TRMB Q3 2026 earnings call transcript, November 4, 2026

Hello, everyone. Thank you for joining us and welcome to the Trimble third quarter 2026 financial results call. After today's prepared remarks, we will host a question 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 will now hand the conference over to Rob Painter, President and Chief Executive Officer. Please go. Go ahead. Welcome everyone. And thanks for joining today. 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 gap performance metrics on an organic basis. Let's start with our three key messages on slide five. First, financial performance. We are delivering short term and long term value creation for our customers and for shareholders. For years. We've talked about our three four three operational cadence where we embrace the end of managing to the short and the long term with three months, four quarters, three years in mind. Second, our right to win. Strategy is the art of doing the things you can uniquely do to win in the market. That manifests as our connect and scale strategy, which is a platform strategy. The opportunity is immense as we connect the physical and digital worlds in our served markets. Third, AI. On top of our right to win, the market opportunity compounds with the investment we are making in AI to deliver differential outcomes, thereby accelerating and reinforcing connect and scale. We're excited about our future.

Today, we'll walk through progression on each of these three topics, starting with financial performance on slide six, where I will hit a few highlights. In the quarter, we deliver both revenue and EPS in line and above the midpoint. of our guidance range, against a backdrop of a challenging supply chain environment and a tepid European market, both offset by strength in the U.S. Kudos to our teams and partners as they continue to well outperform the global market. For the full year, we are holding our revenue guide and slightly increasing our EPS guide. Our full year guidance points to greater than 9% organic revenue growth, EBITDA margins expanding to approximately 30%, and EPS. growth in the mid to high teens, all of which demonstrates the strength of our innovation and execution. I want to emphasize that our EBITDA margin performance is one year ahead of our last investor day model. In addition, we initiated a set of efficiency and cost reduction measures that will enable us to expand margins while simultaneously increasing our investment in AI native innovation. AI is inspiring us to redesign how we work across the company. From go-to-market, to product development, to customer success. ARR was modestly below our expectations and we are updating our full year ARR outlook. AECO growth remains robust and that is important because AECO represents approximately 65% of our ARR. AECO ARR organic growth was 13% compared to 14% in the first half of the year.

We expect similar strength in the fourth quarter. This would result in net new ARR of greater than $200 million, an increase against 2025, and we are pleased with that consistent execution. In field systems, which is 15% of the company's ARR, we are experiencing headwinds in the second half of 2026 from three discrete items. First, as we discussed last quarter, the intentional shift of a white-labeled product line to our own solution is a $20 million drag to ARR growth. for the year. Exiting the product line is the right decision as we were reselling a third-party offering at very low margins and we are confident in our ability to regain the margin and revenue. Second, growth in our positioning services business which provides high accuracy reliable location data and real-time GNSS positioning across a number of industries has slowed meaningfully in the agriculture market particularly in South America. Third, ARR growth reflects lower than anticipated subscriptions on our bundled positioning services offerings across geospatial and civil construction as first-year attached cohorts came up for renewal. To put this into a broader perspective, our team has grown ARR by more than 40% over the last two and a half years and we are growing our most strategic offerings. For example, our machine control as a service offering grew ACV bookings in the quarter by more than 50% generating a significant share of new logos in the process. Another example is Trimble Business Center where we have more than doubled named account users through conversions of support and maintenance to subscription. In transportation and logistics ARR growth was slightly below our first half where the European freight market remains somewhat mixed. Our gross customer retention in Transporion is close to 100% and ARR

grew approximately 9% but volumes and spot price mix were below levels we saw earlier in the year which impacts our ARR. Turning to slide 7 let's pivot to review how AI compounds the value of our Connect and Scale strategy and how we progressed and delivered in the quarter across three pillars. Connect, Scale and AI. Starting with the first pillar of Connect our strategy is anchored by connection, where ground truth forged in the field is connected to best-in-class capabilities in the office. To give an example of innovation delivered in the quarter in construction, the field systems team announced the launch of our ST30 SmartTarget, a new generation surveying system. This system breaks new ground by integrating optical and subscription-based GNSS functionality into a single smart target solution. The ST30 integrates with our field the ST30. The ST30. The ST30. The ST30. Connect . Office and cloud software solutions to provide trustworthy and traceable accuracy while its tilt compensation adds both productivity and safety to enhance the overall integrity of collected data. The integrated GNSS will be available next year as an upgrade and will streamline site operations and allow users to work beyond the constraints of optical line of sight. What that means for the strategy is we further extend the reach of capturing more ground truth with higher fidelity and we connect it to our office

software to enrich workflows and we extend functionality for subscription upgrades. The team also launched the first of our next generation Maxwell 8 based GNSS receivers. These receivers were launched in response to the growing prevalence of intentional jamming and spoofed signals. Trimble continues to lead the way in delivering resilient precise positioning solutions, demonstrating market leadership and providing ground truth to our global people. customers. Within this pillar of connect, we are connecting high value workflows that solve higher order customer problems. Take construction. We are unifying data across the broadest range of stakeholders in our industries. Architects and designers, engineers, contractors and owners. From concept to completion. Value grows as participants connect as the network effects of our platform take hold. You can see an example of this on stage. Slide 8 with our customer MJ Church in the UK where they ran the M27 Junction 10 project with Trimble Connect as its operational heartbeat. Tying survey, design, machine control and mixed reality into a federated model. Dozens of file formats were unified. Digital models for each phase moved from the office to the field instantly. Every shift began with a virtual walkthrough and the team finished one day ahead of a nine day possession. They are repeating the approach on the age. 47 Road. Only Trimble is delivering value like this. In transportation and logistics, we held user conferences in both Europe and the U.S. where we had the opportunity to showcase dozens of innovations to thousands of customers and partners and where our customers were able to share how they are leveraging our technology to make their businesses better. A prime example is how we are connecting back office route planning directly to NCAB execution. Processing over 5.5 built

