product, technology, and go-to-market. We laid out our 3-4-30 ambition through 2027 to deliver $3 billion of ARR, $4 billion of revenue, and 30% EBITDA margins. By delivering transformative outcomes for our customers, we are poised to deliver compelling returns to our shareholders. Today, I'll highlight the last few months of Connect and Scale's strategic progression in three areas. First, product and go-to-market through the lens of our customers. Second, technology innovation. And third, capital allocation. In the fourth quarter, we engaged with thousands of our customers and partners. Our Dimensions User Conference which focuses on the engineering and construction industry, had more than 7,000 registered attendees. We ran sessions onsite at the venue and offsite at a purpose-built proving ground where we could demonstrate our field solutions in the dirt. We had the opportunity to showcase our product innovation progression as we moved from point solutions to workflow to ecosystems. This progression uniquely leverages the vast installed base we have across the lifecycle continuum of the engineering and construction industry. At the offsite venue, pictured on the cover slide, more than 25 of our OEM partners demonstrated onboard and offboard technology, serving a large array of machine types, and we were able to showcase our unique office-to-field workflow connectivity. The unique value we are offering to the ecosystem is evidenced by the strong growth in ARR in both AECO and field systems. Further evidence of this unique value is in the record level of ACV bookings in AECO in the quarter. In transportation, we see and hear our customers asking us to address similar opportunities as our construction customers. They increasingly seek data-rich solutions delivered in a common and connected data environment. While the freight market macros remain challenged, our team is doing a good job controlling what we can control. For example, the Transporeon business achieved an all-time record level of bookings in both the fourth quarter and the year. When the freight markets return to growth, this business is well positioned to showcase its true financial potential. Complementing the product direction is the innovation that has taken hold with our go-to-market initiatives across the company, which have never been better aligned to unlock the potential of Trimble. On the technology innovation front, We continue to progress state-of-the-art and core positioning technologies along with connectivity, collaboration, and visualization. We believe we are well positioned to be a winner in the data-centric and AI-forward world, leveraging trillions, billions, millions, and thousands. Trillions of dollars of construction programs run through Trimble. Tens of billions of freight run through Trimble. We have millions of users of our software. We manage millions of miles of our roadways. And we have hundreds of thousands of instruments and machines out in the field in the real world operated by Trimble technology. Over the last few months, we have increased the adoption of AI to fuel our own productivity, creativity, and to drive profit expansion. We've been launching agents to better support customers, product managers, and our sellers. The potential is exciting, and we will continue to lean into the technology to drive both internal efficiencies and amplify customer value. Finally, I'll cover three topics on the capital allocation front, starting with the divestiture of our mobility business, which we closed on February 8th. We are a significant shareholder in Platform Science, and we refreshed an ongoing and important commercial relationship with their team to link telemetry with our broad set of capabilities, including dispatch, scheduling, routing, navigation, maintenance, visibility, freight procurement, and more. We are accounting for this investment under the cost method of accountings, where our investment will be represented on our balance sheet rather than the non-GAAP P&L. Second, we remain committed to executing our share buyback plan. We continue to believe that repurchasing Trimble stock is an attractive opportunity for capital deployment given our share price today. As further evidence of our commitment, today we are announcing that our board increased our repurchase authorization to $1 billion. Third, given the strength and momentum in the underlying business, and particularly the success we have demonstrated executing our TC1 platform strategy in AECO, we intend to play offense on the acquisition front. Tuck-in opportunities that can quickly integrate and be put in the hands of our sellers are the most obvious category, building on the success we have had with such moves over the past few years. We will also opportunistically consider larger opportunities should they present themselves, particularly in construction software. Though the bar will be high, anchored in our disciplined focus on ROI and compared to the returns we can generate from buying back our own shares. Trimble enters 2025 with a balance sheet well below our leverage targets with continued strong free cash flow generation and with shares trading at levels we find attractive. Collectively, this gives us a range of good options to consider as we drive value for shareholders. Phil, over to you.

