Trimble at Baird Conference: Strategic Shift to Solutions

On Wednesday, 12 November 2025, Trimble Inc. (NASDAQ:TRMB) presented at the Baird 55th Annual Global Industrial Conference, highlighting its strategic transformation from a product-focused company to a solutions provider. The discussion, led by CFO Phil Sawrinski, emphasized Trimble’s "Connect and Scale" strategy, focusing on workflow integration and recurring revenue. While the company showcased strong growth potential, it also acknowledged challenges such as macroeconomic uncertainties.

Key Takeaways

• Trimble’s recurring revenue now constitutes 65% of total revenue, enhancing future revenue visibility.
• The AECO segment shows significant growth potential with only 20% market penetration.
• The company is focusing on organic growth, tuck-in acquisitions, and returning capital to shareholders.
• AI is leveraged to enhance existing offerings, not as a new initiative.
• Trimble is expanding its go-to-market strategy geographically, starting in North America.

Financial Results

• Recurring revenue increased to 65% of total revenue.
• Software services and recurring revenue constitute almost 80% at the company level.
• The addressable market is valued at $72 billion, with only 25% penetration.
• AECO’s addressable market is just under $50 billion, with 20% penetration.
• Annual recurring revenue (ARR) is nearly $2.5 billion.
• Total revenue is just short of $3.6 billion.
• Gross margins exceed 70%.
• EBITDA has grown to nearly 29%, a 600 basis point increase since 2019.
• Earnings per share (EPS) growth is projected in the low to mid-teens.

Operational Updates

• The "Connect and Scale" strategy focuses on integrating workflows, data, and stakeholders.
• AECO business has shown high teens ARR growth for over 10 quarters.
• Cross-selling and up-selling in AECO present a $1 billion opportunity.
• Field Systems performance exceeded expectations, growing 8% in Q3.
• The joint venture with Caterpillar focuses on serving customers with mixed fleets.

Future Outlook

• Significant growth opportunities exist in under-penetrated markets, especially AECO.
• The company is expanding framework contracts and personas for cross-selling and up-selling.
• Investment priorities include maintaining growth, exploring faster growth opportunities, and improving internal infrastructure.
• Macroeconomic uncertainty may pose a headwind for hardware sales.

Q&A Highlights

• AI strategy is focused on leveraging existing domain knowledge and data.
• Confidence in AECO ARR growth due to a large addressable market and effective cross-selling/up-selling.
• The SMB market is addressed with tailored products and pricing, including ProjectSight’s free version.
• Anticipated low single-digit millions from U.S. government spending in the latter half of the year.
• Internal AI implementation is used for code generation and data synthesis to improve efficiency.

For more details, please refer to the full transcript below.

Full transcript - Baird 55th Annual Global Industrial Conference:

Unidentified speaker: Already on the clock, so.

Rob Mason, Senior Analyst: Hey, good morning. We’re going to go ahead and get started. I’m Rob Mason, Senior Analyst here that covers advanced industrial technology. That does include Trimble, which we’re very glad to have here. Phil Sawrinski, CFO, with us. Phil’s going to open with a few comments, and then we’ll go right to Q&A. I’ll hand it off to you, Phil.

Unidentified speaker: All right. Thanks, Rob. Good to be back here. This is my second or third year in a row. I’ll talk a little bit, give you an overview, forward-looking statements. You’ve seen those before. Let me start with a quick overview of Trimble. Some of you may be familiar with Trimble, but let me just give a quick backdrop. What do we do? Trimble, what we do is we transform. We talk about transforming the way the world works. What does that mean? We offer products and services in order to provide higher ROI to customers. When we think about ROI, we talk about safer, cheaper, greener. Safer, how can you run your operations in a better way to be safer? Cheaper, how can you be more efficient in your operations and what you do? Greener sustainability.

We think about doing things right the first time you go through. That saves greenhouse gas emissions, saves emissions. Talking a little bit about our history, because we have been on a bit of a transformative journey. When I started the company 16 years ago, we were a very product-focused company. We did a lot of acquisitions. We had best-in-class products. Over the years, we have transformed ourselves, and particularly probably in the last five years when we started with our Connect and Scale strategy. We saw we had the significant amount of depth and breadth of products and industries that we serve. When we listened to our customers, what did they really want from us? They wanted to bring together the workflows, the data, the stakeholders within these large industrial segments that we are in.

