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Earnings call: Trimble Outlines Record ARR and EBITDA Margins in Q4

EditorRachael Rajan
Published 02/12/2024, 04:14 PM
© Reuters.

Trimble Inc. (TRMB), a global leader in positioning technologies, reported robust performance for the fourth quarter and full year of 2023, with record annualized recurring revenue (ARR) and EBITDA margins. The company's ARR reached $1.98 billion, marking a 13% organic increase from the previous year. Gross margin and EBITDA margin also hit record highs at 64.7% and 26.6%, respectively. Despite a 3% year-over-year decline in product revenues, Trimble saw overall revenue growth, driven by strong recurring revenue offerings and strategic focus on their Connect & Scale strategy. Looking ahead, Trimble provided optimistic guidance for 2024, anticipating continued ARR growth and improved financial metrics.

Key Takeaways

  • Trimble's ARR surged to a record $1.98 billion, a 13% organic uptick from last year.
  • Recurring revenue represented 49% of total revenue in 2023, signaling a strategic shift.
  • Gross and EBITDA margins reached all-time highs of 64.7% and 26.6%, respectively.
  • Revenue increased by 24% year-over-year, with organic growth at 13%.
  • Product revenues dipped by 3% year-over-year but are stabilizing.
  • North America exhibited growth, while Europe faced economic challenges.
  • Buildings and Infrastructure segment saw over 30% year-over-year bookings increase.
  • The company expects organic revenue growth of 4-7% for 2024, with EBITDA margins between 26.5% and 27.5%, and EPS between $2.60 and $2.80.

Company Outlook

  • Trimble anticipates strong ARR growth in 2024.
  • Organic revenue growth is expected to range from 4% to 7%.
  • EBITDA margins are projected to be between 26.5% and 27.5%.
  • Earnings per share (EPS) are forecasted to be between $2.60 and $2.80.
  • An Investor Day is planned to discuss the evolution of the business.

Bearish Highlights

  • Product revenues saw a 3% year-over-year decline.
  • Challenging macroeconomic conditions in Europe impacted growth.
  • Resources and Utilities revenue decreased by 4% year-over-year.

Bullish Highlights

  • Recurring revenue offerings in the Buildings and Infrastructure segment performed strongly.
  • Geospatial revenues experienced an organic growth of 1%.
  • Transportation revenue increased by 1% organically, with Transporeon achieving record bookings.
  • The TC1 platform in the AECO segment has been successful, with plans to use it as a template for other business areas.


  • No specific misses were highlighted in the provided summary.

Q&A Highlights

  • Trimble is focusing on signing up more dealers for its Agriculture segment and working with new partners from the AGCO realignment.
  • The company is making progress with its digital platform, with 15% of revenue transacted through it in 2023 and expectations to increase this to around 35% in early 2024.
  • Operating margin guidance suggests an 80-180 basis points improvement, with higher gross margin from recurring revenue businesses and cost management.
  • TC1 agreements accounted for 50% of Q4 bookings, with strong cross-selling and upselling driving higher average selling prices.

Trimble's financial results reflect a company in transition, leveraging its digital platform and recurring revenue models to drive growth. With its focus on operational efficiency and strategic realignment, Trimble is positioning itself for sustained profitability and market leadership in the years ahead.

InvestingPro Insights

Trimble Inc. (TRMB) has demonstrated a notable performance with their latest financial results, showcasing a strategic pivot towards recurring revenue and operational efficiency. To further contextualize Trimble's position in the market, let's delve into some key metrics and insights from InvestingPro.

InvestingPro Data reveals that Trimble's Market Cap stands at $13.68 billion, underscoring the company's substantial size in the positioning technologies industry. Despite a slight dip in revenue growth over the last twelve months as of Q3 2023 (-0.61%), the company has seen a quarterly revenue growth of 8.18% in Q3 2023, indicating a potential rebound and positive momentum going into 2024. Additionally, the company's Gross Profit Margin remains strong at 63.44%, aligning with the high margins reported in their financial summary.

InvestingPro Tips highlight that Trimble is currently trading at a high earnings multiple with a P/E Ratio of 40.45 and an adjusted P/E Ratio for the last twelve months as of Q3 2023 at 37.52. This suggests that the market has high expectations for the company's future earnings growth. Furthermore, Trimble's stock is known for its low price volatility, which might appeal to investors looking for stability in their portfolio.

A noteworthy point for investors is that analysts predict the company will be profitable this year, which is corroborated by the company's positive outlook for 2024. Trimble has also been profitable over the last twelve months and has seen a strong return over the last three months, with a 25.47% price total return, reflecting investor confidence in the company's growth trajectory.

For those seeking to explore additional insights, InvestingPro offers a total of 9 InvestingPro Tips for Trimble, providing a comprehensive analysis of the company's financial health and stock performance. To access these tips and enhance your investment strategy, consider using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.

Full transcript - Trimble Navigation Ltd (NASDAQ:TRMB) Q4 2023:

Operator: Good morning, and welcome to the Trimble Fourth Quarter and Full Year 2023 Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. Rob Painter, Chief Executive Officer of Trimble, you may begin your conference.

