Trimble Inc. (TRMB) Earnings Call Transcript & Summary

Hi. Good evening, Everybody. This is Ann Duignan, JPMorgan's machinery analyst here in the United States. I'm delighted to have the CEO of Trimble with us, Rob Painter. Rob, thank you for participating in our All Stars Conference. I know this is not your first time, and I think our European investors are pretty familiar with Trimble and the Trimble story. But nonetheless, we will walk us through the businesses this evening and maybe give some further insight into what's going on at Trimble and what things we're hearing from investors that they care about.

And Maybe, Rob, with that in mind, we could start with a question, the kind of elephant in the room this week is China exposure. And so maybe before we start in on the business and the business outlook, maybe we could just start with some background on Trimble's exposure to China, maybe by segment or by business and what you're seeing going on in the country, probably nothing changed in the last week, but what you're hearing from your associates over there.

Sure. Well, first, hello, Ann. Thanks for the invitation to the conference, and good to talk to you as always. Talking about China specifically for better or for worse, our revenue in China is in the low single digits is total -- as a percent of total company revenue. So the exposure overall for Trimble is relatively low from a -- I'll say, domestic consumption in China. Within the domestic consumption in China, we weight more towards our geospatial or survey business, and that's really -- and that's true with the history of the business that we've had in China. I would say the indirect business we have in China, which is significant is through our agriculture business. So I think so in the U.S. or Brazil, that is exported to China, I see that as completely separate from the issues that have come up over the last couple of days of China. As you know, the China swine population was pretty well decimated by the African swine flu. And so between that rebuild and increasing protein consumption and -- in the country, that's its own separate thing, separate from the property crisis.

And I think we would all agree with that. But pretty indirect in terms of people still have to eat regardless [indiscernible] home or not. So thank you for that color. So switching back to the business, your 2021 outlook. You guided revenues up 14%, including a 150 basis point headwind to revenue margin for 2021 because of subscription transition -- excuse me, just a mouthful there. Maybe you can talk to us about what you expect normal revenue growth to be through the upcoming cycles? And what normal growth rate will look like once you've gotten past the transition to more subscription-driven business? And where are we in that process?

Well, I would start by saying that in the short to mid-term, I'd say nothing feels normal at the moment between COVID and supply chain disruptions. It's certainly a very dynamic environment. Having said that, if we go mid to long term, the conviction is still there. I mean the fundamental context in which we're operating as one of a secular opportunity, the markets we serve are large, global, underserved and underpenetrated, and we're providing a fundamental value proposition that makes our customers work get done better, faster, safer, cheaper and greener. The last Investor Day that we had, we put out a long-term growth model between 7% and 9%. And I think over a long-term baseline, that's a relevant place to start. And given where we are in a cycle or other disruptions that are in the world that, that could certainly move plus or minus in any given quarter or any given -- any given year. As it relates to the business model conversions, we sit today with over $1.3 billion of annualized recurring revenue that's been growing double digit. I think that stacks up pretty well against almost any company in the world, almost -- in fact, more than 1/3 of our total revenue -- company revenue today is recurring revenue. More than half of Trimble's total revenue today is software revenue. We have been pursuing business model conversions, and that has created a headwind to growth, as you mentioned, in that range of 150 basis points, which hits both revenue and margins. And we'll pursue that all day long. It is the right thing to do for the long-term health and viability and resilience of the business. I think that we've got potentially a few more years of transition ahead of us because we still have over $400 million of perpetual software, some of which will make sense to continue to convert. And we look actually at some of our hardware offerings and how we can pursue new business models within that. So I hope it's something that continues to be part of our model going forward, Ann.

Well, and that's a good segue into our next question. And that if you could talk a little bit about the hardware business and maybe by segment, Rob. We're seeing that business transition from a hardware sales to a subscription model. How much of that transition is defensive in nature versus offensive? I mean, is the business that sounds moving away from paying for hardware? We think about the transportation business, the truck business, where drivers or operators just want one tablet in the cab and really they want all the software to operate off of one device. So maybe you would talk about that transition out of hardware into a subscription model as opposed to a hardware sale? And what does that do to your margins going forward and the business model going forward?