Thanks, Rob. On January 16th, we filed our 2023 amended 10-K along with our 10-Qs for the first, second, and third quarters of 2024. As we messaged throughout the process, there was no change to our filed financial results. Our full attention is now focused on working with our audit provider to complete the 2024 audit. The good news is that the 2024 audit work builds on the 2023 work. The challenge is that because of the 2023 filing delays, the timeline is compressed. We are likely to file our 2024 10-K after the March 4th due date and are working to file within the 15-day extension that is allowed under SEC rules. At this time, we believe any delays to our filing would be solely due to the tight timeframe. We are, of course, working hard and doing everything we can to file our 10-K on time. Let's review the fourth quarter in the year for 2024, starting on slide six. Unless otherwise noted, I'll be talking about our as-adjusted numbers, which remove the effects of the recent divestitures in the 53rd week, including the January 1st term license renewals. As-reported numbers, along with the reconciliation, are provided in the appendix. Organic revenue was up 9% for the quarter and 6% for the year, with ARR up 16%. We achieved EBITDA margins of 27.8 percent for the quarter and the year, both of which expanded nearly 100 basis points. Reported EPS was at 89 cents for the quarter and $2.85 for the year. The reason we didn't see an even larger EPS outperform was primarily due to additional incentive compensation accruals and additional sales commissions. Moving to the balance sheet and cash flow items on slide seven, Our reported free cash flow for the year was $498 million, which represents a conversion rate of 0.71 to net income. Adjusting for $204 million of M&A-related tax payments and transaction costs, cash flow is over $700 million, with a conversion rate of approximately one times. Our balance sheet is strong, with over $700 million of cash and a leverage ratio of less than one times, which is well below our long-term targeted rate of two and a half times. Let's shift to a segment review of the numbers before we close with guidance, starting with AECO on slide eight. Eighteen percent ARR growth for the quarter and the year and operating income at 31.2 percent for the quarter and the year. This is a scaled business nearing 1.3 billion of ARR and revenue and operating well above the rule of 40. In fact, it was greater than a rule of 45 for both the quarter and the full year. ACV bookings increased over 20% in the quarter, providing momentum to our ongoing commitment to grow ARR at our long-term model rate in the mid-teens. We are especially pleased with the ongoing performance of our Trimble Construction 1 offerings, as well as the level of growth in cross-selling and up-selling initiatives. Next, field systems on slide 9. While for the year revenue is slightly down on an organic basis, It inflected positively in the second half of the year and was up 2% in the fourth quarter. Of particular note, ARR growth at 21% for the quarter and the year demonstrates the intentionality of our business model conversions. In almost every business where we have implemented these changes, we have seen the addressable market expand. It should also be noted that the recurring revenue conversions were 150 basis points headwind to 2024 annual revenue growth. Thus, the two must be looked at in combination. It should further be noted that the team executed on these transitions while increasing operating income margins to 30.1% for the year. Finally, transportation and logistics on slide 10. Revenue and ARR were up 8%, both for the quarter and the year, led by growth above the segment average from our MAPS business and the Transporean business. Operating margins were 24.1% for the year. Transporian continues to deliver in a challenging freight environment with strong double-digit bookings growth for the year, including several cross-sells with North American customers as the Connect and Scale playbook is being replicated in the transportation segment. Before we turn to guidance, let's set context with a few considerations related to tariffs and foreign currency translation. Based on what we know today, we have not modeled any impact of new tariffs into our guidance. Given the software centricity of Trimble today and the geographic diversity of our revenue and supply chains, we are confident we can navigate the environment with minimal financial impact. With respect to foreign currency, our EPS has historically been naturally hedged against currency moves given our global workforce. However, with the growth in AECO and Transporean outside the U.S., we now expect a slight amount of foreign currency translation headwind to flow through to EPS. For 2025 guidance on slide 11, the midpoint of our as-reported guidance is $3.42 billion and $2.87 EPS. This includes one month of mobility with approximately $20 million in revenue and under a penny of EPS. On an as-adjusted basis, our EPS guide implies low to mid-teens EPS growth year-over-year, consistent with our long-term model. Our guidance assumes the strong U.S. dollar holds, and we have incorporated into our guidance full-year foreign currency impacts on revenue of minus $50 million, ARR of minus $30 million, and EPS of approximately minus $0.04. Relative to our initial fiscal 2025 guidance we provided in December at our investor day, on a constant currency basis, we have raised our revenue and EPS guidance. For first quarter guidance on slide 13, We expect as reported revenue to be in the $794 to $824 million range and EPS $0.55 to $0.61. We have provided an updated view of calendarization in the earnings supplement on our investor site, which is in line with what we shared at Investor Day. On an as-adjusted basis, organic growth for the first quarter is in the minus 1% to plus 3% range. Please note that there is no January 1st in our 2025 fiscal first quarter. It was in the fourth quarter of 2024. Adjusting for this would result in first quarter 2025 organic growth of approximately 8% at the midpoint. Also note that the January 1st of 2026 will occur in the fourth quarter of fiscal 2025. Both revenue and operating margins are expected to trend up in both absolute and percentage terms as we move throughout the year, reflecting the fact that our portfolio is now more heavily weighted to the growing recurring revenue business models and less impacted by seasonality in field systems. With that, I'll turn it back to Rob.