Rob Painter: Welcome, everyone. Before we get started, our presentation is available on our website and we ask that you refer to the safe harbor at the back. Our financial commentary will reflect non-GAAP performance metrics, including organic growth comparisons, which refer to the corresponding period of last year, unless otherwise noted. Strategic progression takes place as a series of a thousand little steps, periodically punctuated by non-linear moves and events. Reflecting on the quarter and the year, 2023 represented a transformative year for Trimble. Within the portfolio, the Transporeon acquisition and the announcement of the agriculture joint venture with AGCO represent two of the larger moves in the history of our company. Reflecting on our Connect & Scale strategy over a five-year timeframe, the structural improvement in the business is self-evident and is the result of methodical work over the last few years by our colleagues and partners. Annualized recurring revenue finished 2023 at a record $1.98 billion, up 13% organically, and represents the single biggest lever we have to increase shareholder value. This compares with ARR of $1.1 billion five years ago. Recurring revenue was 49% of our total revenue in 2023 and 53% in the fourth quarter versus 31% in 2018. Remaining performance obligations closed the year at $1.8 billion. Gross margin closed at a record 64.7% in 2023, up 470 basis points over 2022. This compares to 58% five years ago. This is definitive structural improvement. EBITDA margin closed at a record 26.6% for the year. In dollars, we crossed the threshold of $1 billion of EBITDA. This compares to EBITDA of 22.6% five years ago. Operating leverage has been 44% over a five-year timeframe. We are running with negative working capital, and we closed with free cash flow of $555 million, up 60% over prior year. Our ARR and low capital intensity punctuate the difference between industrial technology and industrial. While the evolution of our financial metrics during our transformation have been compelling, the bigger takeaway is how this positions the company today for success now and in the future. Trimble has never been in a better position to help our customers succeed with solutions that address the growing intersection of the physical and digital worlds. We are eager to leverage our strong market position and unique assets to drive continued profitable growth in software and technology-enabled services, to expand margins and to showcase our ability to increase the company's overall returns through smart capital allocation. We believe this framework is the winning formula for a world-class industrial technology company, and we believe executing against this plan will allow Trimble to unlock and sustainably compound value for shareholders. With that structural context, let's turn to Slide 3 and talk about our three-fold framework that guides our capital allocation priorities looking back on 2023 and forward into 2024. First, we remain committed to executing our Connect & Scale strategy. Over the last several years, our P&L investments have been heavily biased towards our software assets in architecture, engineering, construction and owners, which we refer to as AECO. This focus is driven by the size and immediacy of the secular opportunity. Our transformation of AECO software represents the tip of the spear for the company and increasingly provides a template for how we will operate across all of Trimble. Looking at tactical proof points of progression, let's start with our product strategy. Trimble Construction One, or TC1, can be thought of as a commercial framework around pre-packaged bundled offerings. In the fourth quarter, we doubled the number of these pre-packaged offerings by serving more users across more vertical segments. Nearly half of our AECO bookings in the fourth quarter were TC1 bookings. We come into 2024 with a strong portfolio, and we will learn, adapt and expand these offerings. As we connect more of our data and workflows, we will continue to expand these offerings, powered by the investments we have been making in our underlying systems and enhanced by our process transformation. After a couple of years of hard work, we can now see a 360-degree view of our customer set, which unlocks marketing and selling insights to enhance our go-to-market motion with more advanced marketing and selling strategies that are more efficient and cost effective. We will continue to roll-out functionality in 2024 and we will expand the capabilities across more geographies and more of the product portfolio. And it goes further, because product, systems and process work have to link to an aligned go-to-market organization in order to turn possibility into a reality. As measured by cross-sell activity, more than 20% of 2023 annualized contract value, or ACV, bookings in AECO were cross-sell bookings. In the fourth quarter, this number accelerated to over 25%. This didn't happen by accident. The acceleration comes from a packaging of solutions across business lines and is enabled by our digital transformation. We are winning on the breadth of capability. To put this into further context, the AECO teams delivered over 30% ACV bookings growth in 2023 and had a record fourth quarter. Slide 4 shows a number of quotes from our customers, who've continued to give us positive feedback about our direction. We are delivering lifecycle value and uniquely connecting workflows, all while making ourselves easier to do business with. As we come into 2024, we are moving towards an account-based selling model, which will further align ourselves to sell TC1 and cross-sell offerings. This capital allocation is working, and is built on our strategy around the construction continuum that has been accelerated by successful M&A over the last 10 years. Back to Slide 3, the second of our three capital allocation priorities is to further simplify and focus our business. In the last four years, we have divested 21 businesses that did not meet the must-have threshold of a connect and scale business, namely the ability to further a connected industry solution while delivering compelling and sustainable financial results. In early 2024, we divested a small water metering business and a steeler business that we owned in Germany. We continue to look for areas where we can further simplify our portfolio, which goes beyond divestitures. We have reduced thousands of SKUs in the last couple of years and turned a number of standalone products into features within larger bundled solutions. In September, we announced our joint venture with AGCO, which naturally led us to rethink how we organize ourselves, which in turn unlocked an ability for us to further simplify and focus our teams. In the second half of 2023, we undertook $50 million of run rate cost reductions, $10 million ahead of our commitment in November, recognizing that we needed to say no to more things so that we could further focus on the organization. Given the pending AGCO JV and the new organizational structure that officially went into effect in January, we reorganized the business under three pillars: AECO, Field Systems and Transportation and Logistics. This structure brings similar businesses together, enhancing our ability to achieve scale and growth. The new organization in place is already off to a good start, and hats off to the team for executing these changes seamlessly. Beginning with the first quarter, we will naturally re-segment our reporting results to reflect the way we view our business. And when we do this, we will simultaneously be able to deliver an increased level of clarity on our business models that many of you have been seeking. Slide 5 provides an overview of the direction we are going with these three segments, while providing a bit of color on the software and recurring revenue centricity of each segment. Returning again to Slide 3, let's talk about the third of our three capital allocation priorities, which is return the capital to shareholders. In September, when we announced the JV, we communicated our plan to pay down debt and return capital to shareholders via a buyback. In the fourth quarter, we executed $100 million of buyback. On January 30, our Board approved a new buyback authorization of $800 million, replacing the remaining authority under the prior plan. We reiterated our intention to pay down $1.1 billion of debt and communicated that our near-term intentions on M&A are to focus on tuck-in opportunities. These capital allocation priorities sit against the backdrop of our day-to-day execution. They also sit within a context of what we are seeing in our end markets across the global economy. Geographically speaking, North America has been overall healthy. Europe remains quite challenged. The agriculture and transportation markets face macro headwinds, a result of commodity prices and overcapacity in trucking. The engineering and construction markets have proved to be more resilient, with puts and takes across sub-segments. Control what we control is the operating theme in place. We deliver an enduring value proposition in the form of productivity, quality, safety, transparency and environmental sustainability. Record bookings in parts of the business such as AECO software and Transporeon, demonstrate the durability of the business. David, over to you.

