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We’ve shifted to a supply constrained environment in 2021: Trimble CEO

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Rob Painter, Trimble CEO joins the Yahoo Finance Live panel to discuss the growth of the company being driven by recovering demand in construction, stimulus measures and infrastructure.

Video Transcript

ZACK GUZMAN: We're still waiting for updates in regard to negotiations around President Biden's nearly $2 trillion infrastructure bill proposal and what sort of compromise might be reached on that front. That obviously looms large for a lot of companies levered to infrastructure projects, like California-based company Trimble, which straddles the physical and digital world, a project-enabling technology.

Company beat expectations when it reported earnings earlier this month and upped its full-year guidance, giving a range of $3.4 billion to $3.5 billion in full-year revenue, reflecting some uncertainty between a rebound in demand as the economy reopens and potential spillover from an ongoing chip shortage. And for more on l, happy to welcome back into the show, Trimble's CEO Rob Painter joins us right now.

And Rob, just looking at Trimble's business segments over the last quarter, you guys reported buildings and infrastructure, geospatial seeing the biggest pops, while transportation lagged year over year. So how are you seeing things play out at Trimble here moving forward?

ROB PAINTER: Well, at the moment, we're quite bullish on what we're seeing in the macros. So we're seeing what appears to be a construction-led recovery. And we're seeing it, really, on a global basis, including here in North America as we begin discussions around an infrastructure bill.

We see commodity prices, as we know, are strong. And that's been helping our agriculture business as well as our forestry business. So a nice backdrop at the moment.

AKIKO FUJITA: This comes, of course, at a time when there's a lot of concern about prices increasing. I wonder what you're seeing from an inflation standpoint, cost increases. How significant a headwind do you think that's going to be for your company?

ROB PAINTER: Well, if we look at the $3.2 billion in revenue that Trimble has on a trailing 12-month basis, the majority of our revenue today is software-based. And actually, fully 1/3 of our revenue is recurring revenue today.

When we look at the hardware businesses in Trimble, that's where we would expect to see more of the inflationary aspects that are rippling through the supply chain. And they really break down into two categories. There's a transitional aspect, where we expect to see temporary inflation that will come back down. And then there is what appears to be some more structural inflation. And that looks like what we're seeing on the chip side of the components.

So our operational teams are hard at work to make sure we secure our supply. And this is a case where the scale and scope of Trimble is a benefit for us to be able to have access to continued supply.

ZACK GUZMAN: Yeah. How does that work too? Because when we talk about the chip shortage impacting, maybe, some of the smaller suppliers, and you're flexing your scale here to kind of weather that storm-- I mean, how are you seeing it impact all kinds of your business there? Because we've, increasingly-- maybe Akiko knew this. But we're learning more and more about all the sectors impacted by the chip shortage. So what are you seeing internally in terms of Trimble's projects that might be something that investors really haven't connected the dots on yet?

ROB PAINTER: Well, I think we're hearing about this throughout the economy. So I don't think we're unique at all in this respect. And what really, in 2020, was a more demand-constrained environment appears to have shifted to a supply-constrained environment here in 2021.

When we look at the way we forecast the business, we've been seeing really strong growth in the company. We were up 12% in the first quarter year over year. So that demand has really come back. And it's really a lot of blocking and tackling within the supply chain teams to secure supply.

We can use the balance sheet to our advantage because we can extend ourselves to take supply for long periods of time. But it is difficult. I mean, it seems that something does pop up every day, whether it's resonance shortages that came out of Texas during the freeze or the Suez Canal or the more structural aspects that we're hearing about.

AKIKO FUJITA: Rob, it feels like we have overused the words digital transformation over the last year. But as a software company, certainly, you've got a lot of visibility about the shifts that are happening within these companies. There seems to be concern about how much of that momentum, over the last year, can be continued.

I wonder if you can give us some insight on what you are seeing across your clients and how these shifts are likely to continue, even past the pandemic.

ROB PAINTER: Well, Trimble's 43-year history, really, is one of connecting the physical and digital worlds. That means connecting the hardware and software in Trimble and really bridging the divide between the office and the field.

The good news for us is we didn't just wake up and decide that we needed to digitize. We've been up to this for many years, actually decades now, in this vision we have to deliver products and services that connect the physical and digital.

We see increased demand from our customers. The technology platforms that we have are enabling precision agriculture. And that feeds a growing world's population. Our construction platform, as it digitizes, connects the architects, the engineers, the contractors, and the owners to really deliver more project efficiency. In the world of transportation, our technology platforms connect the shippers and the carriers and bring that awareness of what's happening in the field, what's happening in the real world into business planning optimization engines.

ZACK GUZMAN: All right, Rob Painter, CEO of Trimble, appreciate you coming back on here to chat with us today. Be well.