Thanks, Phil. I appreciate that the vestitures and the 53rd week make comparables a bit difficult. We encourage you to refer to the supplement on our website where we outline the moving parts. To keep things simple, whether we are talking on an as-reported or an as-adjusted basis, the message is the same. We ended 2024 on a strong note with a significant beat on our numbers, and we are carrying that momentum into 2025 with raised guidance on a constant currency basis. I'll close with a reflection on confidence and humility. Confidence that every turn is what we deliver to our customers, improving performance and unlocking insights with technology. As we execute our Connect and Scale strategy in 2025 and beyond, we are confident in our ability to execute the strategy and excited about the opportunities in front of us. We are also humble as we navigate the uncertainty in the current environment. Our highly experienced and values-driven team is hard at work to achieve the potential of Trimble. I'll close by extending my gratitude to our colleagues, partners, and shareholders for their ongoing support. Operator, let's open the line to questions.

Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. And if you'd like to withdraw that question, again, press star 1. Your first question comes from the line of Jason Foligno with KeyBank Capital Markets. Please go ahead.

JASON FOLIGNO, KEYBANK CAPITAL MARKETS, That's two for me.

Rob, I'm curious how you're thinking about the current, you know, macro environment. You know, there's pushes and pulls, and wondering if you've had a chance to, you know, gauge sentiment among your owners and construction-type customers.

Hey, Jason. Good morning. Thanks for the question. You broke up there at the beginning, but I think you're asking about the current macro environment, I think with a bias towards what we're hearing. and construction. In that respect, I'd say geographically, North America continues to be the strongest of the geographies where we participate. If I look within North America, you probably won't be surprised to hear that segments such as data centers, energy markets are good verticals for us. They're performing well since it remains strong in those respects. We see differences, let's say, within the United States. The Southeast tends to outperform geographically relative to most other states. You follow the money, there's still the infrastructure bill, the CHIPS Act. There's a lot of backlog that contractors have. Now, with respect to contractors and the backlog, there are fewer new projects that the contractors have. They're working down their backlogs. What we see from our own data is that our customers are hiring. And as they're hiring, that's a catalyst for the adoption of technology. So you're right, there are some puts and takes, both within North America and around the world, but the overall sentiment remains healthy.

Okay. And then related to tariffs, it sounds like you're not modeling anything. financial impact? Is it because you don't know and it's still kind of a wait and see? It's just I think that especially with some of your AECO segments, they would be sensitive to different price changes or perceived price changes.

Thanks. Hey, Jason. Excuse me. It's Phil. So on the tariffs, if you remember, we're about three quarters now software services recurring. and so our exposure is really a lot smaller than it would have been in the past to those. On the more discreet items around Canada and Mexico that have been out there and now have been delayed, we believe it's a relatively small impact, and our supply chain and our operations team is well prepared for some contingency plans that we see just offsetting that. What we haven't really modeled in is, you know, there hasn't been a lot of explicit answers, let's say, on the tariffs as we go forward when we think about any sort of reciprocal impacts and things like that as we think more globally. So right now, we do have confidence in our operations team. We have a global supply chain. We have opportunities and contingency plans that we can enact depending on what manifests. But Just to be clear, we have looked at it, and we don't believe there's a material impact on the financials based on the information we've seen so far.