David Barnes: Thank you, Rob. Slides 6, 7 and 8 cover the financial highlights for the quarter and the year. Organic revenue growth in the fourth quarter was plus 3% and for the year was plus 1%. Excluding the agriculture business, growth was 6% in the fourth quarter and 4% for the year. Standout metrics for 2023 include a 470 basis point improvement in gross margin and $555 million in free cash flow, enabled by profit growth and the success of our efforts to bring inventory levels down. With net debt at $2.8 billion, we remain ahead of the deleverage plan we put in place at the time of the Transporeon acquisition. We have paid down $268 million of the debt incurred to finance the deal. We ended the year with net leverage of 2.8 times, only modestly above our long-range target of 2.5 times. The JV with AGCO is pending regulatory approval, and we continue to expect that the transaction will close in the first half of this year. For modeling purposes, we have assumed that the deal closes early in the second quarter. With debt paydown following the AGCO JV transaction close, our leverage will be below 2 times. Slide 9 covers revenue trends by geography and business model. $1.98 billion of ARR is the standout highlight, up 24% year-on-year and up 13% on an organic basis. Product revenues, which are non-recurring and predominantly our bundled hardware and perpetual software, were down 3% year-on-year. Excluding agriculture, product revenues were down less than 1%, reflecting the stabilization of these businesses now that dealer inventories have come well down from their peak in early 2022. Dealer inventories are now broadly in line with dealers' business outlook, and our sales trends going forward are expected to track underlying demand trends. By geography, growth in North America reflects the relative strength that Rob referenced earlier. APAC revenues were strong, driven by growth in Australia and India. Revenues were down organically in Europe, reflecting challenging macroeconomic conditions across many the end markets we serve there. Slide 10 breaks down performance at the segment level. In Buildings and Infrastructure, the highlight in the quarter was the strong performance of our recurring revenue offerings. Bookings in our AECO software businesses increased over 30% year-on-year, driven in part by the strong cross-sell and TC1 performance, which Rob mentioned earlier. Aided by the bookings performance, segment ARR grew year-on-year by just under 20%, with net retention over 110%, and at the highest levels this business has seen. Segment revenues of non-recurring offerings, principally machine control for civil construction customers, were relatively flat year-on-year, resulting in total segment revenue up organically by 10%. Segment margins were up by 290 basis points year-on-year, driven both by fixed cost leverage and by the mix shift toward higher margin software offerings. In Geospatial, revenues grew organically by 1%. Our && revenue in this segment breaks down across three broad categories: field sales to end users, government business, and OEM business. Sales of our core survey and mapping products to end users returned to meaningful growth in the quarter, reflecting a healthier state of dealer inventories and improving underlying market conditions. Offsetting the strong end user growth, component sales to OEMs were down as we lapped some unusually large shipments a year ago. Segment margins were up by 180 basis points, driven principally by lower component input costs versus year-ago levels. In Resources and Utilities, organic revenue for the quarter was down year-on-year by 4%. Excluding sales of products to agriculture customers, Resources and Utilities revenues were up by approximately 10%. Segment operating margins were lower year-on-year by 160 basis points, driven principally by lower revenue. In Transportation, revenue was up 1% organically. Segment organic ARR was up mid-single digit as growth in our transportation enterprise software and MAPS businesses offset the anticipated impact of churn in our North American mobility offerings. Transporeon remains an inorganic comparison, and the highlight in the quarter for Transporeon was achieving a record level of bookings, up over 20% versus prior year. We were encouraged by the sales performance of the team in light of the difficult macro dynamics in Transporeon's core European market. Segment margins increased year-on-year by 610 basis points, reflecting the higher margins of Transporeon and margin progression in the balance of the segment. Let's move now to 2024 guidance on Slide 11. I will focus on our performance, excluding our Agriculture business and including on a go-forward basis, our more limited exposure to Ag, as a 15% owner of the JV and a supplier of products to the JV. For the sake of completeness, we show on Page 11, two views: a reported view with the Ag business included through the first quarter of 2024; and an as-adjusted view without the agriculture business, which will ultimately be operated within the JV. The outlook for ARR growth remains strong, driven by momentum across our AECO software businesses. We expect full year organic growth rates in the 11% to 13% range, off our year-end 2023 levels of $1.98 billion. As-adjusted organic revenues are expected to grow for the year in the 4% to 7% range. Please note that our fiscal 2024 will include 53 weeks, and the extra week will increase full year and fourth quarter revenues by approximately $85 million. On an as-adjusted basis, we expect margins to improve, with EBITDA margins between 26.5% and 27.5%. This represents margin improvement year-on-year of between 100 basis points and 200 basis points. The margin improvement will come from a combination of improved software mix and the impact of the cost actions we took coming out of 2023. From a cash flow perspective, we expect full year cash flow of approximately 0.85 times non-GAAP net income. Excluding the costs relating to our AGCO JV transaction and the impact of the 53rd week, free cash flow is estimated to be approximately equal to non-GAAP net income. Our base cash flow forecast assumes no change in tax legislation. A bill moving through the U.S. Congress will, if enacted, restore the immediate expensing of R&D for tax purposes. If passed, this legislation would improve incrementally our cash outlook for 2024 by approximately $130 million. Our EPS forecast for the year reflects the beneficial impact of our planned deleveraging following the close of the AGCO JV and up to $800 million of share repurchase. We expect EPS for the year in the range of $2.60 to $2.80. I'll finish by offering a few comments on how our guidance for 2024 breaks out by quarter and by segment. We expect organic revenue growth to be strongest in Buildings and Infrastructure. Software businesses in Buildings and Infrastructure are expected to grow in the mid to high teens with product-related businesses up slightly, leading to organic revenue growth for the full year of between 11% and 13%. Buildings and Infrastructure organic growth includes approximately $70 million from the 53rd week. We plan to accelerate model conversions from perpetual to subscription software, tied with hardware in our civil construction business. Geospatial revenue is expected to be down slightly on an organic basis, with growth in field sales and survey offset by lower sales to U.S. federal customers where business tends to be lumpy from year-to-year. We will also accelerate model conversions from perpetual to subscription software in our survey and mapping business. Resources and Utilities as-adjusted organic growth will be up in the high-single digits, led primarily by continued growth in our positioning services business. Transportation revenues are expected to be up in the mid-single digits for the year and relatively flat on an organic basis, with growth in Transporeon offset by lower North American mobility revenue. We expect reduced hardware revenue in mobility, as we are intentionally pivoting that business away from lower-margin hardware sales to OEMs, instead focusing on the higher value-added data flows. From an operating margin perspective, we expect to grow margins year-over-year in the Buildings and Infrastructure and Resources and Utilities segments. Transportation margins will be up slightly, while Geospatial segment margins are expected to be down year-over-year due to changes in customer and product mix. For the first quarter, let's turn to Slide 12 for additional color. On an as-adjusted basis, we expect organic growth between 2% and 6%, and EBITDA margin between 26% and 27%. Buildings and Infrastructure is expected to drive most of the organic growth in the first quarter, with low-single digit growth in Geospatial. As-adjusted Resources and Utilities is expected to post high-single digit revenue growth in the first quarter. During the first quarter, we expect to see softness in Ag. Weakness in the global ag market is certainly a factor, but the bigger driver is the expected impact of the transition in our distribution strategy. Transportation revenues in the quarter are expected to be down modestly on an organic basis. Overall, we expect sequential improvement in Transportation segment organic growth rates as the year progresses, driven by gradually improving end market conditions and the inclusion of Transporeon in our organic trends, beginning in the second quarter. As Rob mentioned earlier, we are moving to implement a new segment reporting structure that reflects our updated organization and the way we will evaluate our businesses and allocate capital going forward. Our plan is to publish more details on our new segment reporting structure later in the first quarter, with financials going back two years and the perspective on how our 2024 annual guidance cascades to the new segments. We will have a separate conference call with investors to review that information when it is available. Rob, I'll turn it back over to you.