We started on this journey about five years ago where we talk about connect and scale. Connect, again, connecting the workflows, the data, the stakeholders on our platforms. Scale, how do we scale as a company as far as Trimble? We are doing a lot of work in the digital infrastructure in our own world to be able to better serve our customers by seeing who the customers are, what they are buying from us, which will enable cross-sell and up-sell opportunities, but also lowering the friction as we think about our customers. In the past, when you have multiple salespeople selling multiple products into a customer, they want to deal with one Trimble.

We’ve been on a journey, and particularly in our AECO business, being at the tip of the spear that I’ll talk about in a second, where we’ve made a lot of transformations in order to be able to better serve our customers. The other thing we’ve done is transforming and simplifying the company. We’ve made some portfolio moves over the past few years. We divested our ag business. We divested our mobility business in transportation. Prior to that, we had a series of businesses within Trimble that we divested as well. We’ve really changed the makeup and the profile of the company as well. The slide that you see up here, if I start on the left-hand side, this is the makeup.

Basically three segments that we report: transportation, logistics, field systems, which has the bulk of the hardware is in our field systems business, but that business is still greater than 50% software services and recurring. AECO, which is largely construction software. Those are the segments. I think we’ve simplified and clarified a little bit of the story over time with the way we report now. The geography you can see there heavily into North America. Some of that is because of the divestiture. Our ag business had a bigger presence in Europe. Some of that’s just a manifestation of that. I really like to see the revenue by type on the right-hand side. We’re now 65% recurring. The business is almost 80% software services and recurring at the company level. We’ve really transformed the company over the years.

How do we think about our value creation algorithm? First, we start with the strategy being in the right industries. We serve large global industries that are under-penetrated in technology. At Investor Day, late last year, we talked about the addressable markets at a company level, $72 billion of addressable market that’s only 25% penetrated. In our AECO, which is our construction software business, just under $50 billion of addressable market that’s only 20% penetrated. We see the opportunity to grow in these markets and penetrating more as we think about global solutions. The right strategy in the right markets. We talk about the business model. In the business model, we’re now high gross margin software growing faster than our hardware. We talked about our operating leverage over the longer term being in the 30-40%.

That high gross margin translating into op margin expansion. Capital allocation is really around an ROI framework. Where do we believe we have the highest ROI? That starts with investing back into the business in our organic growth, whether it’s go to market or innovation. We see the highest value stream of revenue being the recurring revenue, so the ARR. To the extent that we can find opportunities, whether it’s go to market or in the innovation, to put the money back into the business to continue to grow at the rates that we have been and what we put out at Investor Day, we see that as a first opportunity. We also look inorganic. We’ve been running a tuck-in play. We’re buying small businesses, integrate them quickly. We get a high ROI from those businesses.

They give us more capabilities for our sellers to go cross-sell and up-sell to the existing customer base. We talked about at Investor Day, I mentioned a third of our free cash flow over the long term is going back to shareholders via share buyback, so returning capital back to the shareholder. When you put that all together, and we think about the we look at ourselves as a compounder where over time we can see EPS growth in that low to mid teens. These are a little bit more of the quants of how we’ve transformed ourselves over the years. With our latest guidance, you see ARR almost just under $2.5 billion at the company level. Revenue in just short of $3.6 billion.

What’s really interesting to me and really shows the transformation between 2019 and today is we used to be one-third recurring revenue, and now we’re almost two-thirds recurring revenue. When I look at the gross margins, over 70% now at the company level. The EBITDA almost coming out of this year from a guidance standpoint is almost 29%, so 600 basis points of growth in the EBITDA. Negative networking capital or an asset-light business. We continue to transform the business as we go forward and continue to execute on our connect and scale strategy and look to deliver the results as we go forward. I’ll stop there because I know you have questions.

Rob Mason, Senior Analyst: Perfect. Again, if you have any questions, send those up to us and we’ll work them in. Phil, this business model transformation has been pretty profound. You can see the kind of the scoreboard there on a number of metrics. I’m curious, particularly as the amount of recurring revenue has gone up, the level of visibility inside the business is going to—how’s that changed the way that you manage the business for the long term in terms of how you think about strategic growth investments, bets you’re willing to make? Just maybe relate if there’s been any change there. Seemingly there would be, but I’m just.

