Trimble Inc. — Q1 Fiscal 2021 Form 10-Q
Business and period: Trimble provides technology solutions for construction, geospatial, agriculture, utilities, transportation, and related markets. The unaudited quarter ended April 2, 2021; the comparable prior-year quarter ended April 3, 2020. All amounts below are in U.S. dollars.
Financial performance
| Metric | Q1 2021 | Q1 2020 | Change |
|---|---|---|---|
| Revenue | $886.5 million | $792.3 million | Up 12% |
| Gross margin | $493.3 million; 55.6% | $441.0 million; 55.7% | Up 12%; rate essentially flat |
| Operating income | $140.9 million; 15.9% of revenue | $98.3 million; 12.4% | Up 43% |
| Net income | $114.6 million | $61.9 million | |
| Diluted EPS | $0.45 | $0.25 | Up 80% |
| Operating cash flow | $228.2 million | $155.7 million | |
| Cash and cash equivalents | $264.6 million | $237.7 million at FY2020 end | |
| Debt principal outstanding | $1,397.6 million | $1,555.9 million at FY2020 end | Down $158.3 million |
Product revenue rose 16% to $539.4 million, subscription revenue rose 11% to $184.8 million, and service revenue was essentially unchanged at $162.3 million. Software, recurring revenue, and services represented 56% of total revenue. Management reported annualized recurring revenue (ARR) of $1,319.2 million, up 9% year over year.
Net cash used in investing activities was $9.2 million, versus $214.4 million used in Q1 2020, when the Kuebix acquisition was included. Net cash used in financing was $186.9 million, including $154.9 million of net debt repayments and $40.0 million of share repurchases. The company had $1,389.4 million of debt on its balance sheet, including unamortized discounts and issuance costs; it reported compliance with debt covenants.
Segment results and notable changes
- Buildings and Infrastructure: Revenue of $343.1 million, up 16%; segment operating income of $96.4 million, up 59%. Growth reflected construction demand, hardware and related software sales, and subscription conversions and sales.
- Geospatial: Revenue of $181.7 million, up 24%; segment operating income of $48.7 million, up 60%. The filing cites new product introductions and stronger markets across major regions.
- Resources and Utilities: Revenue of $205.2 million, up 14%; segment operating income of $80.1 million, up 20%. Agriculture strength was supported by favorable commodity prices, government stimulus, and robust new tractor sales.
- Transportation: Revenue of $156.7 million, down 8%; segment operating income of $8.4 million, down 50%. The company cited competitive product-performance challenges in mobility, lower prices, declining subscriber count, and a divestiture; enterprise software subscription growth partly offset the declines.
GAAP operating income benefited from revenue growth and operating expense control. Non-operating expense improved to $3.5 million from $18.9 million, partly due to lower interest expense, increased equity-method investment income, and changes in deferred-compensation plan results. The effective tax rate fell to 16.6% from 22.0%, primarily due to a one-time foreign tax refund benefit and a change in geographic income mix.
Management also reported non-GAAP operating income of $209.2 million, non-GAAP diluted EPS of $0.66, and adjusted EBITDA of $231.3 million. These measures exclude specified items, including stock-based compensation, purchased-intangible amortization, and acquisition/divestiture costs; they are supplemental and are not substitutes for GAAP results.
Liquidity, outlook, risks, and contingencies
- Management said cash, borrowings available under credit arrangements, and operating cash flow should be sufficient for anticipated operating needs, debt service, planned capital expenditures, and any program repurchases for at least the next 12 months. The company had access to a $1.25 billion revolving credit facility maturing in May 2023.
- Remaining performance obligations were approximately $1.5 billion; management expected to recognize $1.1 billion, or 74%, as revenue over the next 12 months. This is not a full-year revenue forecast.
- Strong hardware demand was tempered by global supply-chain shortages, higher freight costs, and labor constraints associated with the lingering effects of COVID-19. Management warned these issues could raise costs, delay shipments, and reduce revenue.
- Forward-looking risks include macroeconomic and COVID-19 effects, seasonality, foreign-exchange and interest-rate movements, acquisition integration, and the ability to convert backlog to revenue. Foreign exchange favorably affected Q1 revenue by $20.6 million and operating income by $4.9 million.
- Unconditional purchase obligations were approximately $286.4 million, primarily non-cancellable vendor purchase orders. The filing reported no material litigation beyond ordinary-course matters and no material changes to the risk factors in the 2020 Form 10-K.
Important facts for investors to verify
- Whether supply constraints, component availability, freight costs, and labor pressures persist and affect shipments, margins, or revenue.
- Whether Transportation’s product-performance and subscriber trends improve, and how that segment’s results compare with the growth in the other three segments.
- How ARR and recurring-revenue growth convert into reported revenue and cash flow; ARR is a management performance measure, not GAAP revenue or deferred revenue.
- Whether the one-time tax benefit and foreign-exchange tailwinds materially affect comparisons in subsequent quarters.
- Debt repayment, available credit capacity, purchase obligations, and cash generation relative to management’s stated 12-month liquidity expectations.