Yes, let's separate the transportation business and the hardware we have there from really the rest of Trimble. In the transportation business, I would say it's -- the hardware is an onboard computer. I mean, in the relative value makeup of the total solution offering, it does comprise less value add compared to the overall offering. And so there, the market has largely moved to go ratable on the onboard computer and bundle it in with the monthly subscription. I'm talking about on the fleet tracking and telematics in that business. The rest of Trimble, I would say, this is very much a leading move and offensive move on our part. It's still very early days in this transition. So this is definitely not playing defense. We see this as providing us a differential ability to give our customers technology assurance. And we believe we can give them that -- by giving them that technology assurance, they can continue to take advantage of upgrades that become available to the technology and the sensors over time, but they'll get a better lifetime value out of the solution when they change the business model. We also believe that business model really is an enabler to connect the hardware and the software that we have together. And that is unique and differential. And I think that actually provides a competitive moat for the business when we link more of our software capabilities to the onboard hardware that's already out in the field. And by doing that, we can really connect the office and the field, and that's connecting the physical and digital worlds and creating a round trip between that office in the field to optimize the work. So very committed to this. Now how that plays into gross margins? Frankly, that will correlate ultimately how the accounting happens over time. If the accounting requires us, even if it's a ratable hardware, the accounting may require us to take the hardware revenue upfront. However, if it goes -- if it shows up really as a recurring revenue, then that could differentially impact margins negatively in the short term because there's a physical cost to that hardware, then we would need the cumulative base of subscribers to that to overcome a headwind on that.

And Rob, for those investors who might be listening in who don't understand Trimble, maybe as deeply as some, maybe you could provide some examples of what you mean when you say provide you with a unique moat or a differentiation versus your competitors? Just give us an example maybe on the buildings and infrastructure side or maybe on the resource side of what specifically you mean by that?

Sure. So if I -- I'll use an example on the construction business and the civil construction business. So actually at the last CONEXPO, we launched a new business model offering. And so let's say, instead of buying a machine control and guidance system from us, which, by the way, is kind of between Level 1 and Level 2 autonomy, which we don't call it autonomy. We call it control and guidance. Let's say, if you're buying a traditional offering, and let's say, it's USD 30,000 to USD 40,000, it's CapEx, we can move that now to an OpEx offering. And then the OpEx offering, the technology assurance component of this is as sensors upgrade and as connectivity gets better in the field, as displays change and become more enable themselves, if the customer is buying from us on that service basis, we can replace the relevant components over time to keep them up to date. Now many of those upgrades these days come in the form of software. Think about the embedded software. And that gives us an ability, I think, to better match the value that's delivered through those software upgrades with the value capture from a Trimble perspective. So we look at value delivery and value capture. That gives us if we're able to capture more of our fair share of the ROI, that's more money we can put back in the continuing innovation. Now that's just the hardware platform. Now think about the software that we can deliver upon that. The majority of our construction business and Buildings and Infrastructure as a reporting segment is software today. It's software that's used in the office. It's software that's used in the field to manage labor, equipment and materials. So we see an ability to bundle more of the software with the hardware. We see an opportunity when you buy some of our Trimble software, let's say, our project management software, our ERP software and construction that has got functionality that already is plugging into our capabilities -- machine control capabilities in the field. And think about linking that production data in the field because you know where the blade is on grade at any point in time. Or if you're in a building, if you know the status of that build and you can map that real-time progress against the plan, so we have the plan through -- in the form of software today. So if you can manage that awareness in the field to the plan in the office, you link that workflow, you can create an intelligence loop to help you optimize that work in the field to help you optimize to your cost and/or to your time. So it really increases the power of the geometry of a 3D model into the cost and time elements.