Unidentified speaker: Yeah, it’s a great question. We really like the ARR business. That gives us a lot of visibility over at least the next couple of quarters, if not longer, in the revenues that will be coming in. We know the margins related to that. That allows us to figure out now where we can make those investments on the OpEx. I mentioned the go-to-market. Is it more feet on the street? Is it building the pipeline by spending more on marketing and innovation? I’m sure we’ll talk about AI, but where do we put the money into innovation? Now what we think about is obviously the long-term model. We want to continue to drive that ARR growth. As I mentioned, I think that’s the highest value revenue stream that we can provide that delivers shareholder value.

That gives us a lot more predictability about what we can spend now in order to be able to deliver the future numbers.

Rob Mason, Senior Analyst: Maybe we’ll just dive right into AI then. Not going to put you on the defensive first, but let’s go ahead and tackle a question. Maybe I don’t know if this being an industrial conference, if there’s as much appreciation for the debate that’s out there. Certainly in the software world, there’s questions around what AI could mean for some software businesses, disintermediation and the like. My first reaction when I think of that in the context of Trimble is step back and think about the two verticals you address, construction, transportation. Frankly, not on the cutting edge of adoption of technology, that’s the opportunity that you’ve leveraged. How do you respond to that debate? How do you see the merits of any of those arguments?

Unidentified speaker: Yeah, so I like where we sit. We’ve been in these spaces for a long time. When I think about AI, it’s really an extension of what we’ve already been doing. This isn’t like a new initiative for us. It’s taking what we already have and actually making it better from a customer standpoint. These industries that we’re in, as you said, they haven’t been digitized. We continue to innovate to create attractive sort of applications to allow our customers to get better. They’re complex industries as well. I think the domain knowledge is something that is maybe underappreciated if you just think generically around AI.

You’ve got to understand how customers are using products, what those workflows look like, and then be able to, in the case of us, be able to create agents, for example, that can look at private data, but also public data, and be able to train those agents to deliver meaningful insights and results for our customers. They want to be more, I mentioned, the faster, greener, cheaper, safer sort of mantra. I think the AI plays into all of it as we think about our customers. I think we’re in a good position to be able to, again, continue to iterate off the things we already have as opposed to thinking about this as sort of a new initiative because we’ve been doing this for a while.

I think, again, the domain knowledge, the fact that we’ve already been in here with our customers, that we can work with them with their private data plus public data to train these agents. That being said, we’re also humbled to this. We keep an eye out. When I was at the, or a few years ago, part of my role was we started up a corporate venture fund. One of the mandates of that was to be able to see the new technology and being plugged into that ecosystem. We’re always watching to look at disruptors. We like our position, but we stay humble.

Rob Mason, Senior Analyst: Yep. Maybe that’s most evident has been in your AECO business. You talk about that being further along. The ARR growth there has been high teens now for over 10 quarters, maybe more than that. That’s with clearly some choppiness in the construction markets as well. Just kind of talk about your ability to sustain that if construction markets get better. Do they stay like they are, which has been somewhat uneven, but just kind of the prospects around that ARR growth in that particular segment?

Unidentified speaker: Yeah, it’s a good question. One I frequently get. I always start with talking about the addressable markets. I mentioned it earlier within AECO, Investor Day, we said $49 billion of addressable market that’s only 20% penetrated. To me, that gives us a lot of opportunity to grow, and it’s about execution. A lot of things we’re doing to be able to tap into that market with some of the digital things that I talked about is how do we get a better view of our customers, the 360, understand what products they’re using, what they should be using, be able to go after the cross-sell and the up-sell. Regarding the cross-sell and the up-sell, we also talked about within AECO, $1 billion of opportunity to just sell products to the customers that we have today.

We see that as a big opportunity for us to continue to grow. To me, it’s around us continuing to execute in the market, and that’s the opportunity we have to continue to grow.