routing requests monthly, we recently introduced advanced batch analytics and preferred route settings in PCMiler web services platform for both shippers and carriers. This allows fleets to analyze lane profitability in the office and push that exact optimized route directly to the driver's copilot navigation app. Guaranteeing this level of execution consistency not only improves driver safety, but also significantly enhances processes. Our TMS offerings by ensuring those back office systems are powered by reliable ground truth execution data from the road. Another example is our latest expansion of Trimble Dock and Yard, which tackles the costly disconnects and manual guesswork that occur the moment a truck reaches a facility. We are bringing the entire yard cycle into one connected flow, starting before the truck even arrives. Our real-time slot management. and Carrier Portal align appointments with actual facility capacity, while our real-time yard management provides site teams with early visibility into changing ETAs to resolve disruptions before they become delays. Reductions in waiting time means customers need less trucks to move the same amount of freight, thus optimizing asset utilization and helping address the driver shortage problem. Let's move to the side. The second pillar on slide seven and talk about scale, where we hold a structural data advantage at the intersection of the physical and digital worlds.

Within Trimble Systems resides deep context and domain knowledge that cannot be replicated. Trillions of dollars of construction projects, billions of dollars of freight spend, millions of users of our software, and millions of transactions running through our platforms, and hundreds of thousands of machines and instruments in the real physical world. The scale of this . . . . The footprint is expanding, and the value of this data is compounding. One of the most important parts of my job is spending time with customers around the world. What I increasingly hear from them is a desire to unlock more from their data. I also hear them emphasizing the importance of trust in a world that is moving fast. Trust in data, trust in models, trust in security, trust at scale. This is exactly what our customers expect when they buy from Trimble. . . . . Because our customers connect their most sensitive data only to a platform they trust, our approach to managing AI risk is anchored on recognized frameworks, standards, and regulations. In construction, the Trimble Connect platform has long-held compliance and risk management certifications, including ISO 27001 and SOC 2 Type 1, and I'm proud to say that we have reached initial implementation status for FedRAMP Moderate. As we layer . . . . authentic AI into and throughout the platform's capabilities, our commitment to trust, safety, and security remain our number one priority.

Trimble's approach to managing AI risk is anchored on recognized international standards, frameworks, and regulations. The Trimble Connect platform has passed independent third-party audits for ISO 42001, with official certification expected later this month. If that sounds like a lot, it is. We take governance and . . . resilience at global scale seriously, and we are confident it competitively distinguishes Trimble. Within this pillar of scale resides conviction that if you're going to be a platform company, you have to have an open and extensible ecosystem that others can build on, and upon which you can compound value for network participants. In transportation and logistics, this is at the very core of what Transporion provides for the business. A multi-sided marketplace with thousands of third-party integration . . . . running tens of millions of transactions per year. In construction, we hold our Turnbull Dimensions User Conference next week, where we expect over 7,000 attendees, both on-site at the conference and at our off-site demonstration test site. On-site, we will hold our first-ever developer summit within the conference, where we have hundreds of registrants and dozens of sessions scheduled. At our off-site, we will showcase how we have expanded our partnerships with OEMs, as well as providers of automation and autonomy. These ecosystem extensions are built on top of our market-leading grade control engine, and all of this data is capable of flowing into Trimble Connect, where its impact can be amplified. Speaking of amplification, let's move to our third pillar, AI. AI is not an abstract add-on at Trimble. It is directly grounded in physical site reality.

By capturing spatial ground truth in the field and feeding it seamlessly into our industry platforms, our connected data becomes the trusted data layer for physical industries, where AI compounds its value by making that data uniquely actionable. With intention, our near-term focus is to broaden and deepen adoption, engagement, and customer productivity while building the foundation for monetization as usage patterns mature. In transportation and logistics, we recently launched ArcAgent, a transportation industry AI platform that connects to live data sources and builds skills on top of them, such as connecting live vehicle GPS telemetry with remaining driver hours of service, and then correlating that with TMS dispatch and warehouse dock schedules to trigger automated exception resolutions. In the quarter, we launched NCAB AI-based driver intelligence, as well as Appian Fleet Assistant for real-time fleet optimization. Over the last few quarters of the year, we have been able to do this for a long time. I have talked about our autonomous freight marketplace solutions for procurement and quotation. Year-to-date revenue is up over 20% in this category, and our bookings growth shows significant potential for strong revenue growth next year, demonstrating the value behind automating spot market carrier selection and rate negotiation. In construction, we are extending the Trimble Connect platform with a unified and deeply integrated agentic AI layer, so agents can be built and governed to take action with

