Trimble Inc.

And thank you for joining us. And welcome to the Trimble First Quarter 2026 Financial Results Conference Call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. I would now like to hand the conference over to Rob Painter, President and CEO. Please go ahead.

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 impact from the mobility business which we divested during the first quarter of 2025. As reported, numbers, along with the reconciliation, are provided in the appendix of our slide presentation. The Trimble team furthered the momentum of the last couple of years and delivered a great start to the year with top and bottom line results ahead of expectations. Revenue at $940 million, up 12%. ARR at $2.435 billion, up 13%. And earnings per share above the high end of our range at 79 cents. We are raising our guidance for the year. Financial performance is the scoreboard. It's the output. The game on the field, or the input, is delivering unique value to customers. On slide four, I want to highlight how we are partnering with our customer, George Leslie, a Scottish-based civil engineering contractor that has embraced the Trimble ecosystem to connect the physical and digital worlds. With our platform, Trimble Connect acts as the orchestration layer of complex workflows that include marine and pier works, water and wastewater treatment, bridges and infrastructure, and energy and power. When performing earth moving, our laser scanners are deployed for capturing the job site in high fidelity 3D to create a digital twin of the physical earth, while our tools back in the office power the design of the terrain model into a constructable model. Enabled by the Trimble ecosystem, this model is seamlessly deployed to our Trimble survey and machine control systems in the field to execute the work in the physical world, while our project management and scheduling capabilities are managing the work, physical to digital to physical. When performing complex steel and bridge work, they take the structural and design model that is managed within the Trimble ecosystem and then use our robotic total stations to precisely orient the digital model on the physical job site. Trimble is the data platform through which our customers' data flows and remains in sync as the work moves from the physical to digital to physical to digital and so on. Through the power of the Trimble ecosystem, George Leslie is realizing significant productivity, quality, and efficiency in ways that Trimble uniquely delivers. Only Trimble can connect and optimize work like this. That's our connect and scale strategy in action. Connecting work in the office and the field, connecting our hardware and software, connecting the physical and digital worlds. We see tremendous opportunity as we bring AI to industry workflows and further establish Trimble as the intelligence and execution layer that reconciles our customers' digital and physical realities. Slide five shows four examples of Trimble AI delivering actionable outcomes and breakthrough levels of productivity across projects in airports, rail, tunnels, and roads for some of the largest and most influential companies and organizations in the industry. only tremble. Speaking of AI, we believe customers will adopt AI from trusted platforms like ours, where we deliver the support, cybersecurity, governance, and sustaining engineering that our customers expect and require. Integrated workflows with deep domain knowledge at scale is a differentiator and a moat. Our ecosystem of third-party connectivity and platform extensibility compounds value delivery and drives network effects. where every connection point in transaction improves the next autonomous decision, making the data not peripheral to the product, but the product itself. In short, we see a world where AI increases the size of the addressable market, and we believe we have a compelling right to win, thus capturing additional avenues of growth. While we monetize our software and AI today primarily through named user licenses, we are architecting ourselves to scale hybrid value delivery at the intersection of licenses and consumption. This isn't just a hypothetical thought experiment. We already deliver consumption models today. For example, Trimble Transporian transacts well over $100 million of revenue through tens of millions of annual transactions on our platform. And our recent native AI products deliver autonomous procurement and autonomous quotation on a consumption basis. In the fourth quarter of 2025, Trimble SketchUp released SketchUp AI as an add-on that is available to our subscriber base. The hybrid add-on is an additional subscription that makes a fixed number of AI credits available to each user each month. We will continue to track market adoption of our AI capabilities along with market readiness for emerging consumption and outcome-based models as our monetization strategy evolves. Let's now turn to some segment-level highlights, starting with AECO. The team delivered another outstanding quarter. Both ARR and revenue were up 14%. Cross-sell and up-sell performed well, and we extended the reach of Trimble Construction 1 into the Asia-Pacific regions. While North America remains our largest market, we are pleased with our performance in Europe as well as the APAC region. Last week, we launched an integration with SketchUp and Anthropix Cloud. This makes it easy for Cloud users to create Trimble SketchUp 3D models directly from conversational text, image, or speech prompts enabled by a SketchUp MCP service that allows Cloud to create and modify SketchUp files. The immediate monetization is downstream in our SketchUp subscriptions. After starting in Cloud, users will then bring their files into SketchUp to further iterate on the design, leverage SketchUp's real-time collaboration features to engage project stakeholders, create visualizations, perform daylight analysis, and more. The midterm revenue opportunity is expanding the addressable market by converting Cloud users into Trimble customers. This is just one of the many examples you are going to see from us throughout 2026. Turning to slide six, on April 2nd, we announced the acquisition of Document Crunch. For context, construction is a relatively low-margin industry, yet remains one of the most risk-exposed industries in the world. More than 80% of projects exceed budget, and when disputes arise, the average claim in North America tops $60 million. The root cause is consistent, errors in project documents and stakeholders failing to understand their obligations. With Document Crunch, we're addressing this directly. We're establishing a new AI-powered risk management category within Trimble, bringing contract intelligence and compliance automation into the project management, estimating, and ERP workflows our customers already rely on. And that's just the beginning. Think about what that means at scale. Layering these intelligence tools across tens of millions of projects in Trimble Connect, billions in construction managed through ERPs, and field workflows that have never before been connected to the contract. We're connecting the field to the office, to the risk, to the execution, and embedding it all into Trimble Construction 1. This isn't just simply AI document review. We are linking the contract and risk elements to the execution in the field and to multiple stakeholders throughout the ecosystem, thereby addressing the core reason for disputes. Early customer feedback has been exceptional, and we're moving quickly to expand reach and to leverage this AI-first development team to organically address new categories. Moving next to field systems, the physical side of Trimble outperformed in the quarter, with particular strength once again in civil construction. Both ARR and revenue were up 12%. We continue to innovate and execute, with end-market strength in infrastructure and data centers supporting our growth. The strategic highlight of the quarter was seeing our team in action at the ConExpo Construction Industry Trade Show in Las Vegas in February. where the 140,000-plus construction professional attendees were able to see Trimble showcased in the booths of 24 leading construction OEMs from North America, Europe, and Asia, thus demonstrating the site technology leadership position we hold in the market. Extensibility is core to our Connect and Scale strategy and crucial to extending our leadership position. At our booth, we were able to showcase support for more machine categories, such as compact machines, along with new functionality for excavators equipped with dynamic swing booms. We also introduced an integration with ground penetrating radar for real-time asphalt compaction quality control. Combined with our expansion of points of distribution in the market and the linkage with workflow as described in the customer example in my opening remarks, We are as confident as ever that we have the right strategy at the right time, executed by the right team. Moving now to transportation, ARR was up 9% and revenue was up 7%. Our booking strength in the quarter gives us confidence in our growth plans for the year. The AI ambitions of this team are inspiring and cutting edge. To unlock the potential of AI for product development requires a systemic paradigm shift across the entire product development lifecycle. Today, the vast majority of new code is generated with AI tools, and our product development organization is fundamentally rewiring how we work, which in turn is increasing our velocity. In addition, we are approaching our target to dedicate 10% of our development resources to an applied AI organization that is tasked with agentic development as well as safe AI deployment. With a couple of recent customer wins in selling autonomous procurement and autonomous quotation in North America, we are building momentum and demonstrating that we can bring Transporean capabilities to North America and that we can cross-sell into our carrier base. So while the macro environment remains challenged, the North American market is beginning to show some signs of market recovery. In Europe, we continue to hold our competitive win ratios and grow our network density. In the first quarter, our new logo growth increased by more than 50% year over year, demonstrating the quality of our solutions, the available market to penetrate, and the solid execution of the team. Phil, I'll turn it over to you now.