Rob Painter: Thanks, David. We were busy in the fourth quarter preparing ourselves to come into 2024 with a running start. We were with over 10,000 customers at Trimble user conferences in September, October and November. We recommitted to our capital allocation priorities, undertook cost reduction, prepared to reorganize the company and made our numbers for the quarter. We plan to host an Investor Day later in the year to discuss the evolution of the business and to provide investors with more financial detail, including updated targets. I will end by taking a moment to welcome Ron Nersesian and Kara Sprague to the Trimble Board, two fantastic additions. Operator, we can now open the line to questions.

Operator: [Operator Instructions] Your first question comes from the line of Kristen Owen from Oppenheimer. Your line is open.

Kristen Owen: Hi. Good morning. Thank you for taking the questions. I wanted to start with maybe the Q1 guides. It sounds like there's some moving pieces in there. And when I look at this outline that you provided on Slide 12, it looks like Ag is really the driver between the revenue growth numbers there and maybe what we would have expected. So, if you could help us just understand what the underlying growth in the JV assets looks like in the Q1? And just any other moving parts that we should be considering for the 1Q guidance? Thank you.

Rob Painter: Good morning, Kristen. This is Rob, and thanks for the question. So, coming into Q1 and thinking about the guide at the company level, what I would want you to hear is the momentum we have with the ARR and the overall business and the stabilization of the supply chains throughout most of the hardware businesses, which reflects in the total year guide. With respect to the first quarter specifically within the current Resources and Utilities segment, some of this is a quarterization topic, and then when we double click within that, within the Ag business specifically, there's two dynamics to consider: one is, at the overall market level, so call it market sentiment; and then the other is, within the transition of the relationship. So, at the overall Ag market level, you can see that from some of the market statistics from farmer sentiment in the U.S. and Europe, and what we've seen from some of the OEM posts on their numbers and unit expectations coming into the year. So that's part of the topic. And then, the other one is called more the aftermarket side. We're in the transition with the prior corporate relationship we've had and into the new JV relationship. And in that time of transition, there's a natural gap. And so, we never expected, as we've been making this distribution transition, that it was going to be a perfectly linear transition. So, we really think about it at the annual level, not at just a quarter-to-quarter comparison to really track the progress. So, the work is well underway from the integration planning between the teams, from signing up dealers in the aftermarket. So, before you get that revenue in the aftermarket, we've got to be signing up the dealers. And so, it's like comparative to looking at bookings and software business that you got to get the booking before you get the ARR. So, I hope that color helps you, Kristen.

Kristen Owen: Yeah, thanks for that, Rob. The other question that I have is a little bit longer term sort of post this AGCO JV. When we look at some of the momentum that you outlined, particularly around like the TC1 platform, how do you use that as a framework in some of the other areas of the business going forward? If you can outline any areas where maybe you're seeing growth with existing customers, how that's driving that cross-sell revenue? And as you go through these model transitions in some of the field services business, how you can use the success that you've seen in TC1 in those areas?

Rob Painter: Yeah. I'm glad you asked that question, because the work that we're doing around TC1 and currently within the B&I segment, soon to be, you'll hear me talking about it with AECO moving forward, architects, engineers, construction and owners, and the digital transformation work that we've been undertaking, people, process, systems work over these last few years, it's really been vastly proportionate to this construction -- overall construction software part of the business. And really, we see it as the template for the rest of the company. We see it as the tip of the spear. There's a lot of work that's gone into it. There's also a lot of learnings that have come along with it, and I mean that in a very good way. The success of what we see in those bookings is demonstrable proof-point, that the strategy works. So, as we think about taking that into other parts of the business and we look forward, let's say, into the future field systems part of the company, what we saw is -- in the quarter is, that we're growing ARR at a double-digit clip in those businesses. And so, we can already take some of the ideas and frameworks around TC1 into other parts of the business. For example, bundling of our correction services -- positioning services with the hardware products that we have. We've been undergoing some model transitions in some of the hardware businesses, where we can separate value between the underlying hardware and then have a subscription or a term license on top of that. So, it's a -- there are things that happen in parallel. It's not perfectly serial, but for sure on the AECO software side of the business, that is a great template for us, and it has certainly been working so far.

Kristen Owen: Thank you for the time.

Operator: Your next question comes from the line of Jerry Revich from Goldman Sachs. Your line is open.

Jerry Revich: Yes. Hi. Good morning, everyone.

Rob Painter: Hi, Jerry.

David Barnes: Good morning.

Jerry Revich: Rob, why don't we just talk about, given the organizational change, obviously you laid out the restructuring savings and opportunities, can you comment on just beyond restructuring? How has the P&L responsibility shifted at all? It sounds like there are more changes beyond just cost savings. I'm wondering, if you could just expand on that. You alluded to cutting back, I think, on some lower ROI projects. Can you just talk more about the opportunities of the realignment beyond cost savings?

