February 11, 2025 • 45 mins
The growth in machine learning and artificial intelligence can drive significant productivity gains for trucking carriers and shippers. Those leaning into these new technologies will be able to make better decisions and drive improved economic outcomes. Transports appear to be in the early innings of this new technology revolution. In this Talking Transports podcast, Rob Painter, CEO and president of Trimble, joins Lee Klaskow, Bloomberg Intelligence senior transportation and logistics analyst, to share his insights into what AI has meant for the company and its customers. Painter also discusses internet of things (IoT), the importance of compounding and how Trimble is connecting supply chains through the life cycle continuum of sourcing, planning, executing and settling.
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Episode Transcript
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Speaker 1 (00:07):
Hi everyone, this is Lee Clasgow and we're Talking Transports.
Welcome to Bloomberg Intelligence Talking Transports Podcast. I'm your host,
Lee Clasgow, senior Freight, transportation and Logistics Analysts at Bloomberg Intelligence,
Bloomberg's in house research arm of almost five hundred analysts
and strategists around the globe. Before diving in a little
public service announcement, your support is instrumental to keep bringing
(00:28):
great guests onto the podcast like the one we have today.
If you haven't already, please do take a moment to
follow rate and share the Talking Transport Podcast with your friends, family,
and colleagues. We appreciate your support. I'm very excited to
have with us today. Rob Painter, President and CEO of Trimble,
a position he's held since twenty twenty. From twenty sixteen
(00:49):
through twenty nineteen, he served as the company's chief financial officer.
Joining the company in two thousand and six, Rob has
held a variety of leadership positions, including corporate development, corporate strategy,
general management of construction Services, general manager of the Intelligent
Construction Tools International joint venture, and Vice president of Trimble
(01:10):
Buildings Construction Software. In twenty thirteen, he was appointed to
serve on the Synopsis Board of Directors. Rob holds a
bachelor's degree in finance from West Virginia University and an
MBA from Harvard University. Welcome to the podcast, Rob, thanks
for joining us today.
Speaker 2 (01:27):
Lee, thanks for having me. Good to be here.
Speaker 1 (01:29):
So are you more of a mountaineer or a Crimson
Tide fan?
Speaker 2 (01:32):
Mountaineers? Baby? It runs deep?
Speaker 1 (01:35):
Okay. So you know, Trimble is a name that I
think you know people within the transportation world now and
in other markets that you know you do that you
guys do operate in. Can you talk a little bit
about Trimble? You know, what do you do and kind
of you know the markets that you serve. Yeah.
Speaker 2 (01:54):
Hey, the why of Trimble is to feed the world
and move the world, build the world. We've had a
forty seven year history and mission to transform the way
the world works. And we're doing that by applying technology
that's connecting work in the physical world and the digital world.
And we're primarily deploying that in industries such as transportation
(02:16):
and logistics, geospatial and engineering and construction. There's over twelve
thousand Trimble colleagues around the world doing business and over
one hundred and thirty five different countries today.
Speaker 1 (02:29):
And so and just for those that are n'taware, Trimble
is a public company as an eighteen billion dollar market
gap and trades on the symbol tr MB. So you
can find that on more information on the Blueberg terminal
all about Trimble. So could you just know you mentioned
the three things that you like to do, feed, build,
and move. Can you talk about you know, you know
(02:50):
why you're here today on talking transports, on your transportation segment?
What kind of software are you providing? How do people
use the software that you guys develop.
Speaker 2 (03:02):
Yeah, So to understand Tremble is probably to understand our strategy,
and for many years we've had a strategy to connect
industry life cycles. We believe in connecting users, data, stakeholders,
and workflow across the participants in an industry life cycle continuum.
So if we look at the transportation industry, we think
(03:23):
of the life cycle fourfold source plan, execute, settle, and
we see that life cycle for the carriers. We also
see that life cycle for the shippers, and at that
intersection point between the two, we see an industry platform
that comes together to move that data across the industry
life cycle. Continuum. So over the last twenty plus years,
(03:48):
we've built up a set of capabilities to serve that
industry life cycle continuum for both the carriers and the shippers.
To be more specific, that means we're doing transportation management,
We're doing maintenance, We're doing tracking and visibility, routing, mapping,
navigation optimization, safety compliance, just to name a few of
(04:12):
the many solutions that we have across the continuum. Our
history had predominantly been more North American based and more
carrier based. In twenty twenty three, we acquired Transporion, which
brought to us European centricity and Chipper centricity, and that
has given us a step function to really go after
(04:33):
this mission of transformation.
Speaker 1 (04:36):
Okay, and could you talk about the transportation logistics business
as it sits within you know, the bigger portfolio of
the company. Roughly how much is it responsible for the
revenues and earnings of the company.
Speaker 2 (04:48):
So at a public at our public company level, you
know today we have approximately over three billion I'll be approximate,
because we have here in a couple of weeks. Our
revenues stands over three billion US dollars today, over seventy
five percent of that is software today, So we're software
forward business. The hardware we have actually really serves as
(05:11):
that I think of it as an industrial IoT context,
that intelligence out in the real world of of what's happening,
and that connectivity is very central to our strategy between hardware, software,
office field, and physical and the digital worlds. If you
take the transportation business specifically, the segment that's one of
our three reporting segments in twenty twenty three, so I'll
go back another year in twenty twenty three, over seven
(05:33):
hundred million dollar business and it's predominantly the vast majority
of that is software.
Speaker 1 (05:40):
And I guess, is there any hardware play here that
you have or are you in the cabs or you're
just in the cabs through software on other people's I
guess devices.
Speaker 2 (05:51):
Yeah, So we've played in the telematics space for a
long time, so now we can talk. We'll probably come
to that in the conversation because we announced a few
months ago an intention to divest our telematics business into
a platform science and then to become the largest shareholder
in that entity on a go forward basis. So we've
(06:12):
very much been in the cab for a long time,
and that does help provide that basis of connecting the
field to the office.
Speaker 1 (06:19):
And could you talk about the addressable market for transportation
logistics At Trimble.
Speaker 2 (06:26):
We see it as over an eight billion dollar addressable
market today. At a company level, if we look at
all the markets we serve, we see about seventy billion
dollars of addressable market. But the eight billion dollars addressable
market we think is growing in the high single digit range,
and that that market is about forty percent penetrated today.
And that's something that's also been central to the thesis
(06:49):
of the strategy at Trembull is serving markets that are large, global,
that are underserved and under penetrated, that have fundamental challenges
to overcome, where technology can be a major component of
helping our customers do their work better, faster, safer, cheaper
and greener.
Speaker 1 (07:07):
And when you say, I guess sixty percent is unpenetrated,
could you give me an example of what that potential
customer would look like.
Speaker 2 (07:15):
So we held an investor day actually on December tenth,
so just a few weeks ago, when we went through
each of the three segments, and one of the things
we talked about in our transportation business is that we
see hundreds of millions of dollars of cross sell and
up sell opportunities. So if you think about the breadth
of the solution base we have and you map that
against the customers that we already serve today, we see
(07:37):
a compelling opportunity to serve our customers better by helping
them adopt more of the technology suite that we have,
and not only just let's say adopting more of the
technology suite we have. You could think of it as
those point solutions. What's more interesting than point solutions is
connecting workflow and connecting ecosystems, solving those higher order problems,
(08:00):
whether they're connecting Tremble or non Tremble solutions in order
to go after some of the bigger problems that our
customers have to address.
Speaker 1 (08:09):
Can you talk to us like you mentioned you got
more penetration the shipper market with a recent acquisition. Can
you talk about, you know, how a shipper might use
Trimble what like you know, what kind of software does
it use? How does it make them better, faster, smarter?
Speaker 2 (08:26):
Sure, so think of let's look at the TRANSPORTI on
business today. It's a transportation management platform. It's connecting carriers
and shippers. It's a shipper forward model. And so far
as we look at the shipper network we have, we
have over fourteen hundred shippers and the network. In that
same network, we have over one hundred and sixty thousand
(08:48):
carriers who are part of that. So now think about
connecting shippers and carriers. Over sixty billion US dollars a
freight is connected through that system. We can to over
We have three thousand integrations with ERP and warehouse management systems.
We have over twenty six million transports are driven no
(09:10):
pun intended through our system every year, every day. That
means there's a few hundred thousand transaction that's happening today
on our platform. It is a platform in the truest
sense of the world that's connecting the shippers to their carriers.
Speaker 1 (09:25):
Right and then, so not only I guess do they
can find capacity on the platform, it also helps them
with the billing and paying and paying the carriers as well.
Speaker 2 (09:35):
So thank sourcing, planning, executing, monitoring, settling, freight audit. These
are all services that exist on our platform.
Speaker 1 (09:45):
And when you say moderning, is that like tracking so
you can see where your freight is exactly gotcha. So,
you know, whenever you're putting together carriers and shippers, especially
in today's world, there's a lot of there's been an
increase in fraud in the trucking industry. How does your system,
I guess fight against that, Like, how do you vet
(10:06):
the carriers that are on the system.
Speaker 2 (10:09):
Well, just that we vet them by signing them up.
And often what our shipper customers will do is bring
to the US their carrier network, gotch So to extent
that the shippers have validated and vetted their carriers, then
that checks the checks the box on that one. So
it's not a yeah, there's not a what you would
(10:30):
call it the false positives that come across our network.