Thanks, Rob. Thanks, Rob. Let me start with capital allocation, which remains disciplined and consistent. During the first quarter, we repurchased approximately $317 million of common stock, a direct reflection of our balance sheet and cash flow strength, our confidence in the long-term value of our business, and our commitment to delivering shareholder returns. We retain a substantial $608 million under our current repurchase authorization, which continues to give us flexibility for opportunistic buybacks. Longer term, we continue to expect at least a third of our free cash flow to be used for repurchasing shares as we look to provide returns for our shareholders. Our M&A strategy remains focused on strengthening our core market positions and adding capabilities that allow us to run the cross-sell motions and provide high ROI for our customers, such as our recent acquisition of Document Crunch. In the first quarter, we also divested a small business in field systems as we continue to sharpen our focus on core competencies and allocate capital and resources to the highest returns. Let's review the first quarter, starting on slide 7. We delivered organic revenue growth of 12%, which exceeded our outlook. This performance was driven by the strength of AECO and field systems, while transportation and logistics delivered positive growth despite a constrained freight market. ARR was in line with our outlook at 13% to a record $2.435 billion. The continued growth in our recurring revenue base provides a predictable and resilient foundation for our business. Gross margins expanded to 71%, and we achieved EBITDA margins of 27.4%, which is a 150 basis point expansion compared to the prior year. Reported earnings per share was 79 cents for the quarter, 7 cents better than the midpoint and above the high end of our guidance. Moving to the balance sheet and cash flow items on slide 8, our first quarter reported free cash flow remained strong at $275 million. Our sound balance sheet provides financial flexibility with $234 million of cash and a leverage ratio of 1.1 times, which is well below our long-term target ratio of 2.5 times. Next is our segment review, starting with AECO on slide 9. AECO delivered a strong quarter, performing in line with expectations. It achieved a record $1.51 billion of ARR, posting 14% ARR growth and 14% revenue growth for the quarter. Operating margin was 31.5%, a 420 basis point expansion over the prior year. Turning to field systems on slide 10, revenue was up 12% in the first quarter, while absorbing headwinds due to the continued model conversions to recurring revenue. The execution by the team resulted in another strong quarter of ARR growth at 12%. Operating margin was 28.8%, which is slightly down, primarily due to timing of OPEX and growth initiatives in the quarter. Finally, transportation and logistics on slide 11. This segment delivered revenue growth of 7% and ARR growth of 9% for the quarter. This represents a sequential improvement from the previous quarter. Operating margins were at 24.2%, which is a 300 basis point expansion from the previous year. Turning to slide 12, let's review our updated outlook for the year. The midpoint of our 2026 full-year guidance for revenue is $3.875 billion, a $15 million increase from the prior guidance and represents approximately 8% growth. We are also increasing our EPS guidance to $3.55. We expect the midpoint of ARR growth at 13% and EBITDA margins at 29.7% as our model delivers strong operating leverage while allowing us to reinvest for future growth. Regarding cash flow, we expect free cash flow to be approximately one times non-GAAP net income and that we deliver free cash flow greater than non-GAAP net income over the long term. Slide 13 breaks down the full year metrics by segment. The trajectory across all three segments is consistent with our prior guidance and remains fully aligned to deliver the investor day company targets for 2027. $3 billion in ARR, $4 billion in revenue, and 30% EBITDA margins. Finally, regarding our second quarter outlook on slide 14, we are setting the midpoints of our guidance at $950 million for revenue, which is approximately 7.5% growth, earnings per share at $0.80, and ARR growth at 13%. We expect EBITDA margins at 27.7%, a 30 basis points expansion year over year. Back to you, Rob.