Rob Painter: Sure, Jerry. Thanks for the question. I'll give you a couple examples. At the AECO leadership, Mark Schwartz is looking after that segment for us now. And at the field systems level, Ron Bisio is looking after that. So, two examples of where we reoriented leaders. Ron's history is long -- baseline history of Trimble is within our hardware businesses and dealer channel expertise. And so, we have all of that consolidated under Ron now, across all the hardware-centric businesses we have. Mark Schwartz has spent the bulk of his Trimble career in that AECO software space, and has just done a terrific job picking up the baton here and taking the business forward. And actually under his leadership, the growth has been accelerating in the business. So that's on the people side of the realignment. A couple of examples on the cost side. Jerry, we took a couple of lenses to this. One was we looked at some bigger areas where we saw that the revenue potential was pushing out from more near to mid term to mid to long term. So, Autonomy is an example of that, where we took, I'd say, a bigger chunk view of -- a realignment view on that, and did a reprioritization of capital allocation. The other one was a fair amount of the cloud investments we were making, platform investments we were doing at the corporate level, and what we decided to do was move those closer to the coalface, closer to the business, so it manifested -- given that AECO is the tip of the spear for the transformation work, move that closer to the AECO leadership, where you have to make those capital allocation trade-offs. They are closer to the coalface. And what I see is some organizational efficiency that comes out of that. So, those are a couple examples on the cost side, when we really took a look at saying, how do we get simpler? How do we get more focused? We've got to execute at a sharper clip. And I think Q4 was evidence that those moves are working, and as we come into Q1 and come into 2024, I'm confident that we've got the right org in place working on the right things.

Jerry Revich: Thank you, Rob. And separately, can I trouble you folks just to flesh out the performance of Transporeon for us? Exiting the fourth quarter, what was organic growth, logo growth, retention rates? You mentioned bookings were good. Can you just expand on some of the quantitative numbers on the performance entering '24?

Rob Painter: Sure. Happy to do that. So just as a reminder, that business model is mostly a transaction model, a consumption model. And so, let's say, at the macro level, the European -- and it's still predominantly European-centric business. The economy hasn't improved. I think, we understand that about Europe when I say that, so that's a headwind to some of the transactions, and there's less spot as compared to contract, which is unfavorable to the business model. Within that, though, we think about control what we can control. So, I'll give you some numbers. Gross retention in the business is essentially 100%. I exclude Russia, where we elected not to do some business, and to get out of that business in Russia, ARR in the high-single digits, operating margins above 20%, and at the deal model level that we had, which means the team is doing a good job working the cost line. The fourth quarter itself was a record bookings in the company's history. At new product introduction level, we have new products such as autonomous procurement, which are driving that book -- part of the reason that's driving that bookings growth beyond the value proposition that we already delivered to the customers. And at a product integration level, our global teams are working together to come to a single -- just one single feature for real-time visibility, bringing the MAPS technology, we already had at Trimble, into the Transporeon business, for example. So those are a few statistics, quantitative and qualitative for you, Jerry.

Jerry Revich: Thank you, Rob.

Operator: Your next question comes from a line of Jonathan Ho from William Blair. Your line is open.

Jonathan Ho: Hi. Good morning. Just wanted to get a little bit more color on your thoughts around, I guess, the macroenvironment as it relates to your guidance and the potential impact to, I guess, the organic growth outlook as you start to look to next year?

Rob Painter: Hey, Jonathan. Good morning. It's Rob. On the macro outlook, well, I'll start with North America -- geographically, North America is the strongest of the overall geographies. Europe is still a challenge, and I think will remain a challenge throughout 2024. So, those are the two major geos that impact the overall business, I would say. Asia Pacific feels a little bit more steady as she goes within that context. Within the vertical markets, in construction, it won't surprise you that we overall see strength in subsegments such as infrastructure, renewables, data centers, reshoring, onshoring drive positive momentum for the bookings. Residential remains more challenged on a global level, and worse so in Europe. The freight markets which would impact our Transportation business, those remained quite challenged, I'd say -- I'd really say globally on that. I commented already on Agriculture, and we see those macros challenged a little bit more globally as well. The thing I would overlay on top of that, Jonathan, as we think about coming into 2024 is, just how structurally different our business is as compared to the Trimble of old. And so, I think it's instructive to think about that $1.98 billion of ARR that we closed the year with. And by the way, that's the way we do that calculation. It's averaged across the fourth quarter. So, if you took really the contracted ARR, what we ended with, that would even be higher. So, we woke up on January 1st with that visibility and predictability into the business. We know from the bookings that we closed the fourth quarter with, how that helps accelerate that growth coming in. So, I think it's an important overlay when we look at the business model. And on one axis -- a business models on one axis, and then the overlay of the geographic and end market segments on the other axis to come to a point of view on the macros that support our view on the guide for the year.

Jonathan Ho: Excellent. And just as a follow up, can you maybe help us understand where we are in terms of the distribution partnership realignment? And what does the opportunity look like just given the divestiture coming up and just the changing nature of your positioning within the space? Thank you.

Rob Painter: Jonathan, do you specifically mean Agriculture? Or do you mean distribution realignment across all of Trimble?

Jonathan Ho: The Agriculture segment of it.

Rob Painter: Okay. All right, from -- okay. So, from the realignment on a distribution, there's a few levers there that we work. One is with the C&H aftermarket dealers themselves, and we continue to be able to sign those up as what we refer to internally as retail outlets that work alongside our full-line vantage dealers. So, the sign-ups of the dealers, I'd say, that goes according to plan. And then, with the AGCO realignment coming in with that, I'd say in addition to that, that's been part of the integration planning work that we've got with the team, and we've got a clear line of sight now to how we're going to work with those new partners coming into the mix. So, in terms of the planning work, I would say it's well underway and it's what we need to do to get the business off to the start, we would like to see it get off to.

Jonathan Ho: Great. Thank you.

Operator: Your next question comes from the line of Tami Zakaria from JPMorgan. Your line is open.

Tami Zakaria: Hi. Good morning. Thank you so much. So, at the last Investor Day, I think you had a slide, you expected about 20% of revenues transacted through the connected digital platform by 2023, and that would go up to 70% by 2024 and 90% by 2025. I know, you're hosting another Analyst Day probably this year. So, where are you in that journey now in terms of getting revenues through that platform?

David Barnes: Hey, Tami, it's David Barnes. One thing I'll say, just as context, is digital transformations and big process and system projects are really hard, and our experience is no different. We ended 2023 with about 15% of our revenue going through the new digital platform, that's principally the North American AECO software businesses. We've been rethinking the scope and focus of our next phase of digital transformation. We'll go from 15% to probably closer to 35% here in early 2024, and that involves bringing more of our businesses. So, including the e-Builder and Cityworks suites, and then expanding the AECO effort all over the globe. We're right now in the process of rethinking how our digital platform interacts best with our hardware businesses and with transportation. So, I'll be -- I'll hold-off in giving a forecast on how we go from 35% to more of the business. I think, we have a more informed and smarter approach now, and we're rethinking our priorities.

