Trimble : Rob Painter (CEO) Fireside Chat at Bernstein Strategic Decisions Conference (Rob Painter (CEO) Fireside Chat Transcript)

Published: 2025-05-29 13:09:05 ET TRMB

Published on 05/29/2025 at 13:09

Chad Dillard: Hi, good afternoon, everyone. Is it afternoon? It is. All right. Well, thank you for joining us. My name is Chad Dillard. I'm the lead analyst here at Bernstein covering the machinery sector as well as electrical infrastructure. And today I'm really pleased to have Trimble on the stage with me, and joining me from Trimble is the CEO, Rob Painter.

Thanks for having us.

So the format of today, we're just going to have a fireside chat. We'll begin with Rob just giving a real brief overview of Trimble. And if you have any questions from the audience, there should be a link floating around, entering your question on Pigeonhole, and I'll make sure to get those questions answered. So maybe I'll pass it over to you, Rob, to give a quick intro on Trimble, and then we'll dive right in.

Rob Painter: Yes, feed the world, move the world, build the world. That's the why of Trimble. That's the purpose of Trimble. Company was founded in 1978 by Charlie Trimble. I'm the third CEO in the 47-year history of the company.

We're applying technologies, really geospatial-centric technologies, in end markets such as engineering, construction, and transportation and logistics. We've had a big transformation in the business over the last few years, but we'll come to that. Today, traded on the S&P 500, very technology forward.

Chad Dillard: Great. So we were just talking before it started that you've been at the helm for 5 years.

It's been quite the journey. So I'd love to get your sense for how--maybe you could describe to everybody just what the path has been and talk about what could potentially be next as the company evolves further.

Rob Painter: Yes. So I have a 19-year history with the company, growing up through many parts of the business, particularly in the construction technology side of the company, with CFO from 2016 to 2019. So a unique vantage point coming into the role that I came into in 2020 and absolute privilege to be able to do this job and to be able to be in an event like this.

Over the last 5 years, we've had a foundational transformation of the business. And just to put some quant around the last 5 years, we've moved from about 50% software company

5 years ago to 75% software. We moved from one-third ARR as a percent of total revenue to two-thirds percent. Today we sit at over $2.1 billion of ARR that grew 17% organically in the first quarter. That's pretty rare territory.

We've had a structural improvement in the gross margins, 1,200-basis-point increase in gross margins in the last 5 years, around the 70% gross margin mark today. That's translated into a 500-basis-point improvement in EBITDA over that timeframe.

We've spent a lot of time simplifying and focusing the business and the portfolio. We've done 23 divestitures over the last 5 years. That amount's against seven acquisitions over that same timeframe. So the simplification in focus, this has provided clarity into the business. Durability shows up in that business model. And by the way, we're also very asset light. That tends to sometimes be lost in the story.

We're on negative working capital, CapEx less than 1% of revenue. So that's the durability meets the momentum that we have in the business. And we see that playing through the results that we have in the company. Coming out of that strength we had in 2024 played into a strong set of first quarter numbers.

So our strategy, we call it connect and scale. Connect--connect users, data, stakeholder across these industry lifecycles we're serving. Connect them in a way that's transformed our business models, like actually how we productize, how we've converted more to subscription models. To enable that and scale is fundamentally about making ourselves easier to do business with.

Chad Dillard: So now let me narrow it down to the last 2 years or so. So since then, you've made some radical changes on your go-to-market strategy, thinking about Trimble Construction One, your sales force reorganization, a few other things. So I'd love for you to talk about some of the results that you're seeing and more specifically, talk about what you can do now that you couldn't before.

Rob Painter: Okay, so there's a few things we can unpack out of that. So I'll narrow in on our AECO segments. We have three reporting segments today. That's been another part of our simplification is being able to simplify how we present to the external world. Actually, you could say how we run the business as well.