Thanks, Phil. I'll end by summarizing three key takeaways from the quarter. First, our connect and scale strategy differentiates at the intersection of physical and digital. There's no other company as uniquely positioned as Trimble. Second, we are leveraging AI to transform how we work so that we can transform how our customers work. We believe customers will gravitate towards leveraging our platform for their own AI ambitions because we are connecting their data, their workflow, and their industry ecosystems. We believe AI will expand the size of the addressable market, and we are ready to adapt our business models to meet the market where it is. Third, the quality of our strategy is driving financial performance that enables us to differentially invest back into our product and go-to-market motions to ensure the strength of our future. My gratitude to the Trimble team and partners, as well as our investors who continue to support our strategy. Operator, let's open the line to questions.

We will now begin the question and answer session. In the interest of time, please limit yourself to one question and one follow-up. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. We do ask that you pick up your handset when asking a question to allow for optimum sound quality. If you're muted locally, please remember to unmute your device. Please stand by now while we compile the Q&A roster. Your first question comes from the line of Kristen Owen with Oppenheimer. Your line is open.

Hi, good morning, and thank you for the question. Nice start to the year, guys. It sounds like things are kind of all rolling in the same direction. You lifted your guidance for ACO and field systems. You beat by seven cents. You lifted the guide by four. So I'm just kind of wondering what are the back half scenarios or how should we think about the level of conservatism that you're baking into the guide given the strong start to the year?

Hey, Kristen, it's Phil, and thanks for the question. So let me start with we're in line with our previous guide from earlier this year. Actually, in fact, we raised the guide for the year, and we're on track to be – to be at or ahead of our 3-4-30 model that we put out in Investor Day. I'd say we have the most visibility we've ever had at the company level with the transformation and the ARR mix. But we do have less visibility on the hardware business. And in light of the conflict we see in the Middle East and uncertainty around tariff policies, along with upper comps in the back half, we've incorporated those puts and takes into our guide. And we'll update you in a few months as we get more visibility on the ARR.

Great. That's very helpful. And then I wanted to dive into some of the consumption model changes that you talked about, Rob, in your prepared remarks. You know, I'm hoping to understand any early indications of how your customers are utilizing tokens for the AI tools that are currently embedded in your products. Just any sort of qualitative or quantitative data that you can provide on utilization trends or where you're seeing tokens being purchased. How are those early learnings informing your commercialization of AI across the platform? Thank you.

Good morning, Kristen. I'll start by discreetly answering the token question. Quantitatively, what we can see is that the usage is growing and that almost all of those credits that are associated with those named user licenses are being consumed. And that's good because it tells us they're actually being used. qualitatively, what I really like are the learnings we're getting from doing this because the development, the deployment, and the monetization motions are all different. Now, if we up-level the conversation, I think the real conversation to have is around the commercialization of AI across the platform because the tokens themselves are a tactic of commercialization. And, of course, we're going to expect to see more of them going forward, and we're building the capabilities in order to do that. But at the same time, we'll deploy many additional commercial tactics. So I'll give you two examples. First one was discrete consumption and transactions. So if you take autonomous procurement and autonomous quotation within transportation, I think that's a great example of that because what we're monetizing through those particular product motions is happening at a higher rate than the traditional non-AI transactions. capabilities that we have. And we can charge more because we're demonstrating a higher ROI over our customers when we do that. A second example is we'll create monetization through the good, better, best product motions where we put AI into those better and best upsell motions. And I highlighted four examples. I think it was on slide five of the presentation that give examples of this. And one of those examples would be automated feature extraction out of the large point clouds that we deliver to our customers. So in that example, that automation of the feature extraction, which turns hours and days of work into minutes of work, we're monetizing that through that better and the best product sets that we deliver to our customers. And in fact, in that example, we're actually also enabling our customers to create their own proprietary data sets for their own unique work on feature extraction. So many different motions and tactics that we'll apply to achieve and reach that vision of commercializing the value that we're delivering to our customers through AI.

Your next question comes from the line of Rob Wertheimer with Mellius Research. Your line is open. Please go ahead.

Thank you. I had two questions on trend at ACO and then on monetization along the line to what you were just talking about. On trend line, obviously ARR growth was strong. The comp on core is a little bit abnormal. And so I wonder if you could just talk about revenue trends of the quarter, just any sense of that. And then as we go through the year, there are questions on a competitor call yesterday. about whether construction is improving or not. There's lots of mixed indicators. I wonder if you might weigh in there.

Hey, Rob. It's Phil. Let me start as we think about the year and the guide for ACO. So let me start with connecting this to some numbers. As I look at the net new ARR, that is growing and has grown in Q1, and we expect that to continue to grow throughout the year. Historically, we also benefited a little bit from a tailwind due to the conversion uplifts. So we moved from maintenance and support into subscriptions. There was a bit of an uplift. So if I look over history, again, that was a bit of a tailwind. Still a small amount of that left, but the impact is a bit less. But the Q1 results in the full-year guide are fully in line with our expectations and the model we put out in Investor Day with that mid-teens ARR growth and mid-teens revenue growth. So, again, I think we're in line with the prior guide and in line with our multi-year model that we put out there.