These are all identified shippers and identified carriers who have
been qualified to be in our network. In fact, many
of the carriers in the network would serve many of
the shippers in our network.
Speaker 1 (10:46):
So you know, you mentioned, you know, cross selling is
a big way to kind of tap that untapped market,
that that the market that penetrate that sixty percent that
you mentioned. Is there anything else that you guys are doing?
Is it? Is it kind of like the acquisition that
you mentioned? Is it doing more both on acquisitions where
it gives you access to different parts of the market
(11:06):
or different different geographies.
Speaker 2 (11:10):
Well, over time, Trimble's been an acquisitive company. We've acquired
over one hundred businesses over the last twenty plus years
in order to positively assert and affect the strategy of
connectivity that I talked about. Having said that, let's talk
about organic growth. We've put over two point five billion
dollars into research and development in the last five years
(11:32):
into our company. So I say very affirmatively that we
think about organic growth first, so attracting new customers to
Tremble and then working with them through the journey to
adopt more of our technologies. We think about innovating within
the portfolio we've got, making what we've got better and
more compelling, making what we've got more connected and therefore
(11:56):
more compelling. Again, I'm can get to this in the conversation.
We've been very forward in this business and investing in
AI for example, and automation and how that can unlock
new features and capabilities for our customers.
Speaker 1 (12:12):
All Right, you mentioned AI, so let's talk about it.
So what are you doing with AI? You know, where
are you in the journey? What is it doing not
only for you, Trimble, but what is it doing for
your customers, whether it's a shipper or a carrier.
Speaker 2 (12:28):
Yeah, so let's break that down and internal facing ad
options of AI and then customer facing and an internal perspective.
Over ninety percent of our engineers are using gethub Copilot
for code development and productivity. Therein we have our own
internal chat GPT, we call it Trimble Assistant, where the
(12:50):
entirety of the company can leverage that behind behind our firewall,
we've got to make sure we protect our intellectual property
as well as our customers data. From a more customer
facing perspective on AI, I'm going to give you a
few examples of that. So we've introduced autonomous procurement and
autonomous quotation capabilities. So in that matching of freight between
(13:16):
the shipper and the carrier, there could be a broker
as well between the shipper and the carrier. Autonomous procurement
is enabling no touch buying and what we're finding is
when we do this, we can deliver seven to twelve
percent savings on the freight. On the autonomous quotation side
(13:36):
of the house, what we're seeing is that pricing accuracy
is improved, and when you're matching that carrier and the shipping,
you're doing it in an automated fashion. You have an
ability to understand not only the price elasticity, but where
what's the state of any given lane and the necessity
to fill that lane. And so we're finding for our
customers that it's more efficient, they're getting better outcomes when
(13:58):
they adopt autonomous procurement and autonomous quotation. We're also using
it for customer support. As you can imagine, think about
in our personal lives, how often these days do we
go to YouTube to try and figure out how something
works that we own or that we've bought. This is
putting more of that power into our customer's hand for
them to be able to get the support they need
(14:21):
quicker using the technology in our mapping business. So we
have a very important and successful mapping business at Trimble,
so we're continually developing those maps, truck specific maps and routes.
Feature extraction, so using AI to automate feature extraction out
of the large data sets to get information. Like we
(14:45):
have a lot of data these days, data isn't the problem.
Information tends to be more of the problem. And so
when you can leverage the AI to turn the data
into information good things, Good things happen.
Speaker 1 (14:57):
And so is the AI has the AI or the
machine learning has that created new opportunities for you because
all of a sudden you had this wealth of data
on your system and now you know, you have tools
that can really process it and you know, provide a
level of analysis and forecasting that you probably might have
(15:19):
not had before.
Speaker 2 (15:20):
Yeah, I feel like the best examples we have with
that are this autonomous procurement and autonomous quotation. Now our
customers can still buy the manual use of that, and
so can you use leverage the technology, but do it
manually to find to find to find their carrier, to
find the loads that they want to take, or you
can put it in the hands of the automation to
do the to do the matching. And then when we
(15:41):
see when we let the automation do the routine, is
that it's providing better answers to the customers and it
really is underpinned by data. Like so I go back
to that. You know, what's one of the very unique
things about Trimble is when you have tens of billions
of freight the run we have over a billion data
points that are come into our systems every day. We've
(16:02):
got five million commercial locations that have dwell time metrics
on them. When you have that kind of density and
scope of data, that gives and creates an opportunity to
do really interesting and compelling things. On top of that
and the examples we talked about, I think it's just
the very very beginning of the game of what's possible.
Speaker 1 (16:23):
So, you know, you mentioned earlier in the conversation the
Internet of things. You know, how has that change you know,
the way I guess the information that Trimble collects and
is able to analyze use leverage which benefits its customers. Yeah.
Speaker 2 (16:40):
So in a way, I tend to think Trimble was
IoT before there was IoT. We were autonomy before we
ever had a label of autonomy. It goes back to
our long history of connecting work in the office and
the field, and so that is you know, we talk
about digital twins these days. You can't have a digital
twin if you don't actually know what the physical object is.
(17:00):
And so that's that reference point we have of work
in the field. Office to me, was very prescient. I'm
looking back, you know, back in time that we've been
on this journey for a long time. We didn't wake
up last year once we heard the words chat GPT
a couple of years ago for the first time and say,
oh my gosh, what are we going to do about it?
We've been on this journey of connectivity for a couple
(17:22):
of decades and so leaves me very optimistic of our
path ahead and the opportunities we have to better serve
our customers.
Speaker 1 (17:30):
Hey, can you like just like dub it down for
me a little bit? So you know, does does you
know when a carrier has is using your service? Are
you in like an owner operator's cab or you just
you're in fleets? It can be both so in order
so your customers can be one person, one truck, or
(17:51):
it could be somebody with five thousand trucks.
Speaker 2 (17:53):
It can, but it's predominantly the fleet, so eighty five
more than eighty five percent of the top two hundred
trucking fleets in North America or Trumbull customer where you
would tend to see the long tail of let's say
the owner operators would be more in our mapping and
routing solutions. Our solutions are really the de facto mileage
of record, I'm here in the US PC miler. That's
(18:14):
that's tremble. So we are very very broadly adopted. But
if you took, if I take the entirety of the business,
it is centric to the larger to the larger end
of customers.
Speaker 1 (18:26):
So I don't know if you have you know, if
you could share, but like, what is you know when
you guys are looking at the data, you know, what
is it telling you about the trucking market right now?
Speaker 2 (18:37):
M So, Hey, I listened to your podcast and so
I've listened to the a number of episodes lately. You know,
you've talked about everything from tender rejection rates to expectations
low single digit on contract expect in North America, double
digit on the on the spot, on the spot rates.
I'd say that's consistent with the data that we're seeing
(18:58):
in our in our systems. So I would be more
confirming what I hear from you and your guests that
you've had on of late if I could double click
a little bit within that, if I use Europe as
an example, through the data we have, you know, we
can see industry specific data, So I give you a
European example here. But I really think it would play
(19:20):
pretty consistent around the world. What we can see is
if you take us in market such as automotive, it's
significantly down over the you know, over the last few years.
In fact, it's sort of down, down, down, down. Not
surprising when you actually think about the macros and the
(19:40):
state of the automotive industry. When I say that where
we see more positive growth as in I'll take retail
as a segment, and we're measuring this by the number
of loads that are moving every every month and then
of course every every year, so we can see differences
by industry, is where I'm going with that, And we
and see the softer and the weaker or excuse me,
(20:02):
the weaker and the stronger parts of the economy.
Speaker 1 (20:05):
Gotcha? And then you know, I know you said organic
growth is preferred in a focus. Are there parts of
the market that you know Tremble is not in on
the transportation logistics side that makes sense for Trimble to
be in. Or is it more about doing what you're
doing to more regions of the world.
Speaker 2 (20:28):
I'm i bias more to more in the regions of
the world. I think with the breadth of the capabilities
we have, if you think of them as legs on
a stool. I think we have the right legs on
the stool. So I think about which as we think
about with a global view of the industry that we have,
(20:49):
we may not be differentially available in any given market,
like not all the products translate globally, and so when
that respect, we'll often look at old by Partner as
a lens of how do we more fully serve our
customers in any given region. Now, we have the most
capabilities in North America and Europe now, but they're not
(21:11):
the same exact capabilities. So we're bringing the capabilities we
have from Europe into North America, and we want to
bring more of the capabilities we have in North America
into our European customers.
Speaker 1 (21:22):
Can you talk a little bit about the capabilities that
you have in Europe that you're bringing into the US, Like,
what are those capabilities?
Speaker 2 (21:28):
Yeah, So in Europe, what we'd be bringing in is
really the transporting on business, so we call it a
freight market place, that same capability to match carriers and shippers.
Our work that we've done for many years decades. In
fact here in North America is very carrier centric, so
we have density of carriers that we can bring to
(21:49):
the network. Our job is then to bring more ship
We already have the carriers, our opportunities to bring more
shippers into into the Tremble network.
Speaker 1 (21:58):
So is that like a load is that? Is that
what a.
Speaker 2 (22:02):
Difference between a loadboard and this is where you think
you get the fraud that can happen, you know, with
the data on that is. Uh, this isn't price discovery.
This is actually transactional. We're not we don't we don't
take ownership of the loads. We're not you know, we're
not a we're not a brokerage in that respect. We
(22:22):
were simply creating a marketplace for the carriers and the
shippers to directly do business with one another.