Rob Painter: And those priorities, if I can add to that to build on David's comment, is for sure to continue on the software businesses as the priority for the work.

David Barnes: Yeah, that's right. Rob said in his commentary earlier that the AECO business is the tip of the spear. It's where we see the highest, most direct early returns through the digital transformation and TC1 and selling bundles. So, that's where our focus is at the moment.

Tami Zakaria: Got it. That's very helpful. Thanks, David and Rob. The second question I have is, I just wanted to understand the operating margin guidance for this year better. I think, excluding the Ag JV, it seems like you expect about 80 basis points to 180 basis points of operating margin improvement this year. What is really -- what are the building blocks of that? How do you really get there? And also, what is the impact of that 53rd week, if any at all, on that margin guide?

Rob Painter: Tami, I'll start -- this is Rob. I'll start with giving you perspective, and then let's have David build on that. I'll start at the structural level of the company, ending the year at 64.7% gross margin compared to 58% from just five years ago. We look at the operating leverage, we've driven over that five-year timeframe, is at 44%. We talked about the bookings progression in Q4, that adds to the ARR, and that contracted ARR that we would have ended the year with coming into the year. So, at a structural level, the baseline of the business is poised to be able to increase the level of gross margin as we continue to grow the business. And you would see in the web tables the difference between the gross margins at the product level versus at the gross -- product level versus the subscription and software businesses, and just how much higher the gross margin is in the software-centric businesses. So, from a straight mix perspective alone, you drive gross margin up. And I'm talking about that structural gross margin because that is a primary driver of what can enable us to drive that operating margin expansion. We also talked about the costs management in the prepared remarks, which is another side of the equation. And David, do you want to build on that?

David Barnes: Yeah. So, as Rob said, structurally, our recurring revenue businesses are higher gross margin, you can see from disclosure, it's about 80% gross margin on the recurring revenue streams versus about 50% on the product stream. So, a lot of the roughly 100 basis point to 200 basis point margin improvement become -- flows directly from the ongoing mix shift of the business. With regard to the 53rd week, we quantified that that'll have about an $85 million revenue benefit for the year, all in the last quarter. The one thing I'll say though, is that's not the only discreet factor that's impacting our business. As I mentioned in my remarks, our business with big government customers, particularly the U.S. federal government, is lumpy from year-to-year. We talked about that as being a good factor earlier in 2023. So, that'll work against us. And then, we're doing model conversions focused on the software that's bundled with hardware. So, if you actually take the change in the federal business and the impact of the model conversions added to the 53rd week, they roughly offset each other. So, my way of looking at the underlying growth momentum of the business, I would say the 53rd week is a positive. Those other factors offset that positive and they're relatively neutral.

Tami Zakaria: Got it. Thank you so much.

David Barnes: Sure.

Operator: Your next question comes from the line of Jason Celino from KeyBanc Capital Markets. Your line is open.

Unidentified Analyst: Great. Good morning, Rob. Good morning, David. This is actually [Devin] (ph) on for Jason today. Thanks for taking our questions. I want to start with the construction software business. Nice to hear bookings growth exiting at more than 30% over there. Really strong results. Maybe looking at 2024, seems like macro could be improving and TC1 really seeing strong traction there. How are you kind of thinking about bookings growth to trend for 2024 and any additional maybe puts and takes you can kind of give us on how the different sub-product group would kind of perform for the year?

Rob Painter: Devin. Hey, good morning. This is Rob. Let me give you my perspective and thoughts on the bookings opportunity we have within the AECO software business. And this is a business now that comes into the year with, call it, in the range of $1 billion of ARR to start with, so of the company's, call it, $2 billion of ARR. So, we're talking some law of large numbers to continue to grow at that double-digit ARR clip, and we have to continue to be able to book at a healthy level. And all of 2023 was evidence of that, and accelerated even into the fourth quarter of 2023. So, we come in with some momentum and confidence around that. The color I'd like to put around that with Trimble Construction One is that it unlocks the cross-sell and up-sell by putting in place a framework that allows our customers to easily scale with us, that in turn unlocks our bundles and the offerings that meet the customers' needs. And so, that then creates an environment where inside the company, we're working together to help scale a customer's usage of our products with a lot less friction that they would have had in the past. And we're seeing faster times to close deals. We're seeing a greater share of wallet share captured when a new logo enters our ecosystem. And one of the things we said in the prepared remarks was that our TC1 agreements have now accelerated to make up 50% of the bookings that we had in the fourth quarter. And those agreements are the basis that powers that cross-sell penetration and that made up 25% of the fourth quarter bookings that we had. Coming into 2024, we'll continue to expand TC1 by rolling it out to more regions, for example, Asia-Pacific, and we'll roll it out into more of the portfolio. For example, that's the "O" and the AECO. So, we play those factors forward. We've got a belief set that we can continue to grow those bookings in the AECO space at a quite healthy double-digit level.

Unidentified Analyst: Got it. No, that's very helpful color. And then, just a quick follow-up on TC1. It seems like things are really picking up over there. I want to ask, are you still mainly seeing adoptions among existing customers that are opting for TC1? Or are you seeing more new customers kind of adopting that product? And then, in terms of kind of the ASP opportunity, are you still kind of seeing the 2 to 3 times uplift that you kind of highlighted at your Analyst Day from TC1?

Rob Painter: Yeah. Good question, Devin. So, there is both, it's existing customers and new customers. At the existing customers, for sure, and call it in the construction ERP space, those are uplifts that we've continued to drive, the conversions from on-prem to the cloud. And as you make that transition from on-prem to the cloud, doing more than just a lift and shift actually changing the nature of the offering. And it's not just a pricing mechanism, it's a value-based mechanism because then you can get access to the broader array of what we have to offer our customers. We do continue to see a healthy uplift when we make those conversions above a 2x rate. And then, on the new logos, well actually within -- it's sort of a blur between existing customers and new customers. What we can see from the cross-sell data is that the customers who still predominantly are buying one or two solutions from us are picking up that third, fourth, fifth, depending on the nature of the exact bundle that they're buying from us. And then on a straight new logo basis, we are certainly continuing to see wins from new customers. So really, it's all of the above answer. When you have new customers, of course, there's not an uplift in the equation. It's all straight new revenue.