Perfect. Fair enough. And then, Rob, you were just touching on this, but I'm just thinking about how you monetize some of the capabilities you're bringing. You're maybe passing through tokens. I don't know if there's a margin there, but maybe you're hoping to win new logos from competitors, new people entering an ecosystem because the capabilities are bigger and easier. I wonder if you could just talk about what you see as the biggest opportunities as your capabilities expand.

Rob, the frame I have on Scrum on monetization starts with value delivery and value capture. So the extent to which we're creating positive outcomes and positive ROI for our customers, we backwards integrate from that into then what would be the fair share for our value capture out of that. So we're mostly focused on the AI capabilities we can create for ourselves on leveraging the Trimble platform and the unique data set and scope and breadth and depth that we have globally. In doing so, we believe, yes, that we can capture new addressable market. We think we can take market share over time. I mentioned three different types of motions, monetization motions in answering that last question. Another one would be if you think about the announcement we made with SketchUp and Claude a few days ago and the integration there is, you know, another motion we see where we can monetize is by creating new users, creating new customers, expanding that addressable market with Claude users who weren't already SketchUp users. So by creating models out of Claude, you need to bring those into a SketchUp model to be able to do more with that. So we'll watch that to see if that's another avenue by which we can gain new customers. So we see opportunities to increase the size of the addressable market. We see opportunities to monetize through our fair share capture of the value of an ROI that we deliver to our customers. And we'll see over time how that plays out into market share.

Your next question comes from the line of Jason Salino with KeyBank Capital Markets. Your line is open. Please go ahead.

Hey, great. Thanks for taking my question. Rob, to that point, you know, on that SketchUp, Claude, you know, partnership that you have, you know, it sounds like the goal is to maybe try to convert, you know, Claude users to SketchUp users, because I imagine they'll need, you know, SketchUp seat. Is there any consumption, you know, credits, you know, you were talking about aligned with this partnership, or is it more, you know, on the license component? And then it wasn't lost on me that, you know, you were one of the only, you know, initial partners with this initial announcement. You know, there's one other, but, you know, could this, is this a table stakes kind of feature? You know, how do you think the, you know, partnerships with the frontier models kind of evolve for you and kind of the markets?

Well, good morning, Jason. Thanks for the questions. You know, I think that this is going to be more table stakes to have different motions and way to reach the market. And we embrace that. So expect to see more from us across the portfolio. You know, that's one example where you can start with the modeling in Claude. I flipped that around the inverse, you know, what we launched in Q4. was SketchUp AI, where you can do that, what we call vibe modeling, natural language prompts, within SketchUp itself to do the modeling. So you want to offer it in multiple avenues, and we'll see going more, I call it atomic level, at the capabilities. We want to be able to do that in Trimble Connect, for example, off of our own agentic AI platform. So multiple paths to market. We're learning a lot. We're learning a lot internally. We'll learn a lot by following our customers and how they use it. We'll learn the motions and, I'd say, optimize the motions of how to convert users and then to bring them into the Trimble ecosystem. And once you're in that ecosystem, let's say if you've done a model through Cloud, and then I talked about in the prepared remarks, if you want to do rendering or daylight analysis on that, you know, that creates capabilities for us to upsell and deliver more value to the customers once they're coming into SketchUp. So coming at it from multiple angles, I do think it's table stakes that we're engaged on a number of levels. And I'm really proud of the team for the entrepreneurial spirit they're displaying. They're really, really going after it.

Okay. And then I might have missed it, but, you know, the field services strength in the quarter, I'm curious if If any of this was, you know, demand that was pulled, pulled forward might not be the right word, but maybe deals had closed, you know, earlier than expected. It's just I look at, you know, high oil prices, high memory prices. I wonder, you know, if clients are trying to maybe get ahead of some of those things.

Good question, Jason. So within field systems, the demand was, strong intrinsically in the quarter, so we saw no pull forward in the quarter whatsoever. The two pillars of strength in the quarter, first ones in civil construction, that really has just been continuing the trend of the last few years. I know you were at Klan Expo. You saw our booth. Trumbull was on 24 other OEM partner booths at ConExpo. The level of innovation the team continues to deliver extensibility for swing booms on excavators, ground penetrating radar integrated into machine control is impressive to see reaching the machine types like compact track loaders, new OEM partnerships, new go-to-market partnerships with their Trimble technology outlets. The sum of activity is creating the demand from the product innovation side as well as the go-to-market reach. The survey team also had and delivered a strong quarter. I'd say also off the back of new platforms, data collector platforms, they've built and continue to go to market. Excellent. So really strong execution in the quarter. Really just a terrific grant for the team.

Your next question comes from the line of Neso Nang from Barenburg. Your line is open. Please go ahead.

Hi, good morning. Thanks for taking my question too, if I may. The first one, if I could start with the ACO. You've talked about the strength in your Trimble Connection, Trimble Construction 1 and Trimble Connect outside of the US. I was wondering if any highlights that you could call out that's really driving that up for cross-field motion as well. And then in the regions outside of North America, if you could maybe talk a little bit about the competitive dynamics that you were seeing as well, that would be really helpful. Thank you.