Speaker 1 (22:29):
Gotcha. You know you mentioned that you had an analyst
day back in December. Did you guys provide some like
long term financial targets that as a company you're you're
looking to work towards.
Speaker 2 (22:42):
Yes, So what we talked about with our investor base
was the continued growth opportunities. So if you take it
at a macro perspective, those same markets that are large, global,
underserved and underpenetrated. Our industries we're serving are fundamentally digitizing,
so there's a positive catalyst for growth. We believe that
that can train in the mid to high single digit
total revenue growth. We would expect to have double digit
(23:06):
annualized recurring revenue or that subscription growth. So we've transitioned
more of our selling models from perpetual to subscription over
the last few years, and we see that differentially growing faster.
More of our capital allocation is going to that. We
live in a cloud forward world, and so it's our
intent to continue to develop and sell technologies that are
(23:28):
very cloud forward and very unconnected. And then Okay, you
have growth, and then what do you have to do?
You have to translate growth into profitable growth, and so
we had to go forward view on the profit growth
that we thought we could continue to drive in the company.
When we looked at our business and talked to our
shareholders a few weeks ago, you know, we were guiding
(23:54):
our twenty twenty four year to end around three point
two billion in revenue over two billion and annualize recurring
revenue and about twenty eight percent.
Speaker 1 (24:03):
You bit, got you and what's the biggest headwind at
a tremble for margin expansion?
Speaker 2 (24:10):
Well, I would probably say if we have a revenue headwind,
would be the would be the margin expansion. I have
a feeling you might want to talk about tariffs, but
you know, the macros themselves that's the biggest barrier, because
if you have your expenses going up every year, but
your revenue is not growing faster than any expenses, that
creates a headwind to margin expansion. Otherwise, I would say
(24:34):
it's getting the balance right of the investment back into
the business, the investment into new capabilities such as artificial intelligence.
But we also believe AI can create efficiencies inside our
own walls in addition to creating efficiencies for our customers.
So we're very mindful. That's why I go out of
my way to say we've put two and a half
billion dollars back into product development in the last five years,
(24:58):
and we will continue to invest back into our business.
Speaker 1 (25:01):
And I guess that business model that you operate really
provides pretty robust incremental margins because if you sell another subscription,
another software, the variable cost isn't isn't that high.
Speaker 2 (25:13):
Well, in one of the fundamental transformations we've had in
the business, even just in the last five years, is
you know, is almost one thousand basis points improvement in
the gross margins of the company. And so what we
guided forward was in the range of thirty to forty
percent incremental margins assuming we can achieve that level of growth,
(25:34):
and that provides us the ability to have a healthier
level of continue to have a healthy level of investment
back into the company.
Speaker 1 (25:42):
Do you guys probably talk about capex how much you
spend a year.
Speaker 2 (25:45):
Yeah, so Turmble is very capital light as a technology company.
We're putting really less than one or two percent back
into capex. We run negative working capital as well, so
very capital efficient business us. That generates cash flow that
is by the way, that cash flow, and we've either
put to work for acquisitions over the years to create
(26:08):
more breadth of capabilities, or to invest back into the
business and back.
Speaker 1 (26:13):
I guess you know a question that you know probably
close to your heart from your CFO days. What are
your priorities with capital? You know, is it buybacks, dividends?
Speaker 2 (26:26):
The number one priority for sure is to continue to
invest back into our business. Otherwise, you know, if you're
a if you're a leader of a company, maybe particularly
I would say a public company, but actually I'd say
really any company, you're paid to be a capital allocator,
and that means putting the capital being time people money,
(26:48):
put it to its highest and best order of use.
So we make that trade off of what's the return
on an investment for buy back versus back into the
business versus acquisition.
Speaker 1 (27:01):
And you talked about you know, subscriptions and you know,
moving more towards that model on the transplational logistics side,
or if you want to talk about company wide, can
you talk about like, you know, the different like what
percentage is reoccurring revenue versus transactional revenue. Is there is
(27:22):
there a goal where you kind of like this is
like this is the right breakout where we want to
work towards.
Speaker 2 (27:27):
Yeah, I mean we have over almost sixty five I
think it's about sixty two percent of our revenue overall
revenue is recurring revenue today and it's been growing more
than two times the rate of our hardware businesses. And
so just by the law of the math, over the years,
that percentage to continue to grow and I would expect
(27:49):
you know to see that you know, over seventy percent
recurring revenue as a percent of total revenue. That gives
us so much more predictability and visibility into our business.
That may it gives us much higher levels of confidence
for that reinvestment that we do back into the business
every year. But more importantly, I mean that's about us.
(28:10):
Like from a customer point of view, what we've seen
when we've moved and transitioned to business models is we've
expanded the size of the addressable market by moving our
customers from CAPEX to op x. The ability to access
the technology becomes more reachable when you transition to that
business model. And so as we've done this in every
single business that we have that Tremble, we've seen a
(28:33):
significant increase in the if I define it as units
or number of customers or number of users, the adoption
has gone up significantly by the adoption and by the
transition of the business model. And that to me is
why it's so important. You know, that's the input, the
square the output of what it means to the financials
of Tremble. That's the scoreboard. That's the output. I'm more
(28:53):
interested in in the input. So when more people are
using your technology and they're getting more value out of that,
and you can retain those customers over time and then
you can serve them with additional capabilities that you have.
Then we're both winning because it has to work for
the customers, it has to work for our employees, and
it has to work for investors.
Speaker 1 (29:14):
And once you get folks into the ecosystem, do they stay?
Do you have any like stats on that? I know
you want to. You want them to get even deeper
into your ecosystem, so you want to cross sell and upsell.
But you know, once they're in tremble, are they like
a customer for life?
Speaker 2 (29:30):
So we measure that by net retention and we sell
We don't sell shelf ware. We we sell usually really
systems of record. So the retention that we have in
our TMS when we sell a TMS that's a system
of record and retention is high, and a TMS business,
and and our and our mapping routing navigation business, retention
is extraordinarily high in that business. And the transportation management
(29:54):
platform we have through transporting on extraordinarily high custom retention
because it's so fundamental to the work. And I really
think about what are the problems we're trying to solve
for our customers, you know, I think about it in
a sense of an operating ratio for a trucking company,
and if they're operating ratios or probably these days somewhere
(30:16):
between ninety two and ninety eight percent, I could do
the inverse of that. That means those operating margins are
between two to eight percent. Think about it from a
P and L lens of that customer. What are the
biggest costs they have? Fuel, labor, insurance, maintenance, And then
we think about the efficiency of our customers or maybe
(30:36):
the problems they are addressing are around dwell times or
driver turnover or weather delays or falling rates, or maintenance
or fuel costs or safety. Our solutions to address each
one of those and if you do that, then you
earn your right to retain and grow with that customer
over time.
Speaker 1 (30:53):
You mentioned that you know TMS is a system of record,
and so it's once you have them, it's hard to
lose them. So does that make it really hard for
you to go after a competitor's customer, Like, how do you,
I guess, reduce the pain points for them to come
onto your system?
Speaker 2 (31:10):
But it's selling a higher and better value proposition. It's
never impossible to leave. And like the center of our
strategy and we call our strategy connect and scale. I
talked about that connectivity, but the center of it is
customer success. It's I think it starts and ends with
customer success. You have to ensure that your customers are
getting value out of what they're buying. We have to
(31:33):
have telemetry and insights to understand how our customers are
using our technology and how we can help them unlock
more value out of what they are buying. And in
terms of delivering a higher order value and a let's
say a value proposition that would promote a customer and
then sent the motivated customer to move from one system
(31:53):
to the other. Think about what we can I think
about what we can uniquely do at Trimble. That breadth
and depth of what we're doing, Like when you're when
you're going to you know, when you're making a buying
decision as a customer, a very big and important buying decision.
You're not just buying for the present, You're buying for
the future in the direction of where that company is
going right. I think about the data centricity I talked
(32:16):
about in the breadth and depth of what we're doing,
think about the incumbent position we have now we have
to execute upon this. But think about the incumbent position,
the unique corpus of data that we're seeing. I think
we can show customers a very bright future if you
work within our network, when we have the ability to
connect maintenance, to connect drivers, to connect workflow. Because of
(32:40):
the breadth and depth of what we offer, that's a
good value proposition when you move customers who are on
prem into the cloud. You know, we saw this during
COVID was an accelerant of it because a lot of
companies of our customers didn't have the in house IT staffs.
So think about you know when things went down, or
think about CrowdStrike event last year, or you know other
(33:01):
or cyber events that happen that's motivating customers to move
to the cloud. That often shows them a path with us,
to stay with us, or to move with us. Think
about cyber alone. You know we have to spend tens
of millions of dollars a year to keep up with
the threat actors out there. That's hard for any company
to do. I believe you've got to be operating at
(33:24):
scale in order to afford to to do that.
Speaker 1 (33:28):
Is is your revenue in the in the transportation and
legious sector. Is it. Is it tied to the freight
cycle or I'm assuming it's somewhat tied. Like I guess,
the healthier the truck market, the more trucks there are,
and the more subscriptions you sell. Is that fair? Yeah?
Speaker 2 (33:41):
Absolutely? I mean, you know, let's say if in a
telematics business that's going to be sold by the number
of trucks you have the technology. On our transportium business,
it's a consumption based model. We make sense on the
dollar per all the transactions that run that run through it.