the same trust, security, and permissions as the rest of Trimble. Customers will increasingly reach those agents through a single front door, Trimble Assist, inside the products they already use. I'll give a number of examples of AI in action across our construction applications this quarter, starting with project management, where our 360 capture solution automatically overlays site photos to 2D drawings, eliminating manual photo tagging for field teams. Paired with an AI powered punchless capability for the closeout inspections that catched unfinished work, field staff can cut walk times from over two hours to about 20 minutes. Document controllers and project engineers can now set up drawings in a few seconds with AI title block processing, down from two minutes. An MEP, or Expanded Live Count AI Takeoff, has processed more than 3 million symbols across more than 300,000 monthly drawings. A feature released this quarter lets estimators train AI models on their own company symbol libraries, cutting manual takeoff time by more than 60%. And AI takeoff adoption among estimating users tripled, from 6 to 19% of monthly active users. For surveyors, new AI feature extraction in Trimble Business Center detects pavement distress and checks curb and ADA ramp compliance without manual field review. In steel and concrete, monthly I'll see you next time. Active users of the Tecla model assistant beta grew more than 50% in the quarter, with actions and Tecla structures succeeding more than 95% of the time.

In risk and compliance management, auto redlining sessions and document crunch more than tripled versus Q2. Finally, in financials, customers using our ERP AI assistants have, by our estimate, saved more than 200,000 hours by automating 300,000 payroll runs, 750,000 invoices, and 150,000 expense receipts. This translates into millions of dollars of labor savings, which we view as crucial in an industry plagued by labor shortages. The innovation is exciting to witness, and it gets even more impressive when considering the potential to leverage this data at the platform level. Trimble Connect is our construction platform, and slide 9 shows a visual of how we are connecting stakeholders across the construction continuum. Trimble Connect is our construction platform. In the third quarter alone, the Trimble Connect platform handled more than 30 billion API calls, up more than 25%, representing the importance customers and developers place on integration with Trimble's ecosystem. Behind that, the platform added more than 1 million projects in the quarter. In the last 12 months, almost 5 million projects were added to Connect, and our RealityCapture platform service grew in just the data volume by 55%. With that application and platform, progression in mind, we believe agents work at their best when deeply integrated into the products, data, and services our customers already use, customized to their full context, trustworthy, with privacy built in rather than bolted on, and easily created and shared across an organization. Think of a customer interacting with a Trimble scheduling agent that inherits the user's permissions, the company's business rules, and the project context, all stored and managed within the Trimble

Connect platform. With access to data and tools from across the platform, the agent can reason on ground truth data extracted from the contracts, BIM, estimates, submittals, ERP, field sensors, and more to monitor the project schedule and deliver actionable insights that are bespoke to the stakeholders whose ability to deliver outcomes is amplified by the intelligence that only Trimble can deliver. To emphasize the point on our market approach, our near-term priority is to compound adoption and customer value, with monetization following through subscriptions, add-ons, consumption, and other models as usage patterns mature. We are exactly where we expected to be, which includes making our Trimble Connect platform capabilities accessible through a unified agentic AI layer, while we scale the ability for our customers to more effectively utilize credits as a consumption currency for AI and API usage at scale. So, I'll close my... I'll close my comments on this AI pillar with a comment on efficiencies within our own four walls. It should go without saying that the strong majority of committed code we produce is now AI generated. We see development teams working on greenfield activities, cutting development cycles down by months and quarters. To get the most of leveraging AI efficiencies is a human topic, not so much a technology topic. The key is not applying a new technology to an old architecture.

Rather, it's applying a new technology... to a new architecture. We are in flight around reorganizing more of our product development teams around a new architecture, one that we believe will unlock velocity at scale while doing so in a leaner fashion. Phil will now take you through what this means for the Trimble model. Phil, over to you. Thanks, Rob. Let me start with reviewing our third quarter numbers on slide 11. We posted revenue of $967 million, up 7%. and earnings per share at $0.86, in line and above the midpoint of our guidance. We delivered record ARR of $2.564 billion, up 10%. Gross margins were lower by 70 basis points to 70.5% due to higher hardware mix. Finally, we achieved strong EBITDA margins of 28.8%, which was toward the high end of our guidance range. Moving to the balance sheet and cash flow items on slide 12. Our reported free cash flow remains strong. At $644 million through the first three quarters. Our balance sheet provides financial flexibility with $215 million of cash and a leverage ratio of 1.2 times, which is well below our long-term target ratio of 2.5 times. We repurchased $224 million of shares in the quarter and have $768 million remaining on our repurchase authorization. Since the beginning of 2025, we have repurchased over $1.4 billion worth of stock. Next, let's review segment details on slide 13. AECO delivered another strong quarter with a record $1.636 billion of ARR, posting 13% ARR growth and 9% revenue growth for the quarter. Operating margin increased 170 basis points to 33.5% and is on track to deliver approximately 36% operating margin for the year, which is 100 basis points ahead of our prior expectations and