Rob Stinson, M.D.: : Hey, good morning. This is Rob. I'll take the question. So with With respect to terminal construction one, we launched the capabilities in Asia Pacific in the quarter. Still, it's obviously still early as a result of that, but that to me is a real highlight because we've seen the positive benefits of that through North America and Europe. Within Europe, we brought project site to Europe in the last few, in the last couple of quarters. The team is doing a really nice job starting to take that to market. In fact, I think the European growth was even faster than the North American growth in the quarter, and that would be indicative of the cross-sell and up-sell motion. Competitively, this is a unique set of capabilities we have at Trimble inside of that TC1 offering the breadth and depth of what we can bring to our customers, much less when we now intersect what we can do with field systems. and AECO. So uniquely positioned at a competitive standpoint, strong highlights that, to me, with the cross-sell and up-sell that translated into the strength, not only at the ARR and revenue beat, but also the bookings that support that ongoing growth here for the rest of the year.

That's really helpful. Thank you. My second question is about around the SketchUp to cloud connector. Really exciting. I think someone's already flagged it as well. Only a few software vendors follow this approach in this design software space. I guess I was just thinking more in terms of risk. I was wondering, you know, how would it work in terms of the data created? in SketchUp through one of the users coming through Claude. Does Anthropic, does it have access to that data? And is it any possibility that they might be able to replicate some of the SketchUp features through the data access that they might have going forward? Or is it something that maybe we shouldn't worry about it at all?

I don't see a near-term concern on that relative to what Claude or another LLM provider could do in that respect. What we like about it is, in fact, we see more opportunity to expand the addressable market for people who are not Trimble customers today. What they have to do to be able to use the service is to create a Trimble identity. So that's important so we can actually know who the user is. So we believe we can capture customers and users who haven't used the tool before. So we've seen that opportunity to expand the size of the addressable market. And it becomes relatively easy to do that modeling because you're doing so through text prompts in order to create that model. So then our opportunity then from a downstream monetization play is to create new SketchUp users and then to upsell those SketchUp users into inside, excuse me, the terminal construction one offering.

Your next question comes from the line of Jerry Revich with Wells Fargo. Your line is open. Please go ahead.

Yes, hi. Good morning, everyone. Rob, I wonder if we could just talk about just a minute on all of the data that you folks have and the value of bringing that together using the AI tools. Is there a way to quantify in terms of the number of projects that you folks have in the system, et cetera, just to build comfort around the ability to essentially leverage AI to drive incremental ARR as opposed to the risk factors that everybody's looking at?

Hey, good morning, Jerry. You know, you've heard me talk before about trillions, billions, millions, and thousands, trillions of dollars of construction run through Trimble today, tens of billions of freight run through Trimble. We have millions of users of our software and hundreds of thousands of instruments, machines in the real physical world operate on Trimble. That is singularly unique. If we talk about, I'll double click within that and we take Trimble Connect, which provides that single source of truth, create that digital twin between the physical and digital Today, inside of Trimble Connect, more than 30 million projects have been created. There's been over 50 million users in Trimble Connect since inception. We have thousands of integrations, third-party integrations, into the individual applications we have across Trimble. We have over 130 extensions, integrations that have been created inside our Trimble marketplace, which is part of Trimble Connect. In fact, at the mentions at our user conference in November, which we'd love to see you and the community attend, we're actually going to hold our first developer conference as part of that. So you take this unique set of proprietary data, the density of that data, this is singularly unique, creating the ecosystem and the partner network to build upon this is why we see such an opportunity for for AI to be a logical extension of our Connect and Scale strategy, really not even a separate initiative. So we really think there's a lot of compelling aspects here for us and for our customers.

Super. And then from a margin standpoint, I was really impressed with transportation and logistics performance in the quarter. I don't know if the margin's exceeded your internal plan, but if you could just unpack the drivers of margins in the quarter, and I think typically you do see a step up in margins in the business 2Q versus 1Q, and I just want to make sure there's nothing in the base that's extraordinary as we think about the bridge in that business from here.

Hey, Jerry, it's Phil. Yeah, thanks for the question. I'm really pleased with the team. As we lap ourselves, we had the mobility divestiture last year, and so there were some stranded costs within that business that the team had worked on throughout the year. And so really, really happy with the performance. We're guiding to about the same rate at the end of the year, throughout the year, 24%. So I think you can view this as structural as we go throughout the year.

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

Hi, good morning. Very nice results. Congrats on that. So this is a question from me who's not a designer and I don't use SketchUp or Claude to draw 3D models. So I apologize for the simplistic nature of the question. But about the Claude partnership, it sounds very interesting and I appreciate the TAM increased potential, but Could you sort of explain how do you have confidence that cloud users would eventually migrate to using SketchUp instead of just staying on cloud that probably keeps getting better at giving customized designs on the platform? Or maybe a better way to ask is what's there in SketchUp now that cloud doesn't and will not be able to help with?