So it's the number of transportation loads that move on
(34:02):
on our system for that part of our transportation business
determines determines the growth. So no, so you probably take
fifty sixty percent of our business and I say that
could fluctuate more with the freight cycle, whereas they'd say
the ballast would be with the rest of the portfolio.
Speaker 1 (34:19):
Gotcha. You know, we talked to a lot about computers, automation,
IoT You know, in the trucking industry, people like to
talk about autonomous trucking. Is that good or bad for Trimble?
If let's say, if the robots take over.
Speaker 2 (34:35):
I think he could be in that positive. I think
there'll be some puts and takes by the way when
I say that, But let me give you some of
the longitudinal, basic online history of Trimble. You know, Charlie
Trumble founded the business in nineteen seventy eight. He was
working at Hewlett Packard at the time and he took
an idea to mister Packard and they weren't interested in
it. It was a technology called Loran for marine positioning. Later,
(34:57):
he took a technology that they were also not inted
in and then started Tremble. And that technology you might
have heard of. It's called GPS. So imagine that that's
the origin story of Tremble. We know precise location. We
don't think about meters at Tremble. We think about centimeters
at Tremble. Our ability to create a digital model of
the physical Earth and our geospatial and surveying business that
(35:20):
goes back to our roots in GPS. And I tell
you that because that actually is the origin story of
how we eventually got into construction, and how we got
into agriculture, and how we got into transportation by understanding
what customers were doing with the sensors positioning sensors that
they were buying from US. We can apply corrections to
(35:41):
the signals that come from the GPS satellites, the correct
for errors that are happening in solar storms, for what
happens through the ono sphere and troposphere, to move meters
down to centimeters. And we sell that increasingly to automotive
companies as well as to farmers and surveyors to have
precision work and companies Today trucking companies and automotive companies
(36:02):
are buying our sensors to do the aid ass systems,
the safety systems on the road, and the lay lane
detection on the road are We sell mobile mapping systems
to create the high definition maps that are on the roads,
and guess what, if you're going to have autonomy, you've
got to have high definition maps to know the condition
of the road. We sell inertial sensors because guess what,
(36:25):
when you go through a tunnel you don't have GPS,
you've lost a lot to the satellite. So there are
aspects of our business that have had i'd say very
positive tailwinds in the last years through the adoption of
and I say automation more than I say autonomy, because
our institutional view of autonomy is that it's a series
(36:46):
of progressive automation. You don't just jump to level five
autonomy and our and our view of the world. You
stare step by workflows and capabilities and functions on that journey.
So there's those as specs like that that could be
a positive for Trimble. But if even if you think
about let's say it did happen we could snap our
(37:06):
fingers and magically we had autonomous vehicles. Do you know
what they need? They need a brain, right and that
brain's telling them what work do I do? Where do
I need to be? You still have to optimize networks,
you still have to optimize routes. You've got to optimize
Now when do you need to charge? And where are
you going? That brain, I mean that brain is what
(37:30):
a TMS is that brain also, well have to we'll
have to help you sort out your maintenance schedules. You're
still going to have to have routing and NAVE and
A and A in a fully autonomous world. So I
see that that is a positive for us. Now, do
I believe we're actually anywhere near level five autonomy in
(37:53):
any sort of big and meaningful way. No, I think
it's further out then we would typically progre you know
that most would probably typically want to say some of
that is regulatory, some of that will be insurance, some
of that will be you know, will the public accept it.
But even if you could do all that, I also
think there's something worth talking about, is are we going
(38:14):
to rebuild our logistics networks, our warehouses? Because the easy
one for me to understand, the straightforward one for me
to understand, is the on ramp to the off ramp
on an interstate. You can do the picture of getting
the dedicated lanes in the future. That final mile is
a radically different problem to solve than on ramp to
(38:34):
off ramp, and our warehouses and logistics centers built on
those on ramp and off ramps today. Not really, there's
a lot of work that has to happen in between.
Speaker 1 (38:46):
Okay, yeah, I think I would kind of agree. It's
kind of further out than most people would would would
like to think. So, you know, you joined Tremble in
two thousand and six. You know, how did you get
into you know, I guess it's not fair to so
you got into transportation, you really got into software, and
so how did you how did your journey take you
(39:07):
to Tremble.
Speaker 2 (39:09):
Well, I have to say I consider myself lucky and
privileged to be at Tremble to get to do what
I get to do. You know, you spend most of
us spend more of our waking hours every day at
work than we do at home with our friends and
her family. And purpose to me is important and runs
runs deep. So that feed the world, move the world,
(39:30):
build the world. I don't take that lightly at all.
So I'm a purpose driven person. I want to do
something that makes a positive impact in the world, and
we get to do that at Tremble. And so that's
why I've been here at nineteen years, why I have
been here in nineteen years, and why this will be
the last place that I work. I'm just I feel
so blessed to be able to do what I get
(39:53):
to do every day. As I say, I happen to
also live in Colorado. And I think the intersection of
being able to live in Colorado and get to do
what I do makes me doubly a lucky person. Are
you a big skier, a skier, climber, biker, all that
good Colorado stuff?
Speaker 1 (40:11):
Limber, I could do skiing and biking. I don't. I
could do climbing, Hey, I don't have the arms for it,
and be I don't have the fortitude. I'm a chicken
when it comes to even standing on a ladder. So,
so you said, you know, so, what is the favorite
your favorite thing about about your job? You know, being
a leader at at organization like Tremble.
Speaker 2 (40:35):
It's it's impact, you know, the impact that you can
have in in this particular role. It has it has
a voice, it has visibility. You know, I talked about
the I really do think that in the role you're
paid to be a capital allocator out you know, that's
the time people money. I've got a very strong and
(40:58):
I hope positive view on the strategy and the opportunity
of this company. And to be able to direct the
resources accordingly, I think is a real joy. I feel
like I show up and work at the United Nations
every day. We've got colleagues that live in over forty
different countries doing business in over you one hundred and
thirty five countries. I've literally seen the world through the
(41:20):
eyes of Tremble.
Speaker 1 (41:23):
All right, and so behind you have a lot of books.
I always like to ask my guests this you know,
do you have like a favorite business or leadership book
that's kind of close to your heart?
Speaker 2 (41:34):
So funny enough, and I guess this would be an
audio recordings that people won't be able to see it,
but it is true. There's a lot of books on
the shelf behind me. Truth is, people send me a
lot of books and I don't don't typically ever get
to reading them, and not just because I'm talking to you.
I tend to be more of a podcast person, So
(41:54):
I like to build the two for one you can
get of you know, being in motion and listening to something.
Not to mention listening at a two x speed, you
can you can get a lot of content that way.
So I have to admit I mostly listened to podcasts.
But having said that, there's two books that would come
to mind for me to to to share with to
(42:15):
share with you. The first one is the book The Goal.
Do you remember that book?
Speaker 1 (42:20):
I love? That was my favorite book I read in
grad school.
Speaker 2 (42:24):
Okay, So that idea of you know, systems thinking and
the bottlenecks that systems thinking really is what what we
think a lot about when we talked about moving from
the point solutions to the workflow and the ecosystems is
solving these higher order problems. And so I love that
from the from the goal of just how accessible they
(42:44):
made that through the through the story. And so you remember,
I think it was Herbie, you know, the one you
had to put in the front of the line. The
other one. More in leadership is a book called Atomic Habits,
and to me, the punch line take away it's more
about you know, I think leadership often begins with self
(43:05):
understanding one's shortcomings, one superpowers and this. But the notion
that he talks to the author talks about in the
book is this idea of being one percent better every day.
I think that is such a powerful concept.
Speaker 1 (43:20):
You know that I have that book by night's shelf.
I need to crack it otten. But I'm sorry you
were saying, well, just.
Speaker 2 (43:27):
Like you know, would you agree that you could be
one percent better at what you do?
Speaker 1 (43:31):
Oh? I can be fifty better what I do?
Speaker 2 (43:33):
Okay, I know I can be at least one percent
better every day. But here's the power. It's the power
of like compounding from one percent better every day is
oh gosh, I remember the number. It's something like thirty
five times better by the end of the year. So
you know, the Einstein has this quote attributed to him,
whether he said it or not, he probably isn't the
one who said it. But you know, compound interest is
(43:55):
the most powerful, uh law of the of the universe.
That compounding effect of just you know, just being a
little bit a little bit better to me as a
powerful lesson from that book.
Speaker 1 (44:06):
Right, And I'm just curious. You mentioned do you like
to listen to podcasts? And I don't know if you
want to tell us what's your favorite podcast about transportation?
Speaker 2 (44:14):
Oh? I thought you're gonna ask me a totally different one,
because you know, the one I like listening to what
I'm talking about business in general is Acquired. I love
the history of business and learning through the stories of
other companies, the you know, the call it the rise,
the the rise, the fall, and the origin stories to
(44:39):
me or are super are super powerful. But in the meantime, hey,
talking transport.
Speaker 1 (44:45):
There we go, that's what I was waiting for. Well, Rob,
it was. It was great getting to know you and
getting to know Trimbull. I really appreciate your time here today.
Speaker 2 (44:54):
Well thanks for having me on and good luck to
you in twenty twenty five.