Your next question comes from the line of Kristen Owen with Oppenheimer. Please go ahead.

Hi, good morning. Thank you for taking the question. I wanted to start with the 2025 guidance, the AECO ARR growth expectations in the mid-teens. Just given some of the changes that you made in 2024 around the commercial organization, bundling, how you're thinking about the contribution of new logos versus cross-sell, up-sell in that 2025 framework?

Good morning, Kristin. It's Rob. I'll take the question. We see about two-thirds from existing customers and probably a little bit less than a third from new logos. So at Investor Day, you'll remember we talked about what we see as a billion-dollar opportunity in cross-sell-up-sell within the portfolio, and that's consistent with that view we have coming into 2025 with the business. And you're right that the investments that we've made and the underlying systems are The transformation we've taken into the product as well as to the go-to-market side of the house positions as well to start to go or to continue to tackle this opportunity.

That's actually a good segue into my second question, which is a little bit more of a big picture question. You mentioned in the prepared remarks, Rob, some of the AI agents that you've been deploying internally. Can you expand on how you're thinking about operating efficiency opportunities? You know, we've been hearing examples of 100 to 200 basis points of sound margin by applying AI to internal functions. How would you benchmark that opportunity internally for Trimble?

I think the 100 to 200 basis points that you hear in operational efficiencies strikes me as aspirational as opposed to currently delivered. So I think if you really break down the operations, you know, you've got, let's just take it by the P&L, you've got COGS, let's say you've got R&D, you've got G&A, and you have sales and marketing. And I think they're differential within each of those. I think it's probably easiest to see some of the ROI already would be in the R&D function. And if you think about internal usage in R&D, tend to think software and majority of our engineers are software engineers. these days. And then within that, double-click again and break down the software development lifecycle. The efficiencies you can see on QA and testing is, I think, different than what you see in development, is different than what you see in hosting, is different than what we see in provisioning. So I think it's important to double-click. So QA testing, I'd say, is probably the highest ROI we can see from using GitHub Copilot. On the development side, you know, we probably see, you know, we talk about, call it 5% to 10% productivity. And, you know, you're measuring that by more lines of code checked in. But, you know, that's not a perfect measure, of course, is just having more lines of code checked in. We see it in the marketing functions, internally driving more automation. We see product managers using it to help create the marketing requirements documents, as well as the more technical product specifications. On the cost of goods sold, we can see efficiencies with how we're supporting our customers, providing more self-help tools along the way. So a good number of activities that we have in motion. I think that level of operating efficiency that you mentioned, that range, is a good aspirational target. But I would say we don't – I can't say that I can quantify that today, Kristen.

Thank you so much for the time.

You bet. Your next question comes from the line of Jonathan Ho with William Blair. Please go ahead.

Hello. Good morning. I wanted to just build on your comments around the data centricity of Trimble's platform, particularly around the AI opportunity. And can you speak to why your data is unique and what you can do with that data for your customers? It was just going to be new products or enhancements of existing products, just trying to understand how Trimble is positioned for this revolution. Thank you.

Thank you, Jonathan. Good morning. What I see that's unique about the data reflects what's unique about Trimble, and that is our products and services that connect the physical and the digital world. That means connecting work in the field and work in the office. That means connecting the hardware and the software of Trimble. So if we take engineering and construction industry, think about that for a moment. The field systems business that we have combined with AECO is incredibly unique. We've been pursuing industries where we can connect users' data workflow across the stakeholders of that industry. So today when we have our AECO business, that's architects, engineers, contractors, and owners. Each of those is over a $200 million investment. business on its own within each of those pillars today. So there's the unique ability to connect the field office. There's a unique ability to link the stakeholders across the industry lifecycle continuum, that lifecycle being from plan to design, to build, to operate. That creates a unique corpus of data. And as our customers increasingly are asking us to help them solve their higher order problems, to unlock the data that they have, but Trimble and non-Trimble data, by the way, that we believe positions us in a unique fashion and certainly represents a lot of the conversations I'm in with our customers, and I'd say particularly probably our bigger customers. So then what we can do with that data that we have is we can develop unique sets of workflows. It reflects in the unique partnerships. So say a unique workflow, move from scan to BIM. It could be we're doing workflow with digital supply chains. That's linking modeling and estimating. That's linking payments and ERP systems. That's thinking about progress to plan in a civil construction context. There's just an enormous amount of possibilities and a bright future I see happening. And I would say in that baseball analogy, it's probably batting practice or that early in the game.