Rob Mason, Senior Analyst: Yeah. Just around that incremental billion on the cross-sell, up-sell within AECO, what kind of regionally you’re in different phases of how your commercial approach has evolved. Kind of update us on where that stands, where it’s more mature, where you’re still ramping some of the commercial actions, and that’s obviously having some impact on the cross-sell, up-sell, I would imagine.

Unidentified speaker: Yeah, and it is because you have to be able to, again, unlock. Part of our strategy and what we’re doing is creating a single framework contract for our customers. What that allows them to do, whether they buy one product or two products, we have natural bundles that we come out of the gate with that make sense for those customers. They can start with one product. If they want to add other products, we make it easy. This is, again, reducing the friction to be able to sell to those customers. As far as stages, let me talk. Company-wide, AECO in North America was where we really started, and we did that intentionally. That was the biggest opportunity for us where we had more depth and breadth of product to be able to run that playbook. We started there.

Within AECO, we’re rolling out to we’ve rolled out a lot of products into Europe and now into APEX. We’re continuing to roll out that go-to-market strategy around the framework contracts and the infrastructure and creating the personas to be able to do the cross-sell and up-sell. There’s still more products to go. As you can imagine, it’s not just a single big bag. Once you roll that out, you’re done. There’s a lot of other things we want to continue to do, enhancements. We’re working on things like a better digital marketing experience around how we can more personalize campaigns to our customers. We look at e-commerce. We’re doing a lot of work on that to be able to allow customers to buy on their own and to self-serve. There’s still more work to do around AECO.

If I up-level to the company, really there’s work to do in our field systems. I mentioned 50% software services are recurring. That’s a little bit different go-to-market that typically goes through a dealer channel. We are updating systems there to be able to do a little bit more of the cross-selling within the field systems. Certainly, we are doing more conversions. We want to be able to manage those subscriptions and have customers be able to manage their subscriptions easier. I think about transportation logistics. It looks more similar to AECO. That is another one where we are going to continue to roll out the tools to be able to tap into the $400 million of cross-sell and up-sell that we identified within the transportation logistics segment.

The point is, this is going to be a multi-year journey, but it’s also going to be a continuous journey as I think about it.

Rob Mason, Senior Analyst: Yeah. Yeah. Earlier this year, I know you talked about having good success with small or medium-sized enterprises, particularly as maybe larger enterprises, their decision-making with all the noise and the macro more elongated. Pivoting there, how are you set up to really attack that type of customer from a commercial standpoint, from a product portfolio standpoint? Does it translate just as well as it does with larger enterprises at current time?

Unidentified speaker: Yeah, so you’re right. We have seen really good success around the SMBs, small, medium businesses. We do think that our products are applicable. The start point may be a little bit different based on the price point and the affordability. For example, one of the things that we came out with almost a year ago at our Dimensions, I think it was exactly a year ago, is what we call our ProjectSight, which is our project management software. We came out with a free version of that. What that does is we wanted to get people that were maybe using spreadsheets or basic tools to be able to manage their projects to be able to use something that’s more bespoke and makes sense for the industries that they’re in and construction.

That was one to be able to reduce, let’s say, the economic barrier, get them used to the technology. There is a path. Basically, there is a limitation. It is kind of a try it before you buy it, where you can buy into a version that is monetized. We also look at it as an opportunity to add new accounts that we can run a cross-sell and up-sell playbook with other products. This goes back to the personas. When we look at who you are and the size of your business and what products you should be using, what the affordability factor is, we create a motion within the sales teams to be able to go and address that market and bring things to you as a customer that resonate with you and make sense from how you run your business and affordability.

Rob Mason, Senior Analyst: Okay. Just you mentioned field systems, the other major segment of your business a minute ago, but that’s a business that certainly performed well in the third quarter, beat plan and grew, I think, 8%, again, above plan. Just kind of talk about what drove the strength there, because that also does have a little more product-centric, more hardware there. But it sounds like those products have been seeing good uptake in civil construction in particular, concerns on government funding, again, not apparent in that business. Maybe just kind of walk us through the dynamics in field systems right now.

Unidentified speaker: Yeah, good call out. The civil construction has been performing really well in that segment. There’s a couple of things that we’re doing within civil construction. I think one is the execution is there. Just a big kudos to the team for being able to execute in the marketplace. We made some changes as are normal with our JV with Caterpillar. Within that, what we’re really focused on is the customer, and the customer particularly that has a mixed fleet that wants to standardize in Trimble technology. One of the things we’ve done is we’re now signing up and working with dealers from other logos to be able to better serve those customers that have the mixed fleets and give them more options as far as the ability to buy Trimble technology in the aftermarket. The team’s done a really good job.