Speaker 1 (44:59):
Thanks you too, and thanks for tuning in. If you
liked the episode, please subscribe and leave a review. We
have lined up a number of great guests for the podcast,
so please check back to hear conversations with c suit executives, shippers, regulators,
and decision makers within the freight markets. Also, if you
have an idea for a future episode, please hit me
up on the Bloomberg terminal or on Twitter at logistics Lee.
(45:20):
Thanks a lot, everyone, and take care.
Hi everyone, this is Lee Clasgow and we're Talking Transports.
Welcome to Bloomberg Intelligence Talking Transports Podcast. I'm your host,
Lee Clasgow, senior Freight, transportation and Logistics Analysts at Bloomberg Intelligence,
Bloomberg's in house research arm of almost five hundred analysts
and strategists around the globe. Before diving in a little
public service announcement, your support is instrumental to keep bringing
(00:28):
great guests onto the podcast like the one we have today.
If you haven't already, please do take a moment to
follow rate and share the Talking Transport Podcast with your friends, family,
and colleagues. We appreciate your support. I'm very excited to
have with us today. Rob Painter, President and CEO of Trimble,
a position he's held since twenty twenty. From twenty sixteen
(00:49):
through twenty nineteen, he served as the company's chief financial officer.
Joining the company in two thousand and six, Rob has
held a variety of leadership positions, including corporate development, corporate strategy,
general management of construction Services, general manager of the Intelligent
Construction Tools International joint venture, and Vice president of Trimble
(01:10):
Buildings Construction Software. In twenty thirteen, he was appointed to
serve on the Synopsis Board of Directors. Rob holds a
bachelor's degree in finance from West Virginia University and an
MBA from Harvard University. Welcome to the podcast, Rob, thanks
for joining us today.
Speaker 2 (01:27):
Lee, thanks for having me. Good to be here.
Speaker 1 (01:29):
So are you more of a mountaineer or a Crimson
Tide fan?
Speaker 2 (01:32):
Mountaineers? Baby? It runs deep?
Speaker 1 (01:35):
Okay. So you know, Trimble is a name that I
think you know people within the transportation world now and
in other markets that you know you do that you
guys do operate in. Can you talk a little bit
about Trimble? You know, what do you do and kind
of you know the markets that you serve. Yeah.
Speaker 2 (01:54):
Hey, the why of Trimble is to feed the world
and move the world, build the world. We've had a
forty seven year history and mission to transform the way
the world works. And we're doing that by applying technology
that's connecting work in the physical world and the digital world.
And we're primarily deploying that in industries such as transportation
(02:16):
and logistics, geospatial and engineering and construction. There's over twelve
thousand Trimble colleagues around the world doing business and over
one hundred and thirty five different countries today.
Speaker 1 (02:29):
And so and just for those that are n'taware, Trimble
is a public company as an eighteen billion dollar market
gap and trades on the symbol tr MB. So you
can find that on more information on the Blueberg terminal
all about Trimble. So could you just know you mentioned
the three things that you like to do, feed, build,
and move. Can you talk about you know, you know
(02:50):
why you're here today on talking transports, on your transportation segment?
What kind of software are you providing? How do people
use the software that you guys develop.
Speaker 2 (03:02):
Yeah, So to understand Tremble is probably to understand our strategy,
and for many years we've had a strategy to connect
industry life cycles. We believe in connecting users, data, stakeholders,
and workflow across the participants in an industry life cycle continuum.
So if we look at the transportation industry, we think
(03:23):
of the life cycle fourfold source plan, execute, settle, and
we see that life cycle for the carriers. We also
see that life cycle for the shippers, and at that
intersection point between the two, we see an industry platform
that comes together to move that data across the industry
life cycle. Continuum. So over the last twenty plus years,
(03:48):
we've built up a set of capabilities to serve that
industry life cycle continuum for both the carriers and the shippers.
To be more specific, that means we're doing transportation management,
We're doing maintenance, We're doing tracking and visibility, routing, mapping,
navigation optimization, safety compliance, just to name a few of
(04:12):
the many solutions that we have across the continuum. Our
history had predominantly been more North American based and more
carrier based. In twenty twenty three, we acquired Transporion, which
brought to us European centricity and Chipper centricity, and that
has given us a step function to really go after
(04:33):
this mission of transformation.
Speaker 1 (04:36):
Okay, and could you talk about the transportation logistics business
as it sits within you know, the bigger portfolio of
the company. Roughly how much is it responsible for the
revenues and earnings of the company.
Speaker 2 (04:48):
So at a public at our public company level, you
know today we have approximately over three billion I'll be approximate,
because we have here in a couple of weeks. Our
revenues stands over three billion US dollars today, over seventy
five percent of that is software today, So we're software
forward business. The hardware we have actually really serves as
(05:11):
that I think of it as an industrial IoT context,
that intelligence out in the real world of of what's happening,
and that connectivity is very central to our strategy between hardware, software,
office field, and physical and the digital worlds. If you
take the transportation business specifically, the segment that's one of
our three reporting segments in twenty twenty three, so I'll
go back another year in twenty twenty three, over seven
(05:33):
hundred million dollar business and it's predominantly the vast majority
of that is software.
Speaker 1 (05:40):
And I guess, is there any hardware play here that
you have or are you in the cabs or you're
just in the cabs through software on other people's I
guess devices.
Speaker 2 (05:51):
Yeah, So we've played in the telematics space for a
long time, so now we can talk. We'll probably come
to that in the conversation because we announced a few
months ago an intention to divest our telematics business into
a platform science and then to become the largest shareholder
in that entity on a go forward basis. So we've
(06:12):
very much been in the cab for a long time,
and that does help provide that basis of connecting the
field to the office.
Speaker 1 (06:19):
And could you talk about the addressable market for transportation
logistics At Trimble.
Speaker 2 (06:26):
We see it as over an eight billion dollar addressable
market today. At a company level, if we look at
all the markets we serve, we see about seventy billion
dollars of addressable market. But the eight billion dollars addressable
market we think is growing in the high single digit range,
and that that market is about forty percent penetrated today.
And that's something that's also been central to the thesis
(06:49):
of the strategy at Trembull is serving markets that are large, global,
that are underserved and under penetrated, that have fundamental challenges
to overcome, where technology can be a major component of
helping our customers do their work better, faster, safer, cheaper
and greener.
Speaker 1 (07:07):
And when you say, I guess sixty percent is unpenetrated,
could you give me an example of what that potential
customer would look like.
Speaker 2 (07:15):
So we held an investor day actually on December tenth,
so just a few weeks ago, when we went through
each of the three segments, and one of the things
we talked about in our transportation business is that we
see hundreds of millions of dollars of cross sell and
up sell opportunities. So if you think about the breadth
of the solution base we have and you map that
against the customers that we already serve today, we see
(07:37):
a compelling opportunity to serve our customers better by helping
them adopt more of the technology suite that we have,
and not only just let's say adopting more of the
technology suite we have. You could think of it as
those point solutions. What's more interesting than point solutions is
connecting workflow and connecting ecosystems, solving those higher order problems,
(08:00):
whether they're connecting Tremble or non Tremble solutions in order
to go after some of the bigger problems that our
customers have to address.
Speaker 1 (08:09):
Can you talk to us like you mentioned you got
more penetration the shipper market with a recent acquisition. Can
you talk about, you know, how a shipper might use
Trimble what like you know, what kind of software does
it use? How does it make them better, faster, smarter?
Speaker 2 (08:26):
Sure, so think of let's look at the TRANSPORTI on
business today. It's a transportation management platform. It's connecting carriers
and shippers. It's a shipper forward model. And so far
as we look at the shipper network we have, we
have over fourteen hundred shippers and the network. In that
same network, we have over one hundred and sixty thousand
(08:48):
carriers who are part of that. So now think about
connecting shippers and carriers. Over sixty billion US dollars a
freight is connected through that system. We can to over
We have three thousand integrations with ERP and warehouse management systems.
We have over twenty six million transports are driven no
(09:10):
pun intended through our system every year, every day. That
means there's a few hundred thousand transaction that's happening today
on our platform. It is a platform in the truest
sense of the world that's connecting the shippers to their carriers.
Speaker 1 (09:25):
Right and then, so not only I guess do they
can find capacity on the platform, it also helps them
with the billing and paying and paying the carriers as well.
Speaker 2 (09:35):
So thank sourcing, planning, executing, monitoring, settling, freight audit. These
are all services that exist on our platform.
Speaker 1 (09:45):
And when you say moderning, is that like tracking so
you can see where your freight is exactly gotcha. So,
you know, whenever you're putting together carriers and shippers, especially
in today's world, there's a lot of there's been an
increase in fraud in the trucking industry. How does your system,
I guess fight against that, Like, how do you vet
(10:06):
the carriers that are on the system.
Speaker 2 (10:09):
Well, just that we vet them by signing them up.
And often what our shipper customers will do is bring
to the US their carrier network, gotch So to extent
that the shippers have validated and vetted their carriers, then
that checks the checks the box on that one. So
it's not a yeah, there's not a what you would
(10:30):
call it the false positives that come across our network.
These are all identified shippers and identified carriers who have
been qualified to be in our network. In fact, many
of the carriers in the network would serve many of
the shippers in our network.
Speaker 1 (10:46):
So you know, you mentioned, you know, cross selling is
a big way to kind of tap that untapped market,
that that the market that penetrate that sixty percent that
you mentioned. Is there anything else that you guys are doing?
