Trimble Inc. (TRMB) Q2 2023 Earnings Call Transcript

For the period ending June 30, 2023

August 3, 2023 8:00 a.m. ET

Prepared Remarks

Questions and Answers

Call Participants

Prepared Remarks:

Operator

Thank you for standing by. My name is Maria, and I will be your conference operator today. At this time, I would like to welcome everyone to the Trimble Second Quarter 2023 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. [Operator Instructions] Thank you.

I would now like to turn the call over to Mr. Rob Painter, Chief Executive Officer. Mr. Painter, please go ahead.

Rob Painter

Welcome, everyone. Before I get started, our presentation is available on our website, and we ask that you refer to the safe harbor at the back. Our financial commentary today will reflect non-GAAP performance metrics, including organic growth comparisons which will relate to the corresponding period of last year, unless otherwise noted.

Let's begin on slide 2 with our key messages. Annualized recurring revenue is our key top line metric at Trimble. Our team, led by our construction software group, achieved 14% organic growth in the quarter, beating our internal expectations by 100 basis points. We now stand at a record $1.88 billion of ARR, which compares to $1.2 billion when we began our Connect and Scale journey in 2020.

ARR has doubled since 2018 and tripled since 2015. We are on track to achieve $2 billion of ARR by the end of the year, a remarkable figure made possible by the Trimble team who continues to work incredibly hard to execute on our customer-driven systems, process and business model transformation.

We delivered EBITDA margin of 25.3%, also slightly ahead of our expectations, which was driven by strong gross margin of 64.2%. For perspective, gross margin was 56.8% in 2015 and 58% in 2018. EPS at $0.64 and year-to-date free cash flow conversion rate to net income of nearly 100% demonstrates the power and potential of our asset-light business model.

Our revenue beat in the quarter is attributable to delivering a large federal government order in the geospatial business in the second quarter instead of the third quarter. For the year, we are holding our revenue guidance and raising EPS.

Moving to slide 3. Let's look at the progression of our Connect and Scale strategy through the lens of our reporting segments, beginning with Buildings & Infrastructure. The market backdrop remains generally favorable.

In North America, we see strength in infrastructure and non-residential construction. Customer backlogs remain healthy and technology helps to address the skilled worker shortage. By the numbers, ACV bookings accelerated on a sequential basis, and we achieved a record level of bookings in the quarter. ARR grew over 20%.