a terrific milestone. Field systems ARR was up 5% and revenue was up 7% and quarter with continued strength in civil construction and geospatial. Operating margin was 29.5%. Transportation and logistics delivered 5% ARR growth, 2% revenue growth and 50 basis points of operating margin expansion to 26.3%. Turning to slide 15, let's review our updated outlook for the year. We are maintaining the midpoint of our 2026 full-year revenue guidance at $3.925 billion, despite headwinds from foreign exchange and to a lesser extent, a small divestiture. This represents greater than 9% organic growth. We are also slightly increasing the midpoint of our earnings per share guidance to $3.66, which represents approximately 17% growth. We expect ARR growth at approximately 10% compared to our prior outlook of 12-14%. Primarily due to the market impacts we discussed affecting the positioning services and transportation businesses. We maintain our EBITDA margin guidance of approximately 30%. We expect free cash flow to be approximately .9 times non-GAAP net income, and we continue to expect free cash flow to be greater than non-GAAP net income over the long term. Slide 16 breaks down the full year metrics by segment. AECO is a scaled, growing, and attractive margin. in business with over $1.6 billion of ARR. We are guiding revenue growth in the low teens and ARR growth of approximately 13%. Driven by the strong performance this year, we are raising our operating margin target for AECO by 100 basis points to 36%. In field systems, we expect revenue growth in the high single digit, ARR growth in the low single digits, and operating income of 30%. We expect transportation and logistics revenue in ARR to grow in the mid single digits,

aICO VMs with children, 28 a.m. And we increase the operating income margin expectation to 25%. With respect to discrete fourth quarter guidance, let's turn to slide 17. We are setting the midpoints of our guidance at $1.046 billion for revenue, up 8%, earnings per share at $1.16, up 16%, and ARR growth at approximately 10%. We expect EBITDA margins between 34% and 35%, which at the midpoint is approximately 100%. Before turning back to Rob, I would like to talk briefly about 2027 on three fronts, starting first with ARR. Our updated 2026 exit growth rate represents a good starting point, with no expected deceleration next year. Our second is to point out the absence of a January 1st in our 2027 fiscal year, which will occur in fiscal 2028, rather than the fourth quarter of fiscal 2027, when a material amount of term... license revenue is recognized due to renewals. This calendar impact means we will have a headwind to 2027 revenue and operating income growth of approximately 90 million. ARR and free cash flow will be unaffected. When adjusting for this dynamic, we expect revenue to be in line with our long-term plan. The third item relates to the efficiencies Rob mentioned earlier. We believe these operational moves will enable us to deliver strong earnings per share growth next year. Exclude the $90 million operating income impact from the absence of January 1st, we expect EPS growth at the high end of our long-term algorithm of low to mid-teens growth. We will dial in the model further on our fourth quarter earnings call in February. Back to you, Rob.

Thanks, Phil. Overall, I am pleased with our performance in the quarter, notwithstanding the near-term ARR headwinds. I'm confident and energized by the progress we are making to accelerate our right to win, excited about

the customer engagement we are building across our platform and inspired by the momentum we are building with AI releases grounded in physical site reality. Next week, November 9th through 11th, we will showcase our latest construction innovations at our Tribble Dimensions User Conference at the Venetian in Las Vegas, including our first developer summit. Thank you to our Tribble team, our global partners, and our shareholders for your ongoing support. Operator, let's open the line to questions.

We will now begin the question and answer session. 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 ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster.

Your first question from the line of Jason. with key bank capital markets. Your line is now open. Please go ahead.

Hey, gentlemen. Maybe an obvious question. I think you mentioned seeing some tepid European market trends. Was this comment more broad-based or was it more specific to the EECO segment? It's just I saw the EECO ARR growth guide come down a little bit. So curious if that was the main driver for that. Jason, good morning. Hey, it's Rob.

Hey, I'm with the respect to Europe. We saw it more in field systems and in the Transporion side of the transportation business. The AECO business, very solid. And really, that's a hold of the view we have on the AECO. So all good there. Okay. All right. And then, Rob, I think you mentioned an interesting stat. You said that API calls were up 25%. I thought that was an interesting data point. I imagine the growth drivers. So the API calls are obviously new customer growth, product expansion, and then, you know, customers using their own agents or using your agents. Maybe can you give us a frame of reference on maybe how much this data point might have upticked versus past trends and then remind us how you're monetizing API usage. Thanks.

Hey, Jason, good question. With respect to the API calls going up, I think that's a really good sign of Trimble Connect as a platform. So I was specifically talking about Connect, which is our platform for construction at Trimble. It reflects the corpus of data that is inside of Connect. It reflects the scale of users that we have in Connect and the number of projects. So I referenced a million projects added in the quarter. I mean, over the life of Connect since we started Connect over 10 years ago, we've had 50 million registered. users in that timeframe. I think we're about over a million monthly active user, around a million monthly active users today. There's a lot of work that happens inside of Connect, and that is where we see the intensity of the API call usage. And that we see is a really good sign, especially as we put more and more of our applications into Connect and now enter AI and the MCP and the MCP. connectivity, server connectivity, more data, able to connect across the lifecycle with the stakeholders in the industry. That's a great sign for us of just how important Connect is proving to be for our customers, for them to be able to do their work and to be able to do it better, faster, safer, cheaper, and greener. With respect to monetization of those API calls, you're going to see more and more of that from us over time. And, you know, we talk about a hybrid model where we believe we'll monetize AI usage at the intersection of the named user license with the ability to have credits on top of that.