Is it? Is it kind of like the acquisition that
you mentioned? Is it doing more both on acquisitions where
it gives you access to different parts of the market
(11:06):
or different different geographies.
Speaker 2 (11:10):
Well, over time, Trimble's been an acquisitive company. We've acquired
over one hundred businesses over the last twenty plus years
in order to positively assert and affect the strategy of
connectivity that I talked about. Having said that, let's talk
about organic growth. We've put over two point five billion
dollars into research and development in the last five years
(11:32):
into our company. So I say very affirmatively that we
think about organic growth first, so attracting new customers to
Tremble and then working with them through the journey to
adopt more of our technologies. We think about innovating within
the portfolio we've got, making what we've got better and
more compelling, making what we've got more connected and therefore
(11:56):
more compelling. Again, I'm can get to this in the conversation.
We've been very forward in this business and investing in
AI for example, and automation and how that can unlock
new features and capabilities for our customers.
Speaker 1 (12:12):
All Right, you mentioned AI, so let's talk about it.
So what are you doing with AI? You know, where
are you in the journey? What is it doing not
only for you, Trimble, but what is it doing for
your customers, whether it's a shipper or a carrier.
Speaker 2 (12:28):
Yeah, so let's break that down and internal facing ad
options of AI and then customer facing and an internal perspective.
Over ninety percent of our engineers are using gethub Copilot
for code development and productivity. Therein we have our own
internal chat GPT, we call it Trimble Assistant, where the
(12:50):
entirety of the company can leverage that behind behind our firewall,
we've got to make sure we protect our intellectual property
as well as our customers data. From a more customer
facing perspective on AI, I'm going to give you a
few examples of that. So we've introduced autonomous procurement and
autonomous quotation capabilities. So in that matching of freight between
(13:16):
the shipper and the carrier, there could be a broker
as well between the shipper and the carrier. Autonomous procurement
is enabling no touch buying and what we're finding is
when we do this, we can deliver seven to twelve
percent savings on the freight. On the autonomous quotation side
(13:36):
of the house, what we're seeing is that pricing accuracy
is improved, and when you're matching that carrier and the shipping,
you're doing it in an automated fashion. You have an
ability to understand not only the price elasticity, but where
what's the state of any given lane and the necessity
to fill that lane. And so we're finding for our
customers that it's more efficient, they're getting better outcomes when
(13:58):
they adopt autonomous procurement and autonomous quotation. We're also using
it for customer support. As you can imagine, think about
in our personal lives, how often these days do we
go to YouTube to try and figure out how something
works that we own or that we've bought. This is
putting more of that power into our customer's hand for
them to be able to get the support they need
(14:21):
quicker using the technology in our mapping business. So we
have a very important and successful mapping business at Trimble,
so we're continually developing those maps, truck specific maps and routes.
Feature extraction, so using AI to automate feature extraction out
of the large data sets to get information. Like we
(14:45):
have a lot of data these days, data isn't the problem.
Information tends to be more of the problem. And so
when you can leverage the AI to turn the data
into information good things, Good things happen.
Speaker 1 (14:57):
And so is the AI has the AI or the
machine learning has that created new opportunities for you because
all of a sudden you had this wealth of data
on your system and now you know, you have tools
that can really process it and you know, provide a
level of analysis and forecasting that you probably might have
(15:19):
not had before.
Speaker 2 (15:20):
Yeah, I feel like the best examples we have with
that are this autonomous procurement and autonomous quotation. Now our
customers can still buy the manual use of that, and
so can you use leverage the technology, but do it
manually to find to find to find their carrier, to
find the loads that they want to take, or you
can put it in the hands of the automation to
do the to do the matching. And then when we
(15:41):
see when we let the automation do the routine, is
that it's providing better answers to the customers and it
really is underpinned by data. Like so I go back
to that. You know, what's one of the very unique
things about Trimble is when you have tens of billions
of freight the run we have over a billion data
points that are come into our systems every day. We've
(16:02):
got five million commercial locations that have dwell time metrics
on them. When you have that kind of density and
scope of data, that gives and creates an opportunity to
do really interesting and compelling things. On top of that
and the examples we talked about, I think it's just
the very very beginning of the game of what's possible.
Speaker 1 (16:23):
So, you know, you mentioned earlier in the conversation the
Internet of things. You know, how has that change you know,
the way I guess the information that Trimble collects and
is able to analyze use leverage which benefits its customers. Yeah.
Speaker 2 (16:40):
So in a way, I tend to think Trimble was
IoT before there was IoT. We were autonomy before we
ever had a label of autonomy. It goes back to
our long history of connecting work in the office and
the field, and so that is you know, we talk
about digital twins these days. You can't have a digital
twin if you don't actually know what the physical object is.
(17:00):
And so that's that reference point we have of work
in the field. Office to me, was very prescient. I'm
looking back, you know, back in time that we've been
on this journey for a long time. We didn't wake
up last year once we heard the words chat GPT
a couple of years ago for the first time and say,
oh my gosh, what are we going to do about it?
We've been on this journey of connectivity for a couple
(17:22):
of decades and so leaves me very optimistic of our
path ahead and the opportunities we have to better serve
our customers.
Speaker 1 (17:30):
Hey, can you like just like dub it down for
me a little bit? So you know, does does you
know when a carrier has is using your service? Are
you in like an owner operator's cab or you just
you're in fleets? It can be both so in order
so your customers can be one person, one truck, or
(17:51):
it could be somebody with five thousand trucks.
Speaker 2 (17:53):
It can, but it's predominantly the fleet, so eighty five
more than eighty five percent of the top two hundred
trucking fleets in North America or Trumbull customer where you
would tend to see the long tail of let's say
the owner operators would be more in our mapping and
routing solutions. Our solutions are really the de facto mileage
of record, I'm here in the US PC miler. That's
(18:14):
that's tremble. So we are very very broadly adopted. But
if you took, if I take the entirety of the business,
it is centric to the larger to the larger end
of customers.
Speaker 1 (18:26):
So I don't know if you have you know, if
you could share, but like, what is you know when
you guys are looking at the data, you know, what
is it telling you about the trucking market right now?
Speaker 2 (18:37):
M So, Hey, I listened to your podcast and so
I've listened to the a number of episodes lately. You know,
you've talked about everything from tender rejection rates to expectations
low single digit on contract expect in North America, double
digit on the on the spot, on the spot rates.
I'd say that's consistent with the data that we're seeing
(18:58):
in our in our systems. So I would be more
confirming what I hear from you and your guests that
you've had on of late if I could double click
a little bit within that, if I use Europe as
an example, through the data we have, you know, we
can see industry specific data, So I give you a
European example here. But I really think it would play
(19:20):
pretty consistent around the world. What we can see is
if you take us in market such as automotive, it's
significantly down over the you know, over the last few years.
In fact, it's sort of down, down, down, down. Not
surprising when you actually think about the macros and the
(19:40):
state of the automotive industry. When I say that where
we see more positive growth as in I'll take retail
as a segment, and we're measuring this by the number
of loads that are moving every every month and then
of course every every year, so we can see differences
by industry, is where I'm going with that, And we
and see the softer and the weaker or excuse me,
(20:02):
the weaker and the stronger parts of the economy.
Speaker 1 (20:05):
Gotcha? And then you know, I know you said organic
growth is preferred in a focus. Are there parts of
the market that you know Tremble is not in on
the transportation logistics side that makes sense for Trimble to
be in. Or is it more about doing what you're
doing to more regions of the world.
Speaker 2 (20:28):
I'm i bias more to more in the regions of
the world. I think with the breadth of the capabilities
we have, if you think of them as legs on
a stool. I think we have the right legs on
the stool. So I think about which as we think
about with a global view of the industry that we have,
(20:49):
we may not be differentially available in any given market,
like not all the products translate globally, and so when
that respect, we'll often look at old by Partner as
a lens of how do we more fully serve our
customers in any given region. Now, we have the most
capabilities in North America and Europe now, but they're not
(21:11):
the same exact capabilities. So we're bringing the capabilities we
have from Europe into North America, and we want to
bring more of the capabilities we have in North America
into our European customers.
Speaker 1 (21:22):
Can you talk a little bit about the capabilities that
you have in Europe that you're bringing into the US, Like,
what are those capabilities?
Speaker 2 (21:28):
Yeah, So in Europe, what we'd be bringing in is
really the transporting on business, so we call it a
freight market place, that same capability to match carriers and shippers.
Our work that we've done for many years decades. In
fact here in North America is very carrier centric, so
we have density of carriers that we can bring to
(21:49):
the network. Our job is then to bring more ship
We already have the carriers, our opportunities to bring more
shippers into into the Tremble network.
Speaker 1 (21:58):
So is that like a load is that? Is that
what a.
Speaker 2 (22:02):
Difference between a loadboard and this is where you think
you get the fraud that can happen, you know, with
the data on that is. Uh, this isn't price discovery.
This is actually transactional. We're not we don't we don't
take ownership of the loads. We're not you know, we're
not a we're not a brokerage in that respect. We
(22:22):
were simply creating a marketplace for the carriers and the
shippers to directly do business with one another.
Speaker 1 (22:29):
Gotcha. You know you mentioned that you had an analyst
day back in December. Did you guys provide some like
long term financial targets that as a company you're you're
looking to work towards.
