Trimble Inc. (TRMB) Q3 2022 Earnings Call Transcript

Trimble Inc. (NASDAQ:TRMB) Q3 2022 Earnings Conference Call November 2, 2022 8:00 AM ET

Company Participants

Rob Painter - Chief Executive Officer

David Barnes - Chief Financial Officer

Michael Leyba - Investor Relations

Conference Call Participants

Jerry Revich - Goldman Sachs

Rob Wertheimer - Melius Research

Kristen Owen - Oppenheimer

Tami Zakaria - JP Morgan

Erik Lapinski - Morgan Stanley

Jason Celino - KeyBanc Capital Markets

Gal Munda - Wolfe Research

Jonathan Ho - William Blair

Chad Dillard - Bernstein

Rob Mason - Baird

Operator

Good morning. My name is Chris and I will your conference operator today. At this time, I would like to welcome everyone to the Trimble Third Quarter 2022 Results Conference Call. All lines have been placed on mute to prevent any background noise. [Operator Instructions] Thank you.

Rob Painter, Chief Executive Officer, you may begin.

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 Page 2 with our key messages. Total revenue in the quarter was $885 million, up 6%, yet short of our own higher expectations. Annualized recurring revenue met our expectations and grew 16% to a record level of $1.55 billion. Gross margin finished at a record level of 60.9%, exceeding our expectations. ARR and gross margin are the two-highlight metrics of the quarter.

Software, services, and recurring revenue comprised 60% of revenue in the quarter, and 57% on a trailing 12-month basis. EBITDA margins of 25.8% and earnings per share of $0.66 also exceeded our expectations in the quarter. While ARR performed extraordinarily well in the quarter, demand for hardware and associated software fell short, especially late in the quarter.

We expect this will continue through the fourth quarter. While detecting the signal through the noise is difficult at the moment, we attribute the weaker hardware demand to two factors. First, we see a relative weakening of overall sentiment, especially in Europe and in other regions negatively impacted by the strength of the U.S. dollar.

Second, we see our dealers, in aggregate, moderating their inventory levels in the back half of the year. This reflects their current sentiment, and also factors in some good news from our supply chains, which began to ease up and offer shorter lead times on our products. We see many parts of the global economy through the industries we serve. If we look at the overall economic indicators, I’d say that, in aggregate, the indicators went from great to good.