Okay. Wonderful. Thank you.

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

Hi. Good morning. And thank you. for the additional color on the ARR portion of the business. You know, just regarding, you know, sort of your revised outlook and guidance. Can you give us maybe a little bit of color on maybe a waterfall of the relative impact from the three items that you mentioned, as well as, you know, help us understand what changed relative to the prior expectations. Thank you. Hey, Jonathan. This is Phil. Let me, so let me talk about the couple of, let me go. On the businesses, first of all. So, AECO, Rob mentioned this, but the business is strong. We see no change in the fundamentals of that business. You know, the net retention, excluding SketchUp, is about 110%, which has been very consistent. Our gross retention has been stable there. Our net new ARR is actually growing throughout the year and will exit at the highest level the year. And then in the AECO, there's also a bit of roundup and rounddown, but with the strong performance of that business, we've increased the operating margin by 180%. basis points to 36%. So that's the AECO. When I talk about the field systems, for context, the field systems is about 15% of the company's ARR. And within that, there's the three businesses, the civil construction, geospatial, and advanced positioning. Advanced positioning is where we sell the satellite-based corrections, and that gives our users higher accuracy without needing a local infrastructure, and that also gives better performance.

I want to thank you very much. The contribution of that business is actually selling the corrections into the ag market, and in particular in South America, and that's gotten worse. And then to a lesser extent, over a year ago, we started including the corrections as a standard one you're offering at the point of sale with our construction hardware. And what we're seeing playing out is that the conversion rates which we modeled, which were based on our previous experience in the ag market, are actually lower than expected. They're still contributing to the growth. But they're lower than what we modeled. Got it. Got it. And just as a quick follow-up, you know, you talked very favorably about some of the AI adoption that you're seeing. Is there any way for us to think about sort of quantification for, you know, what that looks like? Maybe not for the balance of the year, but into 2027, you know, does it start to look a bit more material? You know, just trying to understand sort of the drivers and opportunities there. Thank you.

Hey, Jonathan. Thanks. This is Rob. You know, we went through a number of examples of innovations and progress we're making in AI on the call, and that was just a small slice of what the teams are producing right now. And I see that both at an individual application level, at a workflow level, at an ecosystem level. We see it connecting physical and digital workflows in both construction. And transportation, it's exciting to see what's happening. And it's then more interesting to get these in our customers' hands. And so, you know, the frame we have is we want to drive adoption. We want to drive engagement. And we'll follow, monetization will follow if those usage patterns make themselves clear and mature a bit. I wouldn't expect at a quantification, like an aggregate, for that to be a needle mover in the class. At the first half of next year, I think as we progress through next year, somewhere in the second half of the year, I think it might be a little easier to start to have a little bit of a better sense of what it is doing in aggregate. But I can tell you, we see pockets of evidence of growth. So if we take, for example, the SketchUp business, specifically architecture design business, and we have a hybrid model for the AI. Capabilities that we're delivering, so you buy hybrid in the sense of you buy the named user license. We'd have a good, better, best tier. Inside that named user license, you get a package of credits, and when you go beyond those credits, you then can buy more credits. And we saw quarter over quarter, 100% growth in those credits. Like, that's a good sign for us that the technology is being used. If we look at transportation and autonomous procurement and autonomous quotation, those products have been

in the market. We saw 20% growth year over year. In that slice, we've got bookings that are strong year to date, which give us confidence that that business will continue to grow next year. So this isn't just futures. Like, there is revenue today in the business. The Document Crunch acquisition that we completed last quarter has project-based AI value delivery. That business is well on track with the deal underwrite model we had. So significant growth happening in that business on a percentage basis. Aggregated up, and when you're talking over $2.5 billion of ARR, it does get a little hard to move those needles. But I can tell you it is gaining traction. Thank you. Your next question from the line of Jerry Revick with Wells Fargo. Your line is now open. Please go ahead.

Yes. Hi. Good morning, everyone. Rob, Phil, I'm wondering if you just talk about the pipeline that you have in IECO. I appreciate the ARR revision is pretty small dollar-wise off of a larger base. I'm wondering as you look at the pipeline, what does that tell you about the growth profile for ARR for IECO over the next 12 to 18 months? And, you know, separately from a margin standpoint, as we think about the businesses using a more AI. What are the implications for the margin profile for you folks when you do sell those credits? Can we just step through the economics there, if you don't mind? Great, Jerry. Hey, thanks for the question. So, let's talk about ACO. Think about pipeline feeding bookings, which creates the revenue. At a pipeline level, when we look at the markets that we're serving, they're global, and the fundamentals remain large, global, underserved, underpenetrated. Strong value proposition. Unique offering at the intersection of the physical, digital, the hardware, software, the office, and the field. Asia Pacific pipeline and bookings, I think, were the strongest growers year-over-year in the quarter. I think that somewhat reflects bringing TC1 into the Asia Pacific market. So that's creating pipeline for our sellers. What also is creating that pipeline is, I'll call it the modernization and up-leveling of our marketing efforts. It's just really impressive to see the full slate of tactics that the team has already been executing and has in store. And it all gets better to create that pipeline through the investments we've made in our back office systems and