Speaker 2 (22:42):
Yes, So what we talked about with our investor base
was the continued growth opportunities. So if you take it
at a macro perspective, those same markets that are large, global,
underserved and underpenetrated. Our industries we're serving are fundamentally digitizing,
so there's a positive catalyst for growth. We believe that
that can train in the mid to high single digit
total revenue growth. We would expect to have double digit
(23:06):
annualized recurring revenue or that subscription growth. So we've transitioned
more of our selling models from perpetual to subscription over
the last few years, and we see that differentially growing faster.
More of our capital allocation is going to that. We
live in a cloud forward world, and so it's our
intent to continue to develop and sell technologies that are
(23:28):
very cloud forward and very unconnected. And then Okay, you
have growth, and then what do you have to do?
You have to translate growth into profitable growth, and so
we had to go forward view on the profit growth
that we thought we could continue to drive in the company.
When we looked at our business and talked to our
shareholders a few weeks ago, you know, we were guiding
(23:54):
our twenty twenty four year to end around three point
two billion in revenue over two billion and annualize recurring
revenue and about twenty eight percent.
Speaker 1 (24:03):
You bit, got you and what's the biggest headwind at
a tremble for margin expansion?
Speaker 2 (24:10):
Well, I would probably say if we have a revenue headwind,
would be the would be the margin expansion. I have
a feeling you might want to talk about tariffs, but
you know, the macros themselves that's the biggest barrier, because
if you have your expenses going up every year, but
your revenue is not growing faster than any expenses, that
creates a headwind to margin expansion. Otherwise, I would say
(24:34):
it's getting the balance right of the investment back into
the business, the investment into new capabilities such as artificial intelligence.
But we also believe AI can create efficiencies inside our
own walls in addition to creating efficiencies for our customers.
So we're very mindful. That's why I go out of
my way to say we've put two and a half
billion dollars back into product development in the last five years,
(24:58):
and we will continue to invest back into our business.
Speaker 1 (25:01):
And I guess that business model that you operate really
provides pretty robust incremental margins because if you sell another subscription,
another software, the variable cost isn't isn't that high.
Speaker 2 (25:13):
Well, in one of the fundamental transformations we've had in
the business, even just in the last five years, is
you know, is almost one thousand basis points improvement in
the gross margins of the company. And so what we
guided forward was in the range of thirty to forty
percent incremental margins assuming we can achieve that level of growth,
(25:34):
and that provides us the ability to have a healthier
level of continue to have a healthy level of investment
back into the company.
Speaker 1 (25:42):
Do you guys probably talk about capex how much you
spend a year.
Speaker 2 (25:45):
Yeah, so Turmble is very capital light as a technology company.
We're putting really less than one or two percent back
into capex. We run negative working capital as well, so
very capital efficient business us. That generates cash flow that
is by the way, that cash flow, and we've either
put to work for acquisitions over the years to create
(26:08):
more breadth of capabilities, or to invest back into the
business and back.
Speaker 1 (26:13):
I guess you know a question that you know probably
close to your heart from your CFO days. What are
your priorities with capital? You know, is it buybacks, dividends?
Speaker 2 (26:26):
The number one priority for sure is to continue to
invest back into our business. Otherwise, you know, if you're
a if you're a leader of a company, maybe particularly
I would say a public company, but actually I'd say
really any company, you're paid to be a capital allocator,
and that means putting the capital being time people money,
(26:48):
put it to its highest and best order of use.
So we make that trade off of what's the return
on an investment for buy back versus back into the
business versus acquisition.
Speaker 1 (27:01):
And you talked about you know, subscriptions and you know,
moving more towards that model on the transplational logistics side,
or if you want to talk about company wide, can
you talk about like, you know, the different like what
percentage is reoccurring revenue versus transactional revenue. Is there is
(27:22):
there a goal where you kind of like this is
like this is the right breakout where we want to
work towards.
Speaker 2 (27:27):
Yeah, I mean we have over almost sixty five I
think it's about sixty two percent of our revenue overall
revenue is recurring revenue today and it's been growing more
than two times the rate of our hardware businesses. And
so just by the law of the math, over the years,
that percentage to continue to grow and I would expect
(27:49):
you know to see that you know, over seventy percent
recurring revenue as a percent of total revenue. That gives
us so much more predictability and visibility into our business.
That may it gives us much higher levels of confidence
for that reinvestment that we do back into the business
every year. But more importantly, I mean that's about us.
(28:10):
Like from a customer point of view, what we've seen
when we've moved and transitioned to business models is we've
expanded the size of the addressable market by moving our
customers from CAPEX to op x. The ability to access
the technology becomes more reachable when you transition to that
business model. And so as we've done this in every
single business that we have that Tremble, we've seen a
(28:33):
significant increase in the if I define it as units
or number of customers or number of users, the adoption
has gone up significantly by the adoption and by the
transition of the business model. And that to me is
why it's so important. You know, that's the input, the
square the output of what it means to the financials
of Tremble. That's the scoreboard. That's the output. I'm more
(28:53):
interested in in the input. So when more people are
using your technology and they're getting more value out of that,
and you can retain those customers over time and then
you can serve them with additional capabilities that you have.
Then we're both winning because it has to work for
the customers, it has to work for our employees, and
it has to work for investors.
Speaker 1 (29:14):
And once you get folks into the ecosystem, do they stay?
Do you have any like stats on that? I know
you want to. You want them to get even deeper
into your ecosystem, so you want to cross sell and upsell.
But you know, once they're in tremble, are they like
a customer for life?
Speaker 2 (29:30):
So we measure that by net retention and we sell
We don't sell shelf ware. We we sell usually really
systems of record. So the retention that we have in
our TMS when we sell a TMS that's a system
of record and retention is high, and a TMS business,
and and our and our mapping routing navigation business, retention
is extraordinarily high in that business. And the transportation management
(29:54):
platform we have through transporting on extraordinarily high custom retention
because it's so fundamental to the work. And I really
think about what are the problems we're trying to solve
for our customers, you know, I think about it in
a sense of an operating ratio for a trucking company,
and if they're operating ratios or probably these days somewhere
(30:16):
between ninety two and ninety eight percent, I could do
the inverse of that. That means those operating margins are
between two to eight percent. Think about it from a
P and L lens of that customer. What are the
biggest costs they have? Fuel, labor, insurance, maintenance, And then
we think about the efficiency of our customers or maybe
(30:36):
the problems they are addressing are around dwell times or
driver turnover or weather delays or falling rates, or maintenance
or fuel costs or safety. Our solutions to address each
one of those and if you do that, then you
earn your right to retain and grow with that customer
over time.
Speaker 1 (30:53):
You mentioned that you know TMS is a system of record,
and so it's once you have them, it's hard to
lose them. So does that make it really hard for
you to go after a competitor's customer, Like, how do you,
I guess, reduce the pain points for them to come
onto your system?
Speaker 2 (31:10):
But it's selling a higher and better value proposition. It's
never impossible to leave. And like the center of our
strategy and we call our strategy connect and scale. I
talked about that connectivity, but the center of it is
customer success. It's I think it starts and ends with
customer success. You have to ensure that your customers are
getting value out of what they're buying. We have to
(31:33):
have telemetry and insights to understand how our customers are
using our technology and how we can help them unlock
more value out of what they are buying. And in
terms of delivering a higher order value and a let's
say a value proposition that would promote a customer and
then sent the motivated customer to move from one system
(31:53):
to the other. Think about what we can I think
about what we can uniquely do at Trimble. That breadth
and depth of what we're doing, Like when you're when
you're going to you know, when you're making a buying
decision as a customer, a very big and important buying decision.
You're not just buying for the present, You're buying for
the future in the direction of where that company is
going right. I think about the data centricity I talked
(32:16):
about in the breadth and depth of what we're doing,
think about the incumbent position we have now we have
to execute upon this. But think about the incumbent position,
the unique corpus of data that we're seeing. I think
we can show customers a very bright future if you
work within our network, when we have the ability to
connect maintenance, to connect drivers, to connect workflow. Because of
(32:40):
the breadth and depth of what we offer, that's a
good value proposition when you move customers who are on
prem into the cloud. You know, we saw this during
COVID was an accelerant of it because a lot of
companies of our customers didn't have the in house IT staffs.
So think about you know when things went down, or
think about CrowdStrike event last year, or you know other
(33:01):
or cyber events that happen that's motivating customers to move
to the cloud. That often shows them a path with us,
to stay with us, or to move with us. Think
about cyber alone. You know we have to spend tens
of millions of dollars a year to keep up with
the threat actors out there. That's hard for any company
to do. I believe you've got to be operating at
(33:24):
scale in order to afford to to do that.
Speaker 1 (33:28):
Is is your revenue in the in the transportation and
legious sector. Is it. Is it tied to the freight
cycle or I'm assuming it's somewhat tied. Like I guess,
the healthier the truck market, the more trucks there are,
and the more subscriptions you sell. Is that fair? Yeah?
Speaker 2 (33:41):
Absolutely? I mean, you know, let's say if in a
telematics business that's going to be sold by the number
of trucks you have the technology. On our transportium business,
it's a consumption based model. We make sense on the
dollar per all the transactions that run that run through it.
So it's the number of transportation loads that move on
(34:02):
on our system for that part of our transportation business
determines determines the growth. So no, so you probably take
fifty sixty percent of our business and I say that
could fluctuate more with the freight cycle, whereas they'd say
the ballast would be with the rest of the portfolio.