It’s still a relatively small part of the business. I don’t want to make it seem like a big part of that inflection was because of it. It’s something strategically that we really like and we see the team executing on. The other thing I’d call out just over on the field systems business, we had 18% ARR growth. It’s a significant number now within the field systems segment. The team’s been performing really well from those. Some of it is I put it into three categories. One is just the performance and growing the existing subscription base in the ARR business. Some of it is we’re coming out with more and more products that are just out-of-the-box subscriptions. There’s less of that conversion and transformation that we have to do.

We are also intentionally putting products in there that are subscription that are embedded with some of our hardware products in order to be able to create renewal rates in the future. There are some things there that we did intentionally that are helping to grow that. We expect that to moderate over the years as we start to lap ourselves. The business has really performed well from the conversion standpoint and the ARR growth as well.

Rob Mason, Senior Analyst: Just given that that is more kind of construction project-focused, data centers, of course, have been a strong area, just maybe talk about the pockets of strength and/or weakness within what you’re seeing across construction broadly.

Unidentified speaker: Yeah, the good news is one of the things we really look at is the project backlog, which is still healthy overall. Of course, data centers and a lot of the money that’s behind that is going to be a tailwind. There’s infrastructure behind that as you think about energy that has to support that. The IIJA, there’s still a lot of money. I think the last I saw in August numbers were somewhere in the 40% range has been outlaid. There’s still money to be spent there. Obviously in Europe, there’s been infrastructure bills being passed, which we would think would be a tailwind for us. The macro uncertainty is one that’s a tough one with just the trade talks with geopolitical items. It’s less directly impactful for us.

We mentioned on our earnings call that we were pretty bearish going into the year. We sell to the government, by the way, still in field systems, the U.S. government. We were not very, again, bearish or bullish on that number for this year. We anticipate with the administration change that was going to be a low number. The good thing is there is not much really baked into the forecast. We said low single-digit millions in the back half of the year. The bigger impact is really the sentiment on our customers and the uncertainty. To the extent that we can see more stabilized markets, I could see that being a bit of a help, but maybe not necessarily where we are at today because I think it is a little bit better than where we started the year.

It could easily go the other way, I think is my point, is that’s where things we could see some customers being a little bit reluctant, particularly on the capital. I think it’s less around the ARR business, but more around that hardware, which is more book and burn type business. If there was just a little bit of a retraction, that could be a bit of a headwind.

Rob Mason, Senior Analyst: Yeah, yeah. You mentioned kind of the machine control focus, again, trying to get after that mixed fleet that can be often an aftermarket type fit. But there is an OEM opportunity, I guess, there. I mean, we’re seeing maybe signs that there could be some uplift in construction equipment as you look out. Is that how you would, would that be a needle mover for Trimble in that regard?

Unidentified speaker: Yeah, I’d say net net, if there’s more machine sales, that’s just more of an opportunity for us as we think of the aftermarket. We mentioned, I think, Vermeer power driving. We’re applying our technology with other OEMs versus maybe you think about traditional earth-moving equipment. We’ve always done that. I think we’ve always been partnering. Whether it was in our ag business or in our construction business, we’ve always wanted to serve the mixed fleet and want them to standardize on the Trimble technology, regardless of what color of equipment they end up buying.

A big thing of what we’re doing with the Trimble technology outlets that we’re coming out with, which are some of the other branded dealer channel, that we’re just trying to lower the friction and be able to make it a lot easier for our customers that have those mixed fleets to be able to access the Trimble equipment and standardize on the Trimble technology.

Rob Mason, Senior Analyst: Yeah. Your Connect and Scale efforts have been kind of the underpinnings of a lot of this transformation that’s happened. You’re multiple years in now. It sounds like you still see a lot of runway to make investments and fully leverage this. As we think about maybe over the next year or so, what would be some of the priority areas where you might apply more investment? I think with the gross margin expansion that you’ve had, that just makes that decision tilt more in the favor of towards more investment to go after that growth because it converts so well. Just where would be some of the priorities?