unifying our CRM systems over the last year. So just getting more and more intelligent. And guess what? AI is helping feed that as well. So the pipelines looks good as we look at the bookings and that flow through. That's probably a good place to pause and comment that we continue to see strengthen data centers, reshoring, onshoring of manufacturing, energy, whether that's renewables or oil and oil and gas. So good pockets of strength on the bookings front as well as geographically. All that then feeds into the model that Phil took you through with the net retention and the gross retention, cross-sell, upsell efforts continue to work and drive bookings and revenue ARR growth in the business. And then all of that then not only sets up for the second half of the year or this fourth quarter as we've laid out in guidance and end of 2027 our conviction and that we'll continue to grow. And Jerry, one, just one other point to add as we think about that, um, our backlog as we have it right now is actually up 13% and the recurring backlog is also 13%. Um, and if you actually double click within there, the assassin's subscription backlog is actually, uh, up a little bit higher than that. So that's another indicator of, as we think about going into 2027. Uh, super. Thank you. And can you just comment on the, um, second question on, on margins, please? So as you have more, uh, AI, uh, agent revenue, what does that mean for your unit profitability or, or margins?

Oh, sorry. Yes. Hey, in the, I'd say the short term, uh, near term, um, on that one, we see the gross margins and the business holding, obviously the, um, there, there comes a cost associated, um, with hitting the models. Um, right now. Oh, it's, uh, you know, we're able to, to, to price that to remember, we're pricing it through a number of factors, whether it's in that good, better, best tiering, or if it's consumption, uh, or if it's consumption based or project based, uh, for that matter. So, um, what we see in front of us, um, we're, um, we, we see at a minimum neutral to the margins.

Super. Thank you, Rob. Thanks, Phil. You're welcome. You're next question from the line of Quinn Fredrickson with Baird. Your line is now open. Please go ahead.

Hey, good morning, guys. Um, just wanted to start off within the, uh, field business in the two discrete headwinds you mentioned in positioning services. Uh, do you see those continuing into 2027? I just asked, cause you mentioned you have visibility to sales growth in line with your long-term plan X, the January 1st impact. So does that. I presume these headwinds clear at some point in 27, or is just the rest of the business strong enough to offset? I'll start, uh, Quinn. This is Rob. Um, with respect to, let's say the ag market, um, that one, I don't know how to call the macro on, on, on ag. So I'm not going to, I'm not going to attempt to, uh, to do that. Um, what I will do is, uh, talk about the growth, uh, that we have in the rest of the portfolio. Um, so the machine control as a service business as ACV, um, bookings growth, actually AR growth as well was over 50%. Uh, and what we see when, as we've gone through, you know, to this model, excuse me, over the last few years, more than a third of the customers that we win, uh, with this offering are new logos, but that tells us that we're expanding the addressable market. Um, uh, that gives us conviction as we move into next year. Um, we have a portfolio. that we call building construction field systems where we've, where, where the survey instruments, as you, instead of really thinking of them as outdoors, we take them indoors, uh, more for layout and inside of a building frame. Um, and that business, um, continues to grow strong, strong double digit. Uh, so we see the bookings that we have there that gives us visibility into next year. Uh, so we add that step and then software conversions. I should give you one more as we continue to move from subscription

and, uh, so we, excuse me, from, um, on-prem, uh, to subscription. Uh, we see the bookings, uh, there, uh, and we have the conviction, uh, that will continue to grow there. And we learned, obviously we can take the playbooks that we've had throughout the rest of the company, um, here to learn for that. So that's the stack, uh, when that adds up. Got it. Okay. Thanks, Rob. And then second question, I think in your commentary, you alluded to some restructuring or reorganization, just, you know, any quantification. of any benefits, how much the savings will be retained versus reinvested, as well as how to think about the cadence of those actions. Thanks. Yeah. Hey, Quinn. This is Phil. Thanks for the question. Um, yeah, so we did some work this year. Um, there's puts and takes along this, but the easiest way to think about it going into 2027 is that we indicated about $90 million of a headwind on operating income from this, from not having a January 1st in 2027. So a lot of the changes and the puts and takes would be around that neighborhood. So around, call it 80 to 90 million is what we would expect. Now, there's going to be other things that come back as we reinvest in the business as well, but that's about the quant. Got it. Thanks, Tom.

Your next question from the line of Alex Sklar with Raymond James. Your line is now open. Please go ahead.

Great. Thank you. Rob, maybe first one for you, just with Dimensions coming up next week. I want to dig into new product velocity after bringing that Document Crunch team. Where does that integration stand today, and how are you thinking about organic product expansion motion to kind of grow your share of customer wallet? How much more needs to be done there? Thanks.