Great. And I appreciate the color on that. As you transition and as your sale becomes more of linking the hardware with the software or the scale of the products and services that you offer, are you finding that your sales process has to change? Or are you changing the types of people you're hiring in sales? Are you changing the skills of your salespeople? If you look at it from a bigger picture standpoint, all of this doesn't happen overnight, and it takes a lot of strategy and a lot of change of behavior within the organization. What changes are you making within the organization to ensure the success of the strategy as we go forward?

It's a very insightful question. It changes a lot. Arguably, it changes everything inside the company. So we call our strategy, Connect & Scale 2025. Our Connect & Scale strategy is fundamentally an industry cloud strategy, and we think we're uniquely positioned to deliver on this platform strategy. When we talk about the Connect part of Connect & Scale, we're talking about connecting our users, connecting our stakeholders across the industry life cycles that we serve, connecting the data across these industry continuums. When we talk about scale, we're talking about making ourselves easier to do business with. So our own digital transformation, I'd say we're in the early innings of this. It's a multiyear effort. We're not just getting started, though. We've been working on this for a bit. It challenges us to rethink people. It challenges us to think about processes and systems. It challenges us to simplify wherever we can in the company. So we talk about fewer products and more features. So buying solution suites from Trimble changes the arc of how we define and deliver the products we have. From an underlying systems perspective, it changes the arc of how we're developing because we're having more common customer identity systems, licensing and entitlement engines, more e-commerce self-serve capabilities, all of which is in the service of reducing friction in that go-to-market process. It changes, from a sales perspective, of how we incent and motivate cross-sell and upsell opportunities. Same for how we motivate executive management at Trimble to make sure that we're doing the right things for Trimble that we don't find ourselves optimizing a P&L -- a divisional P&L at the expense of optimizing Trimble because the right answer, of course is always Trimble. So it really challenges us up and down, left and right to the company, and it really orients around 2 words. It's customer success. And as you move into these business models, it's all about retaining and growing the customers that you have and delivering ongoing value and organizing around success of one's customers. And that's a pretty fundamental shift. So yes, a lot of work on that front internally so that we can realize this external opportunity.

And I know, to your point, the strategy is spearheaded by this notion that you'll be there by 2025, though I appreciate that that's not what you really mean by that. But where do you expect to be in this transition by the time we get to 2025? We note that you do intend to host an analyst meeting next spring sometime, I believe, all things being -- I don't know what we want them to be normal maybe. But would you expect to beat your targets by 2025? Or should we think of 2025 as just some 5-year plan and then we go another 25 -- we go another 5 years and we'll be 90% of the way there? I'm just curious how you think about it, Rob, in terms of what will be in the transition by the time we get to 2025?

Yes. Someone asked me the other day if 2025 is a 5-year plan, what's the 10-year plan look like, what would I call that. I would call it data play, the next wave after that. I think owning a share of Trimble is owning a call option on a data company. And let me give you a reason why I say that. And it goes to this office field doing real work in the real world and decades of leadership in this respect. We've got technology in over 155 million acres of farmland. We're managing construction approaching $1 trillion of committed construction volume runs through our systems. We've got tens of millions of users of our technology and construction. We've got over 90% of the top 200 trucking companies in North America use Trimble technology today. So if you think about an industrial IoT lens on Trimble, and we have a tremendous reach into the world and to the field are really around the world. Now to really take advantage of that and deliver better value for our customers, we need to get more of that data back into the cloud. And so to me, a big part of Connect & Scale as it relates to the business model transformation, as I see and we see that the subscription models really have created an ability to get that data back into the cloud. So as more of that data is back into the cloud, that begets the next set of opportunities. So we can already do some pretty interesting things around analytics today, and I think it's scratching the surface of what's possible if we unlock more and more of this data. And so that's why so much of our own digital transformation gets at base level systems like things like data governance that one field of input is -- looks the same across different software applications at Trimble. You have common customer identity such that we know who the customers are and the users and how they're using our technology. We have to have those enablers and those building blocks in order to realize the potential of this data strategy. So connecting more of the stuff together and creating more efficiencies and removing friction through 2025, and then I think that begets a data strategy. And of course, they overlap. They're not totally serial, but that's how I'd answer the question.