Excellent. That's really helpful. Just as a follow-up, any thoughts around the U.S. federal government? Can you give us a sense of how big or small that is in terms of contribution and any potential impacts there? Thank you.

On the federal government side, the orders we predominantly have are in field systems today for us. It's the survey equipment, the GIS mapping equipment, machine control tends to be the biggest consumer of what we sell to the federal government. The federal government work is naturally lumpy with We've had for a few years, it feels like government by continuing resolution that's made it even more lumpy than we had seen in the past. When we look into 2025 and the guide that we have there, what you'll see is that field systems is effectively a flat guide. If we were to take the federal business and do an apple to apple on it, we also have subscription conversions, by the way, happening in field systems. we'd be up over 300 basis points, sorry, no, 3% organic growth if we adjusted for that. So what I'm saying is we see the federal government, we're projecting that to be down for us in 2025 relative to 2024 and still a very important customer for Trimble.

Great. Thank you.

Your next question comes from the line of Chad Dillard with Bernstein. Please go ahead.

My question is on the TC1 regional rollout. I think you guys had some momentum early next year, paused to focus on some of the accounting questions, and just wanted to get a better sense for really where you are in re-accelerating that and how to think about that contribution to growth in 2025. And if you can just update the roadmap for how you're thinking about it now.

Good morning, Chad. Thanks for the question. So I continue to feel really good about Terminal Construction 1 and the success that we're having with that. Part of that success, as you note, is regional rollouts. So North America, Europe, Asia Pacific. So think about it in that order. I think we're in a good spot in Europe as we roll that out, especially coming into this year after our sales kickoffs. I'd say Asia Pacific still has, I'd say is coming next in a more meaningful way. So Europe is the focus on the rollout of that and that's incorporated into our thoughts. for the segment. We continue to get very good feedback from our customers around the world on that. One of the things you do as you go region to region is we have different types of capabilities by region, so it's not one global answer for TC1. And so we continue to dial in the bundles that make sense for the regions and take the feedback from our customers on what they need and what they're looking for from us And we saw that reflected in the bookings performance at the end of the fourth quarter. The team did a terrific job posting a very strong growth in ECD bookings on a year-over-year basis. So feeling good about it, Chad.

Great.

That's helpful. And as you're shifting gears over to field systems, so you're guiding organic revenue growth to flat, but wanting to get a little bit more color on civil infrastructure in 2025. What's embedded for that business? Can you talk about, you know, what contributions, some of the recent changes in terms of channel dynamics, you know, that you may see? And then just any bookings color you can share, at least for the fourth quarter for that business.

Yeah, sure, Chad. This is Rob. I'll take that one. On field systems overall, if we think about the close of the year in the fourth quarter on it, As adjusted basis, we were up 2% organic. If we exclude that federal business, we were up 3.5%. So I look to that as a marker for where we are with what we'll call the field sales. And so in the field, the team is growing organically, and we project that going into next year. In the fourth quarter, ARR was up 21%, and so the bookings also reflected that level of strength of performance. In fact, field sales the fastest, highest ARR grower on a year-over-year business. The team's done a tremendous job of working the business models, tremendous enough that that creates a headwind to the revenue growth as we complete those conversions. So if we look into 2025, the revenue guide is flat, but if we were to adjust for that Fed and the subscription conversions, which are a headwind to the revenue growth, we'd be up over 300 basis points of growth in our guide for 2025. Now, within the portfolio and field systems, think about three pillars that we have in that business. So the civil infrastructure business that we have, I'll come back to that second as our geospatial or survey business, and third is what we call advanced positioning. In advanced positioning, think of the positioning services that we offer, right, that centimeter level Accuracy, ubiquitous around the world, that actually has the most recurring revenue in that pillar, and that we expect to continue to grow next year. And that's certainly in our thoughts in the ARR guide that we have. From the civil business, that pillar, we expect growth. That's the punchline. So we expect the civil infrastructure business to be a grower for us. Had a strong fourth quarter. We like what we've seen coming in here to the beginning of the year in the business. And we've seen it actually globally. So the business is growing. It is performing. There's a number of catalysts for that. Of course, what we sell is productivity. When you put the guidance equipment, our guidance technology on the iron out in the field, like fundamental productivity, 30%, 40% productivity, move the dirt right the first time. Those are profound. value proposition. Customers continue to have problems finding labor. We can make an inexperienced operator good and a good operator great by using the technology. The team's done a nice job as well of product innovation, which we're able to showcase at our user conference. So we have a new, relatively, I should say, new product, the X992, and that helps us reach the mid-tier machine control market. So a number of activities on a number of fronts, and it's leading into nice performance from that business. By implication, then, we expect the pillars, we expect the survey business to be flat to down into next year, but that's also where we have a lot of that federal business.