Hey, Tammy. Good morning. Thanks for the question. And I will be your personal sales rep to sell you a license of SketchUp and make you a user. Until then, imagine going to Claude and through natural language prompting, you don't have to be a user of the underlying modeling technology. So you're new to the software and you want to create a model. You can do so through just typing the prompt of what you want. If you want a new patio for the backyard and it's of a certain size and, let's say, dimensionality and style that you want to put in there. OK, so the squad's going to deliver you a model. We believe that that's not enough. You need to do something with that model. If you just wanted a picture of the model, you could create that in Cloud, but that's not actually going to translate into the workflow. What you then do is if you've created that design of that model in Cloud, you bring it into the SketchUp ecosystem in order to iterate on it. Because the one thing we know with the design is it's not static. You don't just do a prompt and then you're done. You want to iterate on that. You want to collaborate on that. Like one of the real powers of SketchUp is the ability to have multi-user collaboration. And think about the coordination that an architect has with an engineer, much less a contractor or the owner. You're not going to do that through the LLM. You're doing that through SketchUp and then leveraging Trimble Connect to drive that collaboration. And when you want to perform that professional grade analysis and you want to do the energy modeling of that or the rendering on that model, you're going to come into the authoring application or the authoring tool, which is SketchUp, to do that. So I go back to the ability to have started, and Claude, in this example, is we're lowering the barrier to entry to create that next generation of AI-first professionals who can then bring those models into SketchUp for for the next iterations of that. So I hope that helps you a little bit understand that, is that it's insufficient to complete a workflow with that initial model that you've created in an LLM. I agree with, I think, the assertion you're making is that it's going to get better over time. And you can imagine then we'll put more capabilities into those engines up front over time. And we want to bring more Trimble capabilities throughout our ecosystem that direction as well. And so much of that, again, I see as an ability to create new users for our tools. And remember that within the tools we have themselves, whether it's SketchUp or every other software application we're delivering at Trimble, we also have AI inside of those tools. So think of Claude inside AI, Claude inside of SketchUp as opposed to SketchUp inside of Claude. We work it from multiple angles.

That is extremely helpful. Thank you so much and my second question. I wanted to double click on fill systems. The year started off really strong, but you're still targeting low to mid single digit organic growth. Can you remind us what you're expecting for two Q and. To get to your full year guide, we we need to see a lot of slow down versus the first quarter number you had so. Is it conservatism? Are you seeing an impact from the Iran war in 2Q and you expect that to stay for the rest of the year? So any color on fuel systems?

Yeah. Hey, Tammy, it's Phil. I'd say, you know, the first quarter obviously reflected what we saw last year, particularly in civil construction. So the market continues to be strong, particularly in that business. Rob mentioned geospatial performed well in the first quarter. As we start to think about the rest of the year in that business, this is the one that has the least visibility with the hardware particularly. And we start to get into last year, we had really strong second half of the year. So part of this is the year-over-year, the comps. And part of this is the Middle East, getting around the tariff policy, just some of the macros. I'd say You know, so we've incorporated the risk, but we also incorporate the opportunities as we think about the guide and where the strength of the market is. At this point, again, we started the year very well, but we'll continue to keep an eye on it on market and update you in a few months.

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

Hey guys, thanks for sneaking me in. Congrats on a good quarter and just two quick ones for me. The first one is kind of a follow up question. So I think the question a lot of my peers have been trying to ask you on the call so far, and I think that's around the Claude integration announcement. And I think what a lot of people are trying to understand is just as you, you know, as you integrate more and more with Claude, you are increasing your users productivity. And I think people are trying to understand how are you guys setting up yourselves to capture that increase in productivity uh that the cloud connector will provide your average uh sketchup user and i think the second question that i have uh just a quick follow-up is uh on that last field system comment that you mentioned is it fair to assume that there is more conservatism in the field systems outlook uh today than there was 90 days ago given everything that's going on in the world and the visibility that you just spoke

Hey, Josh, good morning. It's Rob. I'll take both of those. With respect to field systems, I'd say what I want you to assume is that we've actually increased the guide for the year. So I want you to see that we don't see that anything has fundamentally changed in the market. We're three months, from a reporting standpoint, we're three months into the year. We've got nine more to go. Let's see where things are, how they're shaking out in three months from now. So no fundamental change in view in the field systems business. In fact, if anything, you could say it's better because of the raise, some of the raise we put through. That's what you need to hear on that one. With respect to Claude and as we integrate Trimble capabilities with LLMs and increase our users' productivity, What I want you to hear there is we start by increasing our users' productivity within the tools they already use from us today. That's the primary place we start. When I think about going the other way and when we're working with Claude with this SketchUp example or other examples that I think you'll see in time to come, we think of those as opportunities to create new users. We think of that as opportunities for our existing users to start, if that's where they want to start, and then bring those models into SketchUp. I just can't stress enough that for the professional user, let's separate maybe the professional user from the consumer user of SketchUp. At that professional user level, you need to bring those files into our ecosystem. If you're going to iterate, if you're going to collaborate, and if you're going to perform professional grade analysis. That's the difference between the professional user and, let's say, the maker, the consumer user of SketchUp. I totally embrace SketchUp consumers. That is the bulk of the user count that we have in that community, and it creates that brand and the content that we have in it. We really monetize at the professional grade level. That is a fundamentally different set of workflow, and hopefully that helps answer the question.

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

Hey, good morning, guys. I'm going to continue on the SketchUp and Claude line of questioning. So a few for me. So I guess, first of all, from an economic standpoint, assuming you guys price for this ad feature, how do you guys think about the split up between what Trimble gets versus what Claude gets? Who owns the data? And I'm just trying to understand, like, how does this compress the learning curve going to more of an agentic approach? And maybe lastly, you know, this is, you know, SketchUp was kind of like the first deployment, but where else do you see this sort of, you know, relationship evolving across your different product sets?