Yes, fair. And Rob, I'm curious, in that context, how much of the success of that strategy will be predicated on customers knowing and appreciating the different brands within Trimble? I mean, does everything have to become a Trimble brand? Or can brands like Viewpoint and e-Builder and SketchUp and all these different individual brands, can they all succeed this or survive this transition? Or does it have to be just one big Trimble brand so that customers are aware of your ability to take data from maybe one piece of software, analyze it and give something valuable back to the customer that they might not have thought about previously?

And I'd say, for sure, it looks more like the Trimble brand. Last week, the Viewpoint team held their annual user conference and announced the transition to the Trimble brand. So I take that as a data point that we're moving that way. SketchUp is a product brand. So many of the company brands will become product brands because those brands have equity associated with them. So it -- we don't want to lose -- for the most part, we don't want to lose that, and we need to put more Trimble on top of it. So that looks more like some, I'd say, Trimble awareness, certainly Trimble brand building, Trimble thought leadership. It changes how we're thinking about the corporate marketing side and how we allocate the marketing capital between advocacy at the Trimble level as compared to the divisional product level. But short answer is, yes, absolutely see more going towards Trimble.

Excellent. I appreciate that. So maybe in that context, since we are talking to maybe more European investors on the Buildings and Infrastructure side, have you seen any increase or any change in the competitive dynamics in Europe or around the world just given the new entrants we've seen? We've seen companies like Siemens and ABB and Schneider all either increased their exposure to anything digital or IoT related on the Buildings and Infrastructure side. Are you seeing any signs of increased competition in that business either regionally or globally? Or would you expect any kind of change in the competitive dynamics in that business as we go forward other than maybe acquisitions become more expensive? Is that the one obvious outcome of all of this?

Yes, you're probably right about that. I would say, yes, we do see increased level. I'll answer first by saying, see increased level of capital coming into the market, whether that's through start-ups or whether that's through premiums on acquisitions that are happening in the space or the new entrants like some of the ones you mentioned, who've primarily done that through acquisition to get into the space. So I'd have to say yes. Take an infrastructure bill in the U.S. If it passes and our fingers are crossed that we can do this. That's no doubt going to attract some insurance into segments of the market. I think there's an aspect of rising tide that will happen with that as we know with, let's say, start-up capital, the majority will fail. Some will -- or if not many will get acquired arguably by companies like us. And then every now and then a few will breakout in and of themselves. The shape is actually how we think about a platform strategy at Trimble. So Connect & Scale is synonymous with an industry platform strategy. We do believe in a market like construction, it's very fragmented. I don't believe that you could actually really have a total closed loop system in construction. And it's pretty easy for people usually to get their own visual of it. If you've ever done your own construction project, you know how many subcontractors and trades are involved in really all aspects of construction. That creates a bit of a fragmented technology landscape. So those who -- our bias is that those who can play both best of breed and open will differentially do better. And that's the lens we have on how we think about a competitive landscape. We won't be able to meet every workflow need in every market and geography around the world. And that shapes how we think about openness at Trimble. It shapes how and we'll probably talk about it later, the Trimble Ventures that we announced, the $200 million corporate venture capital fund. Because we want to be a part of this ecosystem that will innovate and develop in areas that maybe we wouldn't get to fast enough or maybe that we wouldn't have the bandwidth. The last thing I'd say for some of the entrants you mentioned into the market, who we've seen coming in, their business is that are more buildings related than infrastructure related. And they're really in -- I think the premise they have is around facilities management and the long tail of the life cycle management of the buildings and the energy components within that. If that could be a good thing in terms of -- I think that could be a good thing in terms of adoption of more of the technology into that full operations and maintenance part of the life cycle of a building. Today, it's still -- there's not a lot of handover from the as-built models into creating really a maintenance model on an ongoing basis. So it could be actually a positive thing for us.

Yes, I would agree with you. But if you look at the strategy behind a