Great. Thank you.

Your next question comes from the line of Jerry Rivich with Goldman Sachs. Please go ahead.

Hi, yes, this is Clay for Jerry. First one for me. Can you flesh out the performance of Transporian? What was organic growth in the quarter and local growth retention rate?

Hey, good morning, Clay. This is Rob. I'll take that question. Hey, the Transporian team did a terrific job of controlling what they can control. The macros continue to be difficult and Well, actually, really globally in the freight market. Transpoint is a European-centric business where that market is challenged. However, in a very good way, the team had record fourth quarter bookings. They had record bookings for the year. Phil mentioned over 20% bookings growth for the year. So that reflects both existing customers and new logos. We've won many new logos throughout the year, some of the biggest company names you'll find in any vertical. And then the team's done a nice job of cross-selling within that. So we look at the sum, and by the way, on the product side, that team has done some of the most innovative things relative to AI, both for our own internal usage as well as external usage. Tad Piper- capabilities, we have an autonomous procurement autonomous quotation offering that's getting nice uptake and the team is doing a nice job i'm also working to bring. Tad Piper- capabilities from Europe into North America and then we've done some product consolidation globally. Tad Piper- As well, to drive efficiencies and some synergies within that so as phil said in his comments when the freight markets. turn this business's position to perform well and to be able to demonstrate the financial potential of this business.

Thanks. And switching gears here, how do you view the product volatility of the geospatial and heavy simple portfolio? I believe you touched on a little bit on the last question, but just to see my color there.

So the team, I think, does a really nice job of innovation. And just to put a broader context on that, over the last five years, Trimble's put about $2.5 billion into research and development. So we don't just empty talk about innovation. We're putting our money where our mouth is, both AECO, transportation, and field systems. So if I think about Product vitality within the portfolio. I'll take those three pillars. If we take our civil business, I talked about BX992 or SiteWorks as a technology. That's getting us to new machine types and new price points. If I look at our survey business, the team launched last year the R980, and that has improved communications over the prior version of the R12i, which It was an innovation in and of itself. If I looked in the Advanced Positioning Pillar, the team last year launched Ionoguard, and that's correcting for errors in the atmosphere. So you can do the solar cycles that we've had to get accurate, highly accurate performance, which you need, particularly like in the mines and in the field and agriculture. To have that ubiquitous accuracy is very difficult to do, and the team really just had some really novel innovation. So innovation really drives a refresh for our customers of their own technology. So I like what I'm seeing from the team and like what they're working on. I talked about hardware innovation, but I should also mention the software innovation. across that portfolio, and that's reflected in that 21% ARR growth that we had in the fourth quarter. I'm really excited about what the team is doing in reality capture. These days, data is not the topic. We're flooded with data. It's information that we need, and so Trimble is in the business of collecting enormous data sets, and the software activities are converting that data into information, into actionable information.

So in a reality capture, you can apply AI on that to do feature extraction, and then from that feature extraction to create actionable workflows back out in the field. So a lot of good things happening in the business. Thanks. I appreciate it. You're welcome.

Your next question comes from the line of Joshua Tilton with Wolf Research. Please go ahead.