Speaker 1 (34:19):
Gotcha. You know, we talked to a lot about computers, automation,
IoT You know, in the trucking industry, people like to
talk about autonomous trucking. Is that good or bad for Trimble?
If let's say, if the robots take over.
Speaker 2 (34:35):
I think he could be in that positive. I think
there'll be some puts and takes by the way when
I say that, But let me give you some of
the longitudinal, basic online history of Trimble. You know, Charlie
Trumble founded the business in nineteen seventy eight. He was
working at Hewlett Packard at the time and he took
an idea to mister Packard and they weren't interested in
it. It was a technology called Loran for marine positioning. Later,
(34:57):
he took a technology that they were also not inted
in and then started Tremble. And that technology you might
have heard of. It's called GPS. So imagine that that's
the origin story of Tremble. We know precise location. We
don't think about meters at Tremble. We think about centimeters
at Tremble. Our ability to create a digital model of
the physical Earth and our geospatial and surveying business that
(35:20):
goes back to our roots in GPS. And I tell
you that because that actually is the origin story of
how we eventually got into construction, and how we got
into agriculture, and how we got into transportation by understanding
what customers were doing with the sensors positioning sensors that
they were buying from US. We can apply corrections to
(35:41):
the signals that come from the GPS satellites, the correct
for errors that are happening in solar storms, for what
happens through the ono sphere and troposphere, to move meters
down to centimeters. And we sell that increasingly to automotive
companies as well as to farmers and surveyors to have
precision work and companies Today trucking companies and automotive companies
(36:02):
are buying our sensors to do the aid ass systems,
the safety systems on the road, and the lay lane
detection on the road are We sell mobile mapping systems
to create the high definition maps that are on the roads,
and guess what, if you're going to have autonomy, you've
got to have high definition maps to know the condition
of the road. We sell inertial sensors because guess what,
(36:25):
when you go through a tunnel you don't have GPS,
you've lost a lot to the satellite. So there are
aspects of our business that have had i'd say very
positive tailwinds in the last years through the adoption of
and I say automation more than I say autonomy, because
our institutional view of autonomy is that it's a series
(36:46):
of progressive automation. You don't just jump to level five
autonomy and our and our view of the world. You
stare step by workflows and capabilities and functions on that journey.
So there's those as specs like that that could be
a positive for Trimble. But if even if you think
about let's say it did happen we could snap our
(37:06):
fingers and magically we had autonomous vehicles. Do you know
what they need? They need a brain, right and that
brain's telling them what work do I do? Where do
I need to be? You still have to optimize networks,
you still have to optimize routes. You've got to optimize
Now when do you need to charge? And where are
you going? That brain, I mean that brain is what
(37:30):
a TMS is that brain also, well have to we'll
have to help you sort out your maintenance schedules. You're
still going to have to have routing and NAVE and
A and A in a fully autonomous world. So I
see that that is a positive for us. Now, do
I believe we're actually anywhere near level five autonomy in
(37:53):
any sort of big and meaningful way. No, I think
it's further out then we would typically progre you know
that most would probably typically want to say some of
that is regulatory, some of that will be insurance, some
of that will be you know, will the public accept it.
But even if you could do all that, I also
think there's something worth talking about, is are we going
(38:14):
to rebuild our logistics networks, our warehouses? Because the easy
one for me to understand, the straightforward one for me
to understand, is the on ramp to the off ramp
on an interstate. You can do the picture of getting
the dedicated lanes in the future. That final mile is
a radically different problem to solve than on ramp to
(38:34):
off ramp, and our warehouses and logistics centers built on
those on ramp and off ramps today. Not really, there's
a lot of work that has to happen in between.
Speaker 1 (38:46):
Okay, yeah, I think I would kind of agree. It's
kind of further out than most people would would would
like to think. So, you know, you joined Tremble in
two thousand and six. You know, how did you get
into you know, I guess it's not fair to so
you got into transportation, you really got into software, and
so how did you how did your journey take you
(39:07):
to Tremble.
Speaker 2 (39:09):
Well, I have to say I consider myself lucky and
privileged to be at Tremble to get to do what
I get to do. You know, you spend most of
us spend more of our waking hours every day at
work than we do at home with our friends and
her family. And purpose to me is important and runs
runs deep. So that feed the world, move the world,
(39:30):
build the world. I don't take that lightly at all.
So I'm a purpose driven person. I want to do
something that makes a positive impact in the world, and
we get to do that at Tremble. And so that's
why I've been here at nineteen years, why I have
been here in nineteen years, and why this will be
the last place that I work. I'm just I feel
so blessed to be able to do what I get
(39:53):
to do every day. As I say, I happen to
also live in Colorado. And I think the intersection of
being able to live in Colorado and get to do
what I do makes me doubly a lucky person. Are
you a big skier, a skier, climber, biker, all that
good Colorado stuff?
Speaker 1 (40:11):
Limber, I could do skiing and biking. I don't. I
could do climbing, Hey, I don't have the arms for it,
and be I don't have the fortitude. I'm a chicken
when it comes to even standing on a ladder. So,
so you said, you know, so, what is the favorite
your favorite thing about about your job? You know, being
a leader at at organization like Tremble.
Speaker 2 (40:35):
It's it's impact, you know, the impact that you can
have in in this particular role. It has it has
a voice, it has visibility. You know, I talked about
the I really do think that in the role you're
paid to be a capital allocator out you know, that's
the time people money. I've got a very strong and
(40:58):
I hope positive view on the strategy and the opportunity
of this company. And to be able to direct the
resources accordingly, I think is a real joy. I feel
like I show up and work at the United Nations
every day. We've got colleagues that live in over forty
different countries doing business in over you one hundred and
thirty five countries. I've literally seen the world through the
(41:20):
eyes of Tremble.
Speaker 1 (41:23):
All right, and so behind you have a lot of books.
I always like to ask my guests this you know,
do you have like a favorite business or leadership book
that's kind of close to your heart?
Speaker 2 (41:34):
So funny enough, and I guess this would be an
audio recordings that people won't be able to see it,
but it is true. There's a lot of books on
the shelf behind me. Truth is, people send me a
lot of books and I don't don't typically ever get
to reading them, and not just because I'm talking to you.
I tend to be more of a podcast person, So
(41:54):
I like to build the two for one you can
get of you know, being in motion and listening to something.
Not to mention listening at a two x speed, you
can you can get a lot of content that way.
So I have to admit I mostly listened to podcasts.
But having said that, there's two books that would come
to mind for me to to to share with to
(42:15):
share with you. The first one is the book The Goal.
Do you remember that book?
Speaker 1 (42:20):
I love? That was my favorite book I read in
grad school.
Speaker 2 (42:24):
Okay, So that idea of you know, systems thinking and
the bottlenecks that systems thinking really is what what we
think a lot about when we talked about moving from
the point solutions to the workflow and the ecosystems is
solving these higher order problems. And so I love that
from the from the goal of just how accessible they
(42:44):
made that through the through the story. And so you remember,
I think it was Herbie, you know, the one you
had to put in the front of the line. The
other one. More in leadership is a book called Atomic Habits,
and to me, the punch line take away it's more
about you know, I think leadership often begins with self
(43:05):
understanding one's shortcomings, one superpowers and this. But the notion
that he talks to the author talks about in the
book is this idea of being one percent better every day.
I think that is such a powerful concept.
Speaker 1 (43:20):
You know that I have that book by night's shelf.
I need to crack it otten. But I'm sorry you
were saying, well, just.
Speaker 2 (43:27):
Like you know, would you agree that you could be
one percent better at what you do?
Speaker 1 (43:31):
Oh? I can be fifty better what I do?
Speaker 2 (43:33):
Okay, I know I can be at least one percent
better every day. But here's the power. It's the power
of like compounding from one percent better every day is
oh gosh, I remember the number. It's something like thirty
five times better by the end of the year. So
you know, the Einstein has this quote attributed to him,
whether he said it or not, he probably isn't the
one who said it. But you know, compound interest is
(43:55):
the most powerful, uh law of the of the universe.
That compounding effect of just you know, just being a
little bit a little bit better to me as a
powerful lesson from that book.
Speaker 1 (44:06):
Right, And I'm just curious. You mentioned do you like
to listen to podcasts? And I don't know if you
want to tell us what's your favorite podcast about transportation?
Speaker 2 (44:14):
Oh? I thought you're gonna ask me a totally different one,
because you know, the one I like listening to what
I'm talking about business in general is Acquired. I love
the history of business and learning through the stories of
other companies, the you know, the call it the rise,
the the rise, the fall, and the origin stories to
(44:39):
me or are super are super powerful. But in the meantime, hey,
talking transport.
Speaker 1 (44:45):
There we go, that's what I was waiting for. Well, Rob,
it was. It was great getting to know you and
getting to know Trimbull. I really appreciate your time here today.
Speaker 2 (44:54):
Well thanks for having me on and good luck to
you in twenty twenty five.
Speaker 1 (44:59):
Thanks you too, and thanks for tuning in. If you
liked the episode, please subscribe and leave a review. We
have lined up a number of great guests for the podcast,
so please check back to hear conversations with c suit executives, shippers, regulators,
and decision makers within the freight markets. Also, if you
have an idea for a future episode, please hit me
up on the Bloomberg terminal or on Twitter at logistics Lee.
(45:20):
Thanks a lot, everyone, and take care.
Host
Lee Klaskow
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