Hey, good morning, Chad. This is Rob. I'll take that. Okay, there's a few topics in there. Hopefully I can capture them here. The data is the customer's data. So I always want to orient starting there. And that customer is creating a model, an example that we talked about today. That model is downloadable, and you can bring it into SketchUp. From an economic standpoint, let me highlight two different motions we have. One motion is the announcement we had in Q4 of last year where we have SketchUp AI. It's an add-on subscription to the SketchUp license You already have. And with that SketchUp AI license, it's only $11.99 a month for that add-on license. You get a set of credits for it or tokens, but think of it as credits that you get. So from that economic standpoint, that is directly to Trimble. It's all Trimble, and obviously there's a variable cost when we're on the consumption side of that. But we built that into the pricing model. What we are asking about with Claude, if you start in Claude and you create that model that's downloadable, what we really see is the economic model there is to create users downstream. That's the way I would think about that. And how can we create those users downstream? Well, at least today, we start by requiring them to have a Trimble ID. And when you have that Trimble ID, that's how you're able to download that SketchUp model and then bring it into and to SketchUp as the authoring tool. So there's multiple paths to monetization. I think about in one of the first, I think it was the second question we got this morning. When we talk about tokens, I see that as a tactic. That's one of multiple tactics that we have. We'll have tactics of monetization where we bundle AI capabilities into the good, better, best offerings Clearly, we want to upsell customers into the better and the best. We'll provide a higher value. We'll monetize there. We'll monetize purely as standalone transaction or consumption. And one of the reasons we were attracted to the Transporian acquisition when we did it is there's well over $100 million of transactional revenue that comes from that business. We don't have to imagine a world with transactional revenue. We have a world with transactional or consumption-based revenue. And inside of that, we've got autonomous, which in other words, those are AI-first products that we're monetizing on a consumption-based level. So we're open to multiple doors and avenues as the tactics to monetize the capabilities that we're bringing to market. And we think we can do so in a way that expands the size of the addressable market while we're doing it. And all of this is early days, and we see it as virtue. that we're out there in the market, that we're testing, that we're learning, and that we're leading.

Great. That's helpful. So second question, can you talk about what Trimble's doing to shift from like the, I guess, like the co-pilot or assistant-based AI to more of an autonomous workflow product? I guess one thing I'm trying to hit at is, you know, do you have everything in your tech stack inside the four walls of Trimble, or do you need to go out and acquire some of those capabilities? And then, you know, where is, you know, some of the low-hanging fruit today to deploy autonomous workflow in your products?

Chad, let me come at that from a couple of different angles. It's an interesting question. In terms of our own agentic AI development, we have multiple teams in the company that are working on it, but really twofold. One from the engineering and construction, which is the intersection of field systems and ACO, and the second in transportation. So each of those teams have agentic AI teams, and we believe we don't need to go acquire, let's say, an agentic AI platform because we're doing it ourselves. We want to do that organically. Now, the document crunch example is one where we acquired to create a new category, in this case, an AI-powered risk management category, and where we see through document crunch that we can link contract intelligence and compliance automation and link that with the project management that we deliver at Trimble, with estimating that we deliver at Trimble, and with the ERP workflows we have at Trimble. That's singularly unique. It's bespoke. It's domain-specific. That creates a new category. We're open to that. The last example I'll give you is really coming more at it from a field systems perspective, and I'm going to maybe take a play on the word of autonomy. You know, Trimble has been an autonomy company for decades, We happen to call it machine control and guidance. It's between level two and three autonomy today. We already are an autonomy company. And we see what underlies that as a grade control engine. And we see autonomy as a feature extension of the grade control engine that we take to market today. So we will, on our own, continue to work up the stack in autonomy because we see autonomy as a progressive series of automation. and we'll create extensibility on top of our great control engine platform. And that's how we reach these new categories, whether they're safety applications, whether they're ground-penetrating radar applications, whether they're new machine-type integrations, a lot of which we can believe we can deliver when we focus on the underlying platform and extensibility of that.

Your next question comes from the line of Clark Jeffries with Piper Sandler. Your line is open. Please go ahead.

Hello. Thank you for taking the question. And I apologize if I missed this, but I believe reported ARR for AECO was 17% versus the 14% organic. Was there something driving that? I'd assume document country is going to be in a future quarter when that closes. So am I missing something there?

Hey, Clark. Phil, no, the difference is the FX. There's still a benefit with the weaker dollar for the first quarter of this year. So that's a difference.

Understood. Okay. And then second question, maybe just following up on one of the questions around operating margin. I mean, it does seem pretty exceptional what happened in the ECO and transportation logistics from a gross margin and operating margin perspective. Just maybe could we talk about the OPEX timing that did affect field systems? To what extent is that one time and may resolve itself in future quarters in terms of not have that lump of OPEX? Anything to kind of speak about whether or not we're really getting to a point where the leverage of the recurring revenue across these portfolios are starting to really pick up on the margin benefit here? Thanks.

Yeah, hey, Clark, Phil again. Yeah, so at the company level, really good progress on the margin expansion. And what I really like about the company model is there's an and in there. We're able to expand margins and we're able to reinvest in the growth. So I think the teams have done really well. As I think about, I think you asked a specific question in field systems. We did have some, ConExpo, Rob had mentioned trade shows in Q1. And so we've had some additional expenses, and that's where I was saying some of the timing when I mentioned that. There's a couple other things on the innovation side, and particularly in FedRAMP for our certification that we're investing in. And what I mentioned about the investing in future growth, that's one of the additional expenses. But if you look at what we guided for the year, we ended up in Q1 about 28.8% on OI, and we're guiding toward 31% for the rest of the year. So we see improvements.