Unidentified Analyst: Great. Thanks for all the details.

Operator: Your next question comes from the line of Chad Dillard from Bernstein. Your line is open.

Chad Dillard: Hi. Good morning, guys. So, I wanted to go back to your question about the adjusted operating margins, and I was hoping you could bridge from '23 to '24. Just trying to understand like the moving parts of cost savings mix, operating leverage and more specifically, the impact of the AG divestiture.

David Barnes: Okay. Let me start with the last point. So, when we announced the Ag deal, we said that the impact on a '23 pro forma basis of the divestiture of Ag was about 70 basis points negative to operating margins, so that's where we started, and you can see the '24 outlook in our as-adjusted table. The principal drivers from there, as I mentioned earlier, we're planning on an as-adjusted basis, i.e., without the Ag business in the base, 100 basis points to 200 basis points of margin improvement. One way to think of that, Chad, is essentially all of it is in the gross margin improvement, which is a natural impact of mix. If you drill down a little more, we do have the benefit of cost reduction, but we are adding resources where it's driving growth. In fact, all or slightly more than all of our year-on-year OpEx is in our AECO business, where we had over 30% bookings growth, and we have about 20% ARR growth, we are really allocating our operating capital to pour the coal on that on that business. So, you can think of it as taking the cost reductions we've taken and reallocating it to the highest-return, highest-growth business.

Rob Painter: And if I can build on David's comment, which is exactly right, in that capital allocation call. So, the capital allocation call within the P&L to continue to put that go-to-market OpEx into the AECO space. One of the things I should have said in the response to one of Devin's questions was when we look at the net retention ratio, we're near 110% in the AECO part of the business. It's a terrific, terrific outcome that the team is driving. We look for -- what's an instructive measurement for us is looking at the customer lifetime value divided by the customer acquisition costs. And what that data is telling us is that we're well above three on that is -- that tells us that is a place to continue to put OpEx into. You don't get an ROI on that OpEx in year one. So there's, call it, a trade-off there is that we're playing the long-term game to continue to fuel that bookings growth, which will generate long-term sustainable ARR growth, and of course, overall revenue growth.

Chad Dillard: That's helpful. And then, just on the segment reorg, can you talk about the impact on your distribution in go-to-market? Just trying to understand like the operational changes here. I guess like what you can do better now versus before under the old structure?

Rob Painter: Yeah, Chad, I'm glad you asked that, and that's a good question. And let's take the what we are calling field systems now. So think of that as the -- in the old segmentation, the Geospatial businesses that we have, predominantly the one you'll know the best is survey, and then we have the machine control business that distributes through our SITECH that traditionally have gone through the B&I segment. So those come together under Field Systems, Ron Bisio is looking after that. I'll give you a demonstrable evidence of a change that we already made. We have one person responsible for sales now for all the Field Systems. One in APAC, one in the Americas, and one in Europe, Middle East and Africa. So, one person in each to call that three. And that would have been six people, because we would have had that duplicated just a few months ago. What that does, beyond just driving some -- just efficiencies that you could expect, it actually also allows us to rethink the allocation of how we use resources. That frees up some capability for us to put time and effort and money and people into ongoing dealer development. So, beyond the chase, the short to mid term numbers is actually having resources that can help our dealers think about a long term business. In some cases, Chad, we have dealers who cover multiple businesses for Trimble. Some do both civil and survey, some do ag and survey, some do ag and survey and civil. And with one set of eyes or one set of accountability overall of those is we can make more cogent decisions about how we make natural trade-offs that will happen between the portfolios. If I look at the product -- that's the go-to-market. If I look at the product side, what it unlocks is, I'd say, more efficiency in how we think about measuring the hardware SKUs that we have. Over the last few years, we've reduced the SKUs by 10% in the company. That drives simplification and underlying systems. We have one view on our GNSS portfolio, for example, that goes across the business, one point of view now on the total stations and the scanners that can be used across multiple parts of the portfolio. So, I think it drives just a lot sharper portfolio thinking when we look at it at the product lens. So, we put that product lens together with a go-to-market lens, and I think that positions us well. I think, this is -- I think, it was time to do it, and the announcement of the JV gave us a reason to really rethink how we did things and to move fast to put it in place. And the teams, they did all the planning work in the fourth quarter and they've come out of the gate, I'd say, quite strong here as a team, as an aligned team with a defined set of OKRs, objectives and key results, that we've defined by each of these major businesses.

Chad Dillard: Great. Thank you.

Operator: Your next question comes from the line of Joshua Tilton from Wolfe Research. Your line is open.

Joshua Tilton: Hey, guys, thanks for taking my questions here. In the prepared remarks, you guys talked about being open to continuing to divest certain aspects of the business. When you look across your three new reporting segments, where do you see the most opportunity to maybe divest over the next 12 months and continue to simplify the portfolio?

Rob Painter: Well, good morning. Hey, thanks for the question. This is Rob, I'll give you the lens I have on it. I think about two axes on this one. One axis is the financial profile of the business, call it, the -- yes, there's a short-term view on the profile and then there's a long-term profile view on a business. And can it meet the expectation of returns that we have, whether it's return on invested capital or accretion at an ARR growth or at an EBITDA level. On the other axis, we'll look at the strategic attractiveness of that. That could involve the competitive position, but it also looks a lot at an individual businesses or product, let's say, capability to make the whole stronger. And if something sits on its own and isn't making the whole of the business stronger, so it doesn't contribute to a stronger Transportation business or a stronger Construction business, then it's not in the -- let's say, in the favorable side -- it's on a less favorable side of my 2x2 that I'm laying out, and the financial one speaks for itself on that 2x2. So, if I look and apply it against the portfolio, one of the things, if I take Field Systems as an example, within that, going back to the financial crisis back in 2008, there was a time when we had to step in and be the ballast for some of the dealers at the company. And we came in and we acquired a few of the dealers. But we're not ultimately long-term the best owners of a distribution business. We really think that belongs with entrepreneurs out in the field, very, very local businesses. So that would be an example of the divestiture we talked about here in just actually the last few weeks, as an example. So, we would look for parts of the business like that, that really we don't see ourselves as the best owner. So, I'll comment there as opposed to specifics within each of the businesses. But I think we can demonstrably say that we've had the courage to take a look in the mirror, as evidenced by 21 of the divestitures in the last few years driving this simplification and this focus, because we think that that drives the efficiency and the output and the outcomes for the company.