Two of the three are engineering construction focused. So what we call field systems is primarily like the hardware-centric businesses we have at Trimble. And AECO, if you don't know the acronym, architects, engineers, construction, and owners. When we think about these last couple of years, and I'll center on the AECO software business here for the next few minutes. Think about, and by the way, this business must be about $1.4 billion ARRs about the guide that we have for that segment this year, so a scaled business.

We believe the magic happens at the intersection of product and go-to-market. So on the product side, we've greatly simplified how we think about the solutions we have. We do a lot of things at Trimble. We see that as virtue within the industries that we serve. And at the same time, you have to make that accessible by the customers to unlock potential.

I see the world a lot through bundles. So think solution offerings, think collections, think suites of technology, think prepackaged offerings. And so we have a commercial framework we call Trimble Construction One. We have over 20 purpose-built bespoke bundles that we can take to different personas within the market that removes friction from a productization perspective. We intersect that with the go-to-market work.

By the way, when you simplify the offerings you take to market, that makes it easier for the sellers to actually sell, taking friction away from them. And at the level of go-to-market transformation, we moved to named account selling models. So in the past, we might have sent multiple salespeople in to talk to Dillard Construction. Today we have one person who owns that account, Dillard Construction, who's tasked with bringing the best of Trimble to that.

So it's clarity in how we go to market. It's simplification in how we productize. It's simplification as well and expansion through the transition of business models, moving from the perpetual to the subscription. Everywhere we've done that at Trimble, we've seen expansion of the TAM come alongside of that. And that's narrowed the valleys through any kind of transitions we've had as the expansion of the markets. And then further narrowed any valleys because as we've moved into those transitions and moved to selling product bundles, we've actually been able generally to increase, let's say, the pricing and the value to the customers through that model. So the intersection of product and go-to-market is everything and enabled by the underlying systems and processes and people.

Chad Dillard: Got you. So I think you talked about excluding your architecture business. I think you have somewhere around 60,000 clients or so, 30,000 of which have either two or fewer instances of your software.

Rob Painter: Good memory.

Chad Dillard: So how do you think about expanding that? You know, taking two to three, three to four, and then for that incremental dollar of revenue that you generate from there, what does that look like from returns or a margin perspective? Is it better than what it was before?

Rob Painter: So there's a few questions within that question. I'll come at it this way. In that construction software business, we see $1 billion of cross-sell opportunity that sits within the portfolio. Clearly, that looks like moving customers from two solutions to three, three to four, four to five, and dot-dot-dot. And we see an enormous greenfield opportunity, as evidenced by the numbers that you articulated and the pattern recognition or the heuristics you can run against our own customer database. I say we've got the ability now to really access that to understand a certain profile customer, how they benefit when they're using multiple technologies from Trimble. And when you understand that pattern recognition, then you can just simply query how many other companies look like this.

That's the underlying data.

From that analysis, let's call it top-down analysis, then you understand how to create the product offerings to best suit that customer base, and then you can align your go-to-market practices. Also the marketing side--not just the sales, but the marketing motions to

go tap into that--how you actually reach and create pipeline. All right, so those are all important factors and how you go after that large cross-sell and upsell opportunity.

And I look at the 19% growth, ARR growth, we had in the first quarter. It's not 19% on a small base. It's 19% on over $1 billion, well over $1 billion, just in that segment on the loan. So this is happening at scale.

Now ARR is like the scoreboard. What's the thing that happens before ARR? It's the bookings. And we'll think about ACV bookings, annual contract value bookings that drive that. And within those ACV bookings, the new bookings that drive the continued growth, we see about two-thirds of those coming from existing customers and one-third from our new customers. So we can see it in the data that we have that the motions are working and allow us to start, be chipping away at that opportunity to serve the market to its full potential and unlock the value that the customers are asking us to deliver.

Chad Dillard: Got you. So on that $1 billion, how do you think about the adoption curve and when you hit that full run rate of $1 billion across all?