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

Hi. Good morning. I wanted to start out with document crunch. Can you give us a sense of how you can cross all this to your base? And maybe what does the economics sort of look like in terms of that incremental add-on?

Hey, Jonathan. Good morning. So, you know, I think as you heard me say in the prepared remarks, it creates a new high-value category for us in AI-powered risk management. So think about the billions of construction that runs through our ERP today and the tens of millions of projects we have in Trimble Connect, the project management capabilities. Think about the tools we have in the field. There's an enormous amount of data when we think about linking that contract intelligence and compliance automation that comes from document crunch into those project management estimating and ERP workflows that we already have today. And the value proposition is pretty clear in terms of the risk that comes with the construction industry, which I think is relatively well understood. Particularly in North America, it's a litigious industry industry. claims are high dollars in an industry that happens to already be low margin. So this goes well beyond any kind of document review in order to really power that risk management for our customers. So now, okay, with that value proposition, how we take it to market, we'll bundle that inside of Trimble Construction 1. Out of the gate, we We go about it through, I'll call it traditional cross-selling, and we'll build the motions to more tightly integrate it with Trimble Construction One. In other words, it's on one piece of paper coming from Trimble. And we like what we see out of the gate relative to customer inquiry in terms of the press that the deal has generated. It's getting nice coverage. Our selling teams are excited to have it, and customers are telling us this is exactly where they want to go. So that intersection of got to have the right product, meet the right go-to-market motion, feeling good about this one, and stay tuned. We'll keep you updated how it's going.

Great. And just as a quick follow-up, with the use of AI potentially maybe displacing some workers, Do you see any threat to any of the seed-based licensing models that you have as well, or is there the opportunity to shift to maybe more value-based pricing over time? Thank you.

You know, we go back to that monetization conversation we've had in the prepared remarks and through some of the Q&A. That's one of the reasons you see us talking about hybrid models. We do have a belief that we'll see more hybrid models, hybrid at the intersection of the named user license and consumption. At the same time, we have some consumption only businesses and capabilities as well. So there's multiple tactics that we can deploy in that respect. Our industry today is not demand constrained. Our customers have significant backlog. There's a labor shortage. We're hundreds of thousands of workers short in North America. alone, so in the near term, it's hard to see any kind of fundamental worker displacement. We'll always want to anchor to what's the value that we're delivering for our customers, and then to me, back into the monetization, which is a tactic. We're not shelfware. We're not a nice-to-have thing that you use every once in a while. We are fundamental to our system, to our customers' work. If you're a a worker out in the field, you're using our tools all day long. If you're a project manager, you're managing an ERP, you're a civil designer, you're a mechanical estimator, you're an architect, you're working inside of Trimble all day long. So as long as we've got these labor shortages, as long as we continue to provide the value, I feel good about our ability to continue to drive the revenue of the business.

Your next question comes from the line of Guy Hardwick with Barclays. Your line is open. Please go ahead.

Hi, good morning. Hi, Rob, Phil, and Michael. Maybe I missed this earlier. Apologies if I did. But it looks like you beat your Q1 guidance for revenues for about $35 million, and you've raised your four-year guidance for revenues by only $15 million. And now look at the supplementary information that looks like Q1 and 26 is going to be a higher proportion of total revenue and you can half by that half a point for both quarters. So is it really a pull forward you saw in Q1? But at this point, you don't feel you can raise the full year as much as you beat in the first quarter. And then that's the first part of my question. The second part, you also took the top end of your EBITDA guidance down 20 bps. I was just wondering, was that really mixed driven or was there anything else for reason for that?

Hey, good morning, Guy. This is Rob. I'll add color to what Phil has already talked about in the prepared remarks and in the Q&A. Answered, no pull forward in the quarter. Really, by our own policy, I do not like to raise guidance after the first quarter to be three months into the year. That's the standard way I want to approach it. Given the strength of that Q1, we did flow $15 million of that into the year. I'm thinking about it from the perspective of the year. I feel good about where we are positioned. I feel good about where we're positioned now. I feel good about the rest of the year. As we all know, there's volatility and uncertainty out in the world. We'll update you in three months where we are there. So really just think about it as there's a beat and a raise and it's within the frame of wanting to hold that model for the year.

And just as a follow-up, you're getting very close to 2027 and the potential for meeting some of the 2027 targets this year, potentially on the EVDA margin line. You're probably getting questions from investors about future targets. So what could we hear about 2028 targets or beyond? Is that something you would look at maybe later this year?

A good question. I think that's important to reiterate that the 3-4-30 model, 3 billion ARR, 4 billion revenue, 30% op margins in 2027. Look at the numbers that are in the guide that Phil put forward, and we are well on track for that. Play forward operating levers on top of revenue growth into 2027, and it stands to reason that, you know, why we are affirming our path to that 2027 model. We're continuing to deliver and balance the short-term and the long-term progression of Trimble. We're not yet ready to talk about 2028 or to set a frame on that. We haven't yet even thought about when would be the next logical investor day to have that we think it would be smart to put something together for our user conference in November to invite the analyst community investors to see Trimble in action. at Trimble Dimensions in Las Vegas in November. See that, and I think you can get renewed appreciation for the uniqueness and the quality of what we're doing and why we would continue to have conviction that 2028 would continue the path of growth and margin expansion that we're delivering today.

And with that, we have reached the end of the Q&A session. This concludes today's call. Thank you all for attending. You may now disconnect.