Hey, guys. Thanks for squeezing me in here. I actually have a multi-parter on the construction business and then just a quick follow-up on the transportation side. I guess I'm trying to understand, maybe diving a little bit deeper, are you seeing any change in demand from the construction and market post-election here in the States? And then the second part of that question is, you did make it a point to highlight the potential for some larger acquisitions specifically focused on construction. Is there anything that you feel that's missing from the TC1 bundle or the construction portfolio today that you guys are most interested in? And then I got to follow up.

Hey, Josh, good morning. On the change in demand since the election or, well, since the election or since President came into office, nothing discernible is the punchline. I mean, you know, you hear a sentiment, you hear expectations of are we going to have onshoring, reshoring, are supply chains going to move around? But I think overall we're in a wait, more in a wait and see mode. I haven't seen any kind of fundamental movement, let's say, on new projects coming out. So let's wait and see. And I'd say ask the same question next quarter, and maybe we'll have some more data to be able to provide at that time on that. Because about a third of construction in the US is running through our system. So I think we would have a pretty good view on what's coming, both at the contractor level as well as the owner level. In terms of the M&A side within construction, to answer your question, I think about it in a couple of respects. One axis is geography, and the other is really more product-oriented. At a geographic level, you know, when we talk about our term construction one offering, it's really a commercial framework. We have different capabilities around the world. We don't have the exact same capabilities around the world. And so we look geographically, let's say, take a construction ERP system. And construction ERP has done extraordinarily well for us in a number of markets, most notably North America. We don't have a construction ERP. I'll take Central Europe, or you could say Southeast Asia, you could say India. We'll look at those markets and and where we think we can stitch together a good offering begs the question built by a partner. So we'll go through that analysis, and we do go through that ourselves for how to geographically expand and even strengthen the offering. From a product capability side and gaps, I think a little bit less. I don't think about gaps so much. To the extent that there's gaps, that's where tuck-ins can come into play. Often the tuck-ins are really more flexible. They're really more features than they are independent businesses that fit really well within our platform offering. I also think about it on the axis of segmentation. So let's say if we play in one tier of the market, let's say in one business that we play more mid and large contractor, within that segmentation, we'll ask the question, okay, if we want to play more in, let's say, the small mid, how would we do that? Or if we want to play in the largest of the large, how would we do that? Do we extend the product offering, or could we go acquire an installed base and then bring in the rest of the capabilities that we have to link, bundle, cross-sell, and upsell? So that's the way we think about it, Josh. I'm not being overly specific on purpose, but hopefully that helps frame how we go about it.

It definitely helps. Maybe just a quick follow-up on the transportation side. I think it's clear like Transporeon bookings, still pretty solid, even though freight market remains challenged. How do we think about what bookings for this business or for Transporeon will look like when the freight market recovers?

Good question.

Actually, that's a good question. I think that on the bookings growth itself, it would be Probably pretty similar. It's not obvious to me that it would be that much higher. I mean, OK, other than, OK, you know, the sentiment is better and there's more spend available. You would think that'd be a positive catalyst. But we actually have quite a reasonably low barrier to entry with our model because it's a transactional model. And so in a transactional model, really the more fundamental thing in a freight recovery is more, and by the way, economic recovery that translates into a freight market recovery, is more transactions happening for each of the customers that we already have. And that's where, and we've seen this in the business historically, is when you come out of a down cycle, you can have a very fast recovery or a very fast improvement. I mean, it's already a very good business, so a very fast improvement. I think operating leverage, when I say that, and the nature of the gross margins are in the 80s in that business. So you drive a really nice inflection in the number of transport executions or loads moving on our system, and you can drop a significant amount of operating leverage quickly. So I would look more at that, Josh, than I would the bookings.

Makes sense. Thank you, guys, and congrats on the quarter. Thank you. Thanks.

Your next question comes from the line of Tammy Zakaria with JP Morgan. Please go ahead.

Hi, good morning. This is Ishan on behalf of Tammy. I had two questions. The first is around the share repurchase authorization. Do you have a plan in terms of quarterly cadence or do you expect to complete the entire authorization this year? on a related note, if, as you mentioned, your plans on M&A, how would that impact the share approaches for the, if at all?