Unidentified speaker: Yeah. As we go through our planning process, one of the things we always talk about is where there’s opportunities to maintain and sustain the growth that we already have and how do we shore that up. If nothing else, increase the confidence. We also talk about incremental investments to say, can we actually, are there opportunities for us to grow faster at a higher pace? We’re always having those discussions as we think about the capital allocation and the highest ROI. We believe, again, that that ARR revenue stream is the highest ROI for us. When we see those opportunities, we will continue to invest in that. I mentioned before the go-to-market, the innovation, primarily the AI and putting money into that.

We really think about this as a long-term investment and setting ourselves up for that long-term and the growth. The other side of things is we talk about a lot of the infrastructure is we want to be able to also, we’re doing some work and investments on the actual infrastructure and how we operate internally. Because as we continue to grow the top line, we want to be able to scale internally, be able to support that. That’s probably a bit of an unseen part of the investments. It’s something, as we think long-term, to really set ourselves up with as we continue to grow the revenue that we’re not growing our G&A, for example, at the same pace.

Rob Mason, Senior Analyst: Where have you found opportunities to apply AI to your own operations internally, just along those lines?

Unidentified speaker: That’s a good question. Maybe I’ll put it into sort of three buckets. There’s an obvious, let’s call it, let’s say, a discrete one, which is we use our coders. They’ll use software, basically, to auto-generate code. And I think over 90% of our software developers are using some tool to be able to do that. I think about, I’ll put in another bucket that’s more general. And I use myself as an example. I’m able to bring in a lot of materials around the company. As you can imagine, there’s a lot. But I can synthesize that very quickly using AI tools to be able to summarize documents or actually even search internally to find information. So I can get to things a lot faster. And what does that do? That allows me to actually spend more time on more strategic decisions or even driving more tactical execution opportunities.

I see that around the company where maybe people are getting more efficient. It’s a little bit less tangible to measure that efficiency because it’s more anecdotal. You can see it in so many different places in the company. Then say there’s the other thing that we’re looking at is I think about our third-party vendors or our software is who’s making the investments in their software. We recently hired a new CIO. One of the things he’s looking at is sort of our whole vendor and where our third-party purchase is. Where are those opportunities? Who actually can deliver more ROI for us? Should we be using the same vendor? Should we be using another vendor that’s actually embedding the agents and the AI into their technology where we can actually take advantage of it?

That is another initiative that we are looking at. I just draw the parallels to how Trimble actually sells to our customers in the efficiency and the productivity. We look at that at our vendor base as well.

Rob Mason, Senior Analyst: Yeah, yeah. Maybe in the little bit of time we have left, just touch on priorities for capital allocation. It’s been a heavy buyback year, but it seems you had some excess cash, and that’s where it went. As we think on a go-forward basis, the free cash flow profile of this business is quite attractive. How do you plan to manage that or distribute that?

Unidentified speaker: Yeah, so I think what you’re referring to is we had when we sold the ag business, we had significant proceeds from that. We committed to doing a we paid off debt, and then the remainder was used for share buyback. That was the big amount at the beginning of the year. As we go forward, I mentioned a third of the free cash flow going back to shareholders via share repurchases. If I think about the decision-making on the capital allocation from a balance sheet, the first is using the cash to reinvest in the business on the organic growth. Beyond that, we look at inorganic opportunities.

We have been running this tuck-in play where we, again, it is not a big capital outlay, but we can do a lot more frequency and added capabilities, put that in the hands of the sellers, create some cross-sell and upsell opportunities within that. We have been running that. We really like that playbook. I think about, are there bigger opportunities within the inorganic? We would tend to be focused on the construction software. It would be similar if we did something larger. It would look at something like Viewpoint, which is somebody, a customer base, a sticky product that we can, again, run the cross-sell and upsell opportunities for something like that. At any given time, we look at it through an ROI lens. Do we pivot more toward share repurchases or some other opportunity?

Where’s the highest ROI that we can provide for our shareholders?

Rob Mason, Senior Analyst: Perfect. We’ll pull up there. We’re at time. There is a breakout session upstairs in the Chestnut Room. So if you have any questions, follow up there.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.