Good morning. Thanks. Great question. So, hey, we're very excited for Trimble Dimensions next week. We are going to be... Leaning into the platform story that we have at Trimble, the unique one at the intersection of the physical and digital. As you can imagine, we'll have a lot to say as it relates to AI. We have, I think it's 800 sessions that are scheduled. So, not only is that us being able to talk about new products, it's our customers leading a lot of those sessions. We're running a... Off-site, in addition to the... into the on-site. So, the new product, the Velocity will, you know, our customers and folks like yourself who can make it out there, we'll be able to see what we're doing both in the office and in the field. And if we take Document Crunch specifically, this is a fantastic team. We've put more capital behind this team. They are actually, I think, kind of helped a lot of the rest of the business see what's possible as it relates to product velocity in an AI native fashion. A lot of inspiration there. We've actually given that business and the leader of that business additional responsibility for payments, as well as there's a couple new products that we're going to launch at Dimensions next week. One of them specifically, a year ago, we would have been looking at acquiring a business. And fast forward in an AI world, we've built it ourselves and are ready to take it out next week. So a lot of really just, I can't say enough good things about the Document Crunch team, Josh and everyone in that business. And then more broadly, just at Dimensions, it's going to be a fun week.

Okay, great color. And then I'm not sure who wants to take this one, but digging into the AACO segment, can you parse out some of the trends? Seeing from that core kind of TC1-enabled, multi-product base versus the kind of one to two product customers, is the divergence in trends related to retention or cross-sell, is that widening at all? Thanks. I'll take that one. I'd say it's quite consistent what we see. The upsell motion actually was where we had the most growth in this last quarter, upsell growth, outpaced cross-sell growth by a little bit. So that's it. That means we're deepening the penetration within our existing customers. We're winning new seats. So that's a good sign of deepening adoption within our customers. And what we tend to see is that a cross-sell motion at one time period creates the upsell motion in a future period. There's a certain logic to that, to see that play out. And what that means then is we continue to see steady growth of customers going from one to two, two to three, three to four, et cetera, et cetera, et cetera, et cetera, et cetera. or applications that they're, that they're using from us. So continue to feel really good about the fundamentals that we have there in the business. And then actually also want to highlight beyond ACO. Truth of the matter is, is the customer doesn't care about ACO or field. It's Trimble construction capabilities. And at that intersection point, we think there's really exciting things that we can continue to do to unlock that work in the field. So think about the survey.

There's collecting data, machine control, streaming, real-time positional awareness, and linking that into the office with the systems that are managing those projects and the schedules and those financials. That BIM model meets the financial model meets execution and progress in the field. That's special. That's unique and something we think we can only do. All right. Great. Thank you for the call.

Next question from the line of Rob Wertheimer with Milius Research. Your line is now open. Please go ahead.

Hi. Good morning. You guys have unpacked the field system fairly well. And I don't suppose it's a surprise really that South American Ag is weak. On the bundled offering in construction, was there a geographic overlay? Because it seems like North American construction is picking up pretty well. And then just out of curiosity, it seems like you bundle it with new machine sales subscription. But was there any. Anything else in there where you're wrapping other products from Trimble into that?

Hey, Rob, good morning. So, on the bundled offerings, are you referring specifically to machine control offerings out of field? Or do you mean it more broadly? Yeah, yeah. I just didn't know if you were able to wrap the machine control slash correction services and field into anything else.

Got it, got it. I'm estimating. So, from the B2W acquisition we've did a few years ago. Estimating and then infield trap capabilities is a natural, has been the most natural place where we're bundling at either the point of sale or doing co-sell motions with the direct and the indirect teams, you know, the referrals. So, if you're doing estimating for civil construction, you know, earth moving specifically, it's logical that one who is buying our machine control systems also needs to create estimates. for that earthworks. The next thing that's very logical to connect to that is project management. So, you're right. You're managing the work and then project management in the office and the field. So, those become the bundles, Rob. And I would say those still, I think, are in their very early days. So, we think we have a lot of room to run there to perfect that motion. And then you can imagine once you do that, the next move on the board is connect that to the financial system and take a north America market. For example, we, you know, uniquely have density and that construction financials. And by the way, also within financials, and I don't just mean ERP, I also mean payments, because earth moving contractors generally get paid based on how much earth or how much dirt they're moving. And you can see how that would flow back into our ability to manage the projects and the financials and the payments.

All right, perfect. Thank you. That's interesting. And then just in general, though, in the in the quote unquote weakness that you saw in outside of ag, in field systems, was there any Europe or any geographic overlay on that, you know, that would further explain? Thank you. Well, I call it Europe in field systems. I called that out in the in my opening remarks. And I go back to the first quarter when we talked about the war in the Middle East and how that would play out and that, you know, I had a degree of caution in the back half of the year. Or if. The war didn't end, that that's definitively not good. It's not good for our business in the Middle East. And, you know, we see the inflation that that has rippled through Europe. So I'd say that was modestly weaker. And then that was offset, as you noted, with the strength in the US. Thank you. Your next question from the line of Kristen Owen with Oppenheimer. Your line is now open. Please go ahead. Hi, good morning. Thank you.

Thanks for the question. I recall that we talked a little bit about this last quarter, but maybe just coming back to it, help us understand, you know, that gap that we're seeing in ACO revenue versus ARR growth. And then just given the term license calendar piece, does that gap start to narrow in 2027?

