Trimble Inc. — Q3 2021 Form 10-Q
Business context and reporting period
Trimble provides technology solutions across construction, geospatial, agriculture, utilities, transportation, and related markets. This unaudited quarterly report covers the quarter ended October 1, 2021, and the first three quarters of 2021; comparisons are with the corresponding 2020 periods. Dollar amounts below are in millions unless stated otherwise.
Financial performance and liquidity
| Metric | Q3 2021 | Q3 2020 | First three quarters 2021 | First three quarters 2020 |
|---|---|---|---|---|
| Revenue | $901.4 | $792.1 | $2,733.1 | $2,318.0 |
| Gross margin | $504.5; 56.0% | $439.7; 55.5% | $1,523.2; 55.7% | $1,286.4; 55.5% |
| Operating income | $147.5; 16.4% margin | $102.0; 12.9% margin | $433.2; 15.9% margin | $297.9; 12.9% margin |
| Net income attributable to Trimble | $124.0 | $84.7 | $377.4 | $209.6 |
| Diluted EPS | $0.49 | $0.34 | $1.48 | $0.83 |
- Q3 revenue grew 14%; product revenue rose 19%, subscription revenue 12%, while service revenue was roughly flat. Year-to-date revenue grew 18%.
- Q3 and year-to-date GAAP operating income each increased 45%. Q3 non-GAAP diluted EPS was $0.66, up 10%; year-to-date non-GAAP diluted EPS was $2.04, up 27%. These are company-defined non-GAAP measures and exclude specified costs and adjustments.
- Operating cash flow was $595.2 for the first three quarters, versus $483.7 in 2020. Investing activities provided $51.0, including proceeds from business and property sales; financing activities used $363.2, including $140.0 of share repurchases. Cash increased $275.5 to $513.2.
- At quarter-end, total debt was $1,321.9 carrying value; principal outstanding was $1,329.2, down $226.7 from year-end 2020. Current assets were $1,560.5 and current liabilities $1,141.2. The company reported compliance with debt covenants and access to a $1.25 billion revolving credit facility.
- Management said cash, operating cash flow, and available borrowing capacity should be sufficient for anticipated operating needs, debt service, planned capital expenditures, and potential repurchases over the next 12 months.
Material changes and business trends
- Buildings and Infrastructure revenue grew 10% in Q3 and 16% year to date; Geospatial grew 24% and 33%; Resources and Utilities grew 23% and 24%. Transportation revenue rose 1% in Q3 and was essentially flat year to date.
- Annualized recurring revenue was $1,363.6 at quarter-end, up 8% year over year, or 11% excluding foreign currency and divestitures. Software, recurring revenue, and services represented 55% of year-to-date revenue.
- Q3 gross margin improved modestly year over year. Management cited strong revenue, lower amortization, less discounting, and favorable product mix, partly offset by higher hardware supply-chain costs.
- Other income included gains from business sales; other income, net, was $16.6 in Q3 and $42.4 year to date. Interest expense also declined year over year.
Outlook, risks, and contingencies
- The filing provides no specific numerical revenue or earnings guidance. Management reported strong demand and expects the shift toward software and recurring revenue to continue.
- Supply-chain disruptions, component shortages, extended lead times, freight expense, and parts and labor constraints were affecting operations. Management expected these issues to persist, potentially delaying shipments, increasing costs, reducing revenue or gross margin, and extending backlog. Longer-term, higher-cost binding commitments may limit flexibility.
- Remaining performance obligations were approximately $1.6 billion; the company expected to recognize $1.2 billion, or 75%, in the next 12 months. Backlog conversion remains subject to delivery and other execution risks.
- Unconditional purchase obligations were $696.3, compared with $241.1 at year-end 2020, mainly reflecting platform investments under the Connect and Scale 2025 strategy and non-cancellable inventory commitments.
- The company announced a $200 million strategic venture fund. Its $750 million share-repurchase authorization had $650 million remaining at quarter-end and may be suspended or discontinued at the company’s discretion.
- Risks include COVID-19 and macroeconomic effects, supply constraints, foreign-exchange and interest-rate changes, tax examinations, acquisition integration, and execution of strategic investments. The company reported no material legal proceedings and no material changes to risk factors since its 2020 Form 10-K.
Important facts for investors to verify
- Whether component availability, freight costs, and longer lead times continue to constrain shipments, margins, and backlog conversion.
- Whether recurring-revenue and ARR growth persists, and how growth and profitability develop across the four segments, particularly Transportation.
- The sources and sustainability of earnings growth, including business-sale gains, tax benefits, and the adjustments excluded from non-GAAP results.
- How the substantial purchase commitments and Connect and Scale 2025 investments affect cash needs and operating flexibility.
- Debt maturities, covenant compliance, and actual use of the remaining repurchase authorization and venture-fund capital.