Trimble Inc.

Thank you for standing by. My name is Bailey and I will be your conference operator today. At this time, I would like to welcome everyone to the Tremble third 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, again, press star and 1. I would now like to turn the call over to Rob Painter, President and CEO. You may begin.

Welcome, everyone. Before I get started, our presentation and safe harbor statements 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 the divested agriculture and mobility businesses, as well as the 53rd week of fiscal 2024. As reported numbers, along with the reconciliation, are provided in the appendix of our slide presentation. Okay, let's get to it. Our third quarter results delivered a top and bottom line beat, and we are once again raising guidance for the year. The story of Turnbull this year can be summarized in three words, clarity, durability, and momentum. That message continues today, driven by the purposeful execution of our Connect and Scale strategy. Our strategy continues to guide our own transformation, delivering transformative outcomes to our global customers and in positioning us well to deliver on our 2027 financial commitments. We're also carrying this momentum forward with the Trimble brand. Earlier this year, we launched our NASCAR partnership with RFK Racing. And last week, we announced our partnership with Liverpool Football Club. This isn't just a sponsorship. LFC will employ Trimble Technology in the design and construction of its world-class infrastructure. That's Connect and Scale in action. Turning to slide five, the numbers clearly reflect our execution. We delivered $901 million in revenue in the quarter, up 11%. Our ARR grew 15% to $2.31 billion, with a notable 17% increase in our AECO segment. EPS at 81 cents was up 16% year-over-year and higher still on an organic basis. The structural quality of our model is self-evident. Recurring revenue accounted for 63% of third quarter revenue and software and services for 78% of our total. As you will see from the results in skilled systems, the physical solutions of Trimble are uniquely empowering workflows by connecting the work between the office and the field with rich mission-critical data sets. Before turning to the segments, I want to briefly address three topics we've heard many of you asking about over the last few weeks. First, the impact of the US federal government shutdown. We correctly anticipated lower government revenue early in the year and have been able to contain the impact on the business, which we previously quantified as single-digit millions in the back half of 2025. The second topic is the impact of AI on vertical software. In short, we see a net opportunity We believe we are uniquely positioned to capitalize on this transformation for three key reasons. First, AI is a logical extension of Connect and Scale, not a separate initiative. We've been working with AI for years, and we are already connecting physical and digital solutions, workflows, and ecosystems. We believe AI will be adopted inside industry platforms like ours as a natural extension of the data coming out of the mission-critical systems we build today. We're not chasing a new market. We're leveraging our core assets. Second, our industries are inherently difficult to disrupt. We operate in physical industries like construction and transportation, and they're fragmented and complex. This requires deep domain expertise, extensive go-to-market capabilities, and a trusted partner that can bridge the office and the field. The unique corpus of data that flows through our ecosystems each and every day, combined with our deep industry relationships, creates a powerful competitive moat that a new pure play AI company cannot easily replicate. Third, we are already executing on this opportunity. We remain humble to the potential for disruption and are hard at work integrating AI across our business. We're using it to drive internal efficiencies and accelerate our product innovations. We view AI as a powerful tool to enhance our value proposition and extend our leadership. Expect us to drive productivity over time. The third topic is the strong demand for AI data centers. Many of our customers have significant global backlogs and continue to invest to service them, with an emphasis on speed of delivery. This is clearly reflected in our ACB bookings performance. We have the benefit of serving a diversity of end markets, infrastructure, residential, energy, commercial, onshoring and reshoring of manufacturing, and more. Our business is resilient because we are not dependent on any single project type, contractor profile, or end market. Okay, let's turn to the segments, starting with AECO. The team delivered another outstanding quarter. ARR at $1.42 billion and revenue at $358 million were both up 17%. Our ACV bookings remain strong and in line with our long-term model, and we continue to see strong engagement and expansion with our core commercial customer base, with net retention excluding SketchUp at approximately 110%. Market feedback continues to validate our value proposition to connect workflows and integrate ecosystems to address higher order problems, create connected data environments, and facilitate multi-sided marketplace business models. In the quarter, we launched SketchUp 2026, which is now enabling real-time viewing, which in turn enhances collaboration and usage. We launched ProjectSite, which is our AI-enabled project management solution, into Europe and Australia. Our unique Trimble workflows are linking design and reality capture. They're linking scan to BIM and digitizing site layout, delivering step function levels of quality and productivity to our customers. In October, we held a user conference with our owner and public sector customers, showcasing our latest innovations in our suite of asset lifecycle management solutions. We sit in a unique spot to help asset owners digitize their capital program management, as well as their permitting and operational asset management needs. This digitization enables us to provide AI-driven insights that solve real problems. Moving to field systems, the business outperformed in the quarter, with particular strength, again, in civil construction. Kudos to the team. This is the industrial IoT of our business, our data collection node in the physical world. Revenue at $409 million was up 8%. ARR at $386 million was up 18%, driven by strength across our geospatial and civil solutions. At a product and workflow level, An example of our continued mixed fleet innovation comes from our announcement with Vermeer and their pile drivers. The solution we enable automatically moves the physical machine to the precise location of a pile according to the digital project plan, then optimizes the depth of the pile with minimal operator input. The system allows one operator to complete the task of driving piles, which otherwise would be a two- or three-person job. Productivity and quality, that's Trimble at work. Our latest AI innovations are now offering automated point cloud classification and inspection analysis tools to quality control as-built construction. In addition, we continue to expand our points of distribution to help better drive adoption of technology in the market. In September, we held our first Trimble Dimensions in Australia, enabling us to showcase our innovations to almost 1,000 attendees in Brisbane. Next week, we're excited to be back in Las Vegas to host our flagship Trimble Dimensions user conference for all our AECO and Field Systems customers, where we will showcase new workflow solutions along with our latest AI innovations. The reach of this business into the physical world is near ubiquitous. The sampling of customers and projects, one in a quarter, spans the globe. Rail projects in Japan, airports in Quebec and Colorado, transportation authorities in Norway, Paris, and the US State Department of Transportation, survey agencies in Thailand and Saudi Arabia, as well as wins with automotive and autonomous mining OEMs. Moving to transportation, ARR at 501 million was up 7%, delivering profitable growth in a challenged freight market. In September, we held a European user conference in Amsterdam, an inspiring forum with representation from some of the largest and most important companies in the world in attendance, many of whom were new customers. At the end of this month, we'll be in New Orleans for our North American user conference. To give a sense of connected scale and action here, we start with critical customer problems, network optimization, empty miles, driver retention, maintenance, and fuel management. Our ecosystem strategy enables interoperability to help companies achieve a more holistic view of their supply chain, leading to better planning and execution. This breadth of data enables AI to learn and forecast future processes. enabling predictive analytics for demand, capacity, and potential disruptions. As an example of this strategy in action, we announced and launched our freight marketplace offering with Procter & Gamble as our anchor shipper customer. We are building the next generation of an intelligent and responsive supply chain. With that, I'll hand it over to Phil to walk us through more of the numbers, including our updated full-year guidance.