Yeah, hey, thanks for the question. This is Phil. So as we noted earlier, we just replaced our existing authorization with the new $1 billion authorization. And the way we're thinking about that is, We've talked earlier about the $625 million that was remaining on the prior, and that's an amount related to the proceeds from the ag JV. And so we're still anticipating, let's call it over Q1 and Q2, to initiate the share repurchases focused on that first $625 million that we've already talked about executing. And so the way I think about that is between Q1 and Q2, probably... two-thirds of it hitting Q1 and about a third of it hitting Q2. And then beyond that, with the remaining $375 million, what I talked about on Investor Day was at or above a third of the free cash flow is going back to share repurchases. So I think the way to think about that is roughly $700 million, let's call it, of free cash flow and a third of that $200 million a year And so that's roughly 50 a quarter that I would expect once we get past that initial 625. That's the way I think about modeling it. And I think your question on the M&A is, again, it depends on the M&A, but right now with what we're focused primarily on the tuck-ins, we believe we have plenty of firepower to continue to do the tuck-in work on the M&A. If we do something bigger, we do believe we still have more than enough capacity to do that. And just a reminder, our targeted leverage rate over the long term is about two and a half times. And we're well, well underneath that. We're well below 1x right now. So we have plenty of room on our balance sheet.

Great. That's super helpful. And my second question is around the FY25 guide compared to your initial outlook laid out in the investor's day report. which areas have actually led to the positive change in the organic revenue guide, you know, in constant currency basis?

Yeah, good question. So at Investor Day, just to walk through the delta, relative to Investor Day, we had about a $40 million FX headwind on revenue. And so the puts and takes where we were roughly $3.4 billion is what we guided at Investor Day. Our current guide as reported is $3.42. And so add $20 million for the mobility for one month of the mobility business that we had in January before we closed on that. And then that $40 million that we had as a headwind of FX, think about that as the effective increase to offset the FX. on the organic growth, and I'd say that it's really across primarily the AECO and the field systems businesses with the performance that Rob talked about in civil and the performance in AECO, especially coming out of the end of the year with really strong performance continuing into 2025.

Great. Thank you so much. Sure.

Your next question comes from the line of Robert Mason with Baird. Please go ahead.

Yes. Good morning, Rob. So I appreciate all the level of detail to get us level set, given all the moving pieces, adjusted numbers, pretty helpful. So just taking that that you provided, it looks like within your segments, and I'll speak field systems, your margins are up about 100 basis points on kind of flat organic growth. And then in the transportation business, margins kind of flat on high single digit core growth. So could you bridge those two dynamics if I'm interpreting that correctly? I would have thought field systems needed to absorb some channel investment, so that's probably a good outcome. But just the TNL margins being flat, is that the right interpretation?

Yes. So, hey, Rob, it's Phil. One at a time. So on the field systems, we talked about this before. With some of the changes to the JV with the CAT, the CAT JV, we've shifted some of the margins that were in our equity investment income line into the OPEX. So we sell product into the JV, and we changed some of the margins and pricing on that. And so that actually helps improve the the margins in the field systems business. Now, some of that is actually offset by what you said, which was the investment in the channel build-out. And so we do get some upside there because of the economic shift. And then on the transportation business, I think the big item that's a headwind there is really the FX. So the Transporean is all Euro-denominated and is profitable. And so when we translate that back, given the strong U.S. dollar, that actually creates a decent headwind for the transportation segment.

So the, I think, four-set headwind you called out, that's disproportionately in T&L then?

It's primarily T&L and AECO. AECO, given the growth, and particularly in Europe, doesn't have a big footprint like we do in field systems. And so it's both transportation and ACO. But yeah, Transporean, because of the size of that and all, Euro-denominated, it's a big portion of it.

Sure. Just as a quick follow-up, I think you touched on some of the geographic strength calling out North America, but could you add a little color or context of what you are seeing in Asia-Pac and in Europe? Hey, Rob.

This is Rob. Good morning. And what India is, good morning. India is doing especially well. I'd say that's the highlight in the region. I'd say the toughest market on the other bookend, probably China and Japan are challenged. Japan to the FX is particularly difficult. in that market. And then in between, you're going to have Australia, New Zealand. But India is the standout positive.

There you go. Thank you.

And ladies and gentlemen, that does conclude our question and answer session. And that does conclude today's conference call. Thank you for your participation. And you may now disconnect.