Hey, Kristen, good morning. This is Phil. Let me take that one. So, yeah, the main dynamics on that delta is, well, there's two pieces. I'll call it the timing of the term licenses. The term licenses, we recognize that revenue up front. We smooth that out for ARR. And so that timing can, in any given quarter, can be up or down. There's also a facet of that, that if we sell some multi-year terms, there's even more revenue in a given quarter. The other piece of it is professional services that we have still in AECO, a large portion, particularly in our owner's business. That's been declining as we move more and more from customization. into more standard cloud offerings. And so, that obviously is not tied to ARR. So, that's why we are focused on ARR that really normalizes those dynamics. And if I look over a longer term, if I just look at our full year, for example, this year, the gap actually closes. We're guiding in the low to mid-teens for the revenue growth and about 13% for ARR. So, that does get closer if you look at it over a multi-quarter period.

Great. Thank you so much. And then, I did want to follow up to the extent that you're able to give an update on the transportation business. Obviously, conditions in Europe have changed. Diesel prices have come up. So, just any sort of update that you can provide on the alternatives discussion there. Thank you.

Hey, Kristen. This is Rob. The answer is it's business as usual for us. And I hope you got a sense from my prepared remarks that there are a lot of really good things happening in the business. Having both of those user conferences in the quarter grounded us and the importance of what we do. The European market has its puts and takes, you know, with the diesel prices. There's aspects that, of course, are not good. And then there's other aspects which create business for us. So the message overall is the same as last quarter. There's no predetermined outcome or timeline as it relates to the review. Great. Thank you.

Your next question from the line of Mark Chappell with Loop Capital Markets. Your line is now open. Please go ahead.

Hi, thank you for taking my question. As you look ahead into 2027, Rob, could you just talk about any changes that you anticipate on your go-to-market strategy? You know, in particular, maybe you could talk about how you're thinking about sales coverage or channel partnerships, cross-selling, and maybe where you see some. Some of the greatest opportunity for improvement there.

Good morning. Hey, great question. I give the teams, all our teams, great credit for the transformations they've made over the years on the go-to-market side of the house, really moving from product-based selling to platform selling to that named account user selling, which is absolutely crucial if you're going to drive the cross-sell opportunities. You know, best serve the customers for what they buy from us. I'd say the next wave of what I would characterize as our opportunity to level up would be at the intersection of the direct and the indirect, so with the ACO and field where we serve common customers, we're able to do that, I think, quite well at the enterprise account level, and I've seen that get better and better throughout the year, so I would expect to see good things from the team there, and maybe at some more late 27 into 28 were at scale without much of the hand holding that it works on its own, but that intersection point, direct, indirect, serving large account opportunities, it's going well, and I think that we're going to be able to unlock even quite a lot more of that next year, and there's even an intersection point with our form of forward deployed engineers working with that when we're doing that. It's just really exciting to see what customers are unlocking with our technology. Thank you, you're welcome.

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

Hey, good morning, guys. So Rob, I wanted to go back to your prepared remarks when you were talking about the different capabilities of AI in your process. You mentioned that, you know, there's millions of dollars of labor savings. So I guess my question is, number one, you know, how much does Trimble or how much is Trimble entitled to capture? And then number two, can you talk about the adoption of those capabilities by your customers, by your region?

Hey, Chad, good morning. So it really is just, it's fun. It's exciting. I think it's compelling to see what these capabilities are achieving and what they're accomplishing. Again, I'll keep coming back to this frame that we want to drive adoption engagement. There's a lot we're learning. There's a lot our customers are learning. With respect to, I'll say, a thought on value, I'll call it value capture and how we think about that. We think about quantifying value delivery and then getting our fair share of that value capture. So the equation for us has got to start with the value that's created for the customers, and then we work backwards from there. So that's a more really a thematic answer that I'd give you. And you can see order of magnitude improvements as you transcend from what we call a point solution productivity into workflow, solving those higher order problems. And there are aspects. You could say somewhat separate but related where we can see savings in labor hours. Say if you're using document crunch and you're doing where AI is automating redlining, there's less human intervention needed for that. Or on the ERP side, I referenced automation and payroll and invoices and expense reporting that we think is saving hundreds of thousands of hours and therefore millions of dollars in labor hours. So we think about it. We definitely think about, so I'll say labor savings for customers, which matters so much in this market that is tight on labor, understand that, quantify that, and then work backwards to our value capture.

And that value capture, you know, at a minimum, we would want to be within a frame of how we've historically done that with a bias to that being even higher.

Great. That's helpful. And then maybe. I just wanted to talk about your M&A pipeline and your approach. So, I guess, like, how do you think about the split between buy versus build, especially now that we're shifting more towards AI capabilities as products?

Yes, Chad, it's a great question. I mean, first, within the capital allocation frame with the M&A. Pillar, we believe in discipline M&A that fits our strategy, and it has to absolutely fit our strategy, and we differentially think about the intersection of the physical and the digital. So, in other words, differential interest and capabilities that hit at that intersection point. Yeah, my answer today on buy versus build, I think, is different than it would have been a couple of years ago, where today we have a sharper lens on acquisitions that might have been more, I would have described as tuck-in in the past. We're asking ourselves a lot more questions if we can build instead of buy. And next week at the user conference, we'll have at least one, maybe more examples to be able to share. We're making announcements on some, we're going to call them capabilities or features or products that we've been able to build fast and we're building them inside of our platform and native way connecting them. That's different. That's pretty exciting. Great. Thanks all. You're welcome. We have reached the end of the Q&A session and that does conclude today's call. Thank you all for attending. You may now disconnect.