Thanks, Rob. Let me start with some comments regarding capital allocation. During the third quarter, we repurchased $50 million worth of shares, a direct reflection of our confidence in the long-term value of our business and our commitment to delivering shareholder returns. This leaves approximately $273 million under our current repurchase authorization. Longer term, we continue to expect at least a third of our free cash flow to be used for repurchasing shares. Our M&A strategy remains focused on strengthening our core market positions. We look for opportunities in high growth areas such as construction software with a particular emphasis on token acquisitions, smaller strategic purchases that integrate quickly and enhance our existing platforms to deliver a rapid return on investment. Let's review the third quarter of 2025 starting on slide six. Organic revenue growth at 11% exceeded the high end of our outlook, driven by the strength of AECO Anfield Systems, with transportation and logistics continuing to grow in a challenging freight market. ARR was in line with the top end of our outlook at 15% to another record of $2.31 billion. The consistent growth in our recurring revenue base provides a predictable and resilient foundation for our business. Gross margins expanded 90 basis points to 71.2%, showcasing our continued model progression. We achieved EBITDA margins of 29.9%, which is a 160 basis points expansion year-over-year. Reported earnings per share was $0.81 for the quarter, $0.10 better than the midpoint of our guidance, and $0.06 above the high end of our guidance. Moving to the balance sheet and cash flow items on slide seven. Our year-to-date reported free cash flow remains strong, at $206 million when considering the $277 million cash tax payment paid in the second quarter, which was related to the agriculture divestiture. Our balance sheet is a source of strength and financial flexibility, with $233 million of cash and a leverage ratio of 1.2 times, which is well below our long-term target rate of 2.5 times. Moving to a segment review of the numbers before we close with guidance. and starting with AECO on slide eight. AECO delivered a record 1.42 billion of ARR, posting 17% ARR and revenue growth for the quarter. Operating income at 31.8% increased 270 basis points year over year. This business continues to operate well above the rule of 40, reflecting a balance of high growth and profitability. Next, field systems on slide nine. Revenue was up 8% in the third quarter, despite approximately 150 basis points of model conversion headwinds. The segment posted another strong quarter of ARR growth at 18%, where we continue to successfully execute our business model conversions and deliver and expand capabilities that are subscription-based. Field systems operating income at 33.4% increased 40 basis points, driven by a greater mix of higher margin recurring revenue. Finally, transportation and logistics on slide 10. The segment delivered revenue growth of 4% and ARR growth of 7%. We continue to make excellent progress on our connected scale strategy, which will unlock a cross-sell and up-sell opportunity we size at approximately 400 million within this segment. Operating margins expanded 10 basis points year-over-year to 25.8%. Let me turn to guidance on slide 11. With the strong performance in the third quarter, We are increasing the midpoint of our full year as reported 2025 revenue guidance by $45 million to $3.565 billion. We are also increasing our full year EPS midpoint outlook by $0.10 to $3.08 and are maintaining our organic ARR growth midpoint at 14%. From a cash flow perspective, we are holding to our full year view to be approximately one times net income after adjusting for the $277 million cash tax payment related to the sale of the agriculture business and the approximately $30 million in M&A costs. We continue to expect that we can deliver a free cash flow greater than non-GAAP net income over the long term. Before turning the call back to Rob, I want to connect these results to our long-term vision. Our execution to date in 2025 reinforces our confidence in achieving our fiscal 2027 targets, which we refer to as our 3-4-30 framework. That is $3 billion in ARR, $4 billion in revenue, and 30% EBITDA. An early look at 2026 revenue has us in the mid to high single digit range. We look forward to providing more details regarding 2026 in February. Back to you, Rob.