Joshua Tilton: Very helpful. And then, it also sounds like we're going to get a little more color around the '24 guidance in context of these new reporting segments when you give us that additional disclosure. But maybe if I just step back and take a little bit longer view, like how do you guys think or how should investors think about the different growth rates across those three segments over the next, call it, three to five years?

Rob Painter: Yeah. So I'm going to stay pretty high level on that because, I think, it'll be more appropriate to take that view when we do the next Investor Day. On the slide, I think it's Slide 5 in the presentation that was attached to the prepared remarks, we did give a sizing of AECO Field Systems and Transportation and Logistics, sizing from a view, and it's plus or minus on the revenue for 2024, and maybe more instructively, at the -- with the software breakdown and the recurring revenue breakdown within each of those segments that we'll have. What I can say on top of that, at company level and what we've talked about in the past is we think we can continue to drive the double-digit level of growth of the annualized recurring revenue. And so, that's number one or two on the top strategic priorities I've got for the company. Field Systems makes up the hardware businesses. That's one, I think is instructive to look back to 2019. And if you look at that longitudinal growth of the CAGR over that timeframe, it is in the range of what we have put forward at prior Investor Days in terms of, call it, at a four to 6%, depending on which part of the business, the survey business we've historically talked about at 4% to 6% level, with some of the other hardware being a little bit higher. But that's what compromises that. So you could look at that past data and I think that 2019 to 2023, or you could extend it into 2024 view, fits within the range. We've got that. And obviously, it's been up or down and the standard deviations have been high within a quarter-to-quarter view. That's why we think it's instructed to look at a long baseline view. And then, you'd come to the Transportation business and what's new of course, since the last time we would have done in -- an analyst model or an Investor Day, would have been the addition of Transporeon into the portfolio. So, I'll give you that view to start with, and let's stay tuned. But maybe one thing that's -- an additional thing I'll say that could be interesting is when we last did the Investor Day, we said by -- if you did the math by 2027, that we would be a 60% recurring revenue business. And if you take David's prepared remarks and guide at a pro forma level, we think we'll be there in 2024. I'll leave you with that.

Joshua Tilton: Super helpful. Thank you.

Operator: Your final question comes from the line of Rob Wertheimer from Melius Research. Your line is open.

Rob Wertheimer: Yes. Hi. So, I wanted to ask two on the Transportation market, if I may, and you touched on this earlier, Rob, on Transporeon, where you had a good bookings quarter in the midst of, I assume, a pretty weak European market. So, any further commentary on what you changed there, or if anything changed to drive that growth? And given that business is levered to spot transactions and rates, any insight as to what the sustainable growth might be when that market comes back? And then just the second question will be simply on the idea of de-emphasizing hardware sales to OEMs in Transportation, and focusing on the flow of data. Is there any strategic link there? Do you get less flow of data if you don't have as much in the field on devices? And could you just talk around that issue? Thank you.

Rob Painter: Yeah, Rob, thanks for the question. So, let's take them in order with the bookings growth in the fourth quarter, and what is still a difficult market overlay. I think it demonstrates the value proposition that the technology provides, and I had a chance to go to our customer conference in Barcelona in September, and what you see in a room like that, and what you can see on the PowerPoint slides are some of the very largest logos in the world who use our Transporeon technology. It's really quite impressive, whether it's retail or CPG, or packaging or building construction materials. When you look through the different verticals, it's really an impressive array of companies and a difficult market environment while companies can be reluctant to either spend the money or to spend the organizational effort to make a change, to do something different, the fact of the matter is that we can drive efficiencies and productivities -- productivity into our customers. What we see is that our win rates are as high as they've ever been. And so to us, that's an important factor in how we think about the business. And the control of what you can control, and not losing market share is an important metric. And we think that the bookings, while they're less than we would like on an overall annualized basis, I'll be clear on that, within what we've got, that they are showing that we're holding, if not gaining share in the market. So, I do have my gratitude to the team for delivering that and fighting it out every day. And you asked about the spot contract mix and what could that look like on the other side. It's like I heard Jamie Dimon, when asked what's the definition of a recession, he said, it's something that happens every seven years. So, take some version of that quote. If it was actually true, take some version of that quote. We know that the freight markets go up and down. So, the market will -- and it does show signs of having stabilized. Now stabilized is different from increasing. What we can see over a long baseline is that the business out of freight recessions has accelerated strongly coming out of that. And it makes sense, and it's a consumption-based model, is that we would expect if the market inflects, and I'm not making a call that it will inflect in 2024, to be clear, as it inflects, the business just naturally can significantly increase the level of revenue that comes through. And I'd say at a strong double-digit level is what I would expect that to move to. And then, last you asked about at the OEM level and the de-emphasizing of the hardware. I'd say the hardware in the Transportation segment is quite different than the hardware around the rest of Trimble. There is less differentiation in that onboard compute, and these days even more of our own in call them, in-cab hardware devices are close to commercial off the shelf tablets. So, making our own hardware years ago was a unique, differentiated factor and it seamlessly integrated into our full software offering, and you are kind of like one throat to choke, offer the full solution. As that technology landscape changed, it's just not a great place to be. We refer to it internally as the lower calorie -- low-calorie revenue, because there's just not attractive margins or [indiscernible] margins with all of the hardware. Not all of the hardware is equal, but at that OEM level, if OEM wants to value engineer the lowest cost hardware, it's just not a place, I think we're going to ever be the best doing that at some kind of global scale. Thus, looking at the data integration. When we look at the data, OEMs have one set of data that they're interested in, which is frankly different than what customers are interested in to run their businesses. That is to say that data on machine health is extraordinarily valuable to the OEMs. And by the way, it is important to customers, but it usually comes to customer service agreements, whereas customers operate mixed fleets of equipment and the customers are trying to drive their own productivity and efficiency and safety and visibility, and to operate within whatever installed base of technology that they've got. And so, we think that data feed will continue to be necessary both at the -- for the OEM level, but also you need to be able to provide a gateway, so to speak, to be able to bring the customers on to a more fully functional, in this case, telematic solution. And by the way, whether that's Trimble or not Trimble solutions, I think that would be true for the market to have that flexibility. So Rob, I hope that helps provide some color.

Operator: And this concludes today's conference call. We thank you for joining us today. You may now disconnect.

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