Rob Painter: Okay, so now we'll be breaking into aspects of the time curve. So we held an investor day in December here in the city, and we put forward a 3-year model for the company where we believe we can continue to grow that top line ARR in the teens for the foreseeable future, given what we see in front of us. And that is just working at a slice of that $1 billion opportunity within construction. I believe by the time that we've unlocked the full potential of that $1 billion is that there's another compelling set of numbers, especially in the data in an AI-forward world, given the unique corpus of data that we have access to at Trimble. Completing the thought probably from the last question, too, at the business model level, we for sure think about the incremental margins that we can generate.

So we seek to continue to deliver profitable growth as we grow that. As, obviously, the gross margin profile of the company has increased, that provides a set of degrees, I should say, of freedom, and that all baked into the incrementals that we set a 30% to 40% range of incrementals over the next 3 years. So do that math playing it forward, call it 100 BPS-ish of gross margin and the same on the bottom line improvement as a baseline expectation.

Chad Dillard: So let's talk a little bit more about products. Let's stay with the AECO business. So you've talked about five core sets of software suites. Can you give some hard examples on how each of those deliver greater productivity for the customers that you serve?

Rob Painter: Yes. So let's first look at the quantum of what we're doing in this AECO software business, repeating at architects, engineers, construction owners. Each one of those businesses independently has over $200 million of ARR. So this is a pretty diverse set of businesses that we have that are each scaled capabilities on their own. I think that's important context to have. Okay, before I go further, repeat the question.

Chad Dillard: Yes, so just maybe you can talk about some of the hard examples. If you look over the five software suites, which is how it drives productivity.

Rob Painter: Okay, so if we take each one of those pieces, I tend to think of a shopping mall analogy is the one that I'll tend to use. And if you think of a shopping mall, you have anchor tenants in the mall and then we have the retail fill-in, right? So I think we can all get that visual. And then if you keep that visual, you have the kiosks that can be in the middle of the hallway in the shopping mall. And that to me represents in a way the portfolio that we have.

Okay, so what do I mean by that? Okay, the anchor tenants. For us that looks like ERP, construction ERP. It looks like construction project management. We are scaled in architecture and design. Conceptual design actually, really, is the capability through a product called SketchUp.

We're scaled--that ERP, by the way, comes from a business called Viewpoint that we had acquired a number of years ago. That's an important part of the whole nucleus of a Trimble Construction One offering. If I look in steel detailing engineering design analysis, Trimble tech less structures, steel and concrete. We have an anchor tenant in what we're doing for mechanical, electrical, plumbing contractors, from design, to estimating, to 3D content, to pricing engines that feed those estimating engines. This is an anchor tenant.

And for owners, we manage their capital programs. Over $1 trillion dollars of construction are managed through our capital program management that feeds that owner side. So those are the--to me, those represent the anchor tenants. And what our customers are trying to solve in construction are multifaceted. But ultimately they're looking to do their business better, faster, safer, cheaper, greener.

Construction runs on very thin margins. What we know is the data will tell us that 80% of projects are late and 40% are over budget. And in a room like this, if I ask people how many have ever done a construction project, most hands will go up. I say leave your hands up if that construction project was done flawlessly and on time and on budget, and I almost never see a hand that stays up.

So there's a visceral appreciation, usually, for the challenges that this industry faces and what digitization can bring when you drive communication, coordination, and collaboration into this industry. We're helping it digitize, thereby delivering the productivity at the intersection, really, of sustainability. This is the value proposition you get.

You're using our technology. This isn't shelfware. These are systems of record. This is software that you're using all day, every day, so very, very integral to how the business operates. Asterisk, doubly important if you're worried about a macro environment, then it helps to understand that we're the system of record, not the "nice to have." I call it the value delivery on those anchor tenants.

The retail fill-in, I call those smaller products that we have in each of that A, E, the C and the O. And that kiosk that I described in that shopping mall analogy, think of those as tuck-in acquisitions that we've done. Really, they may have been former companies. To us, we've seen them as features that fit into the broader product suites that we take to market.

Disclaimer

Trimble Inc. published this content on May 28, 2025, and is solely responsible for the information contained herein. Distributed via Public Technologies (PUBT), unedited and unaltered, on May 29, 2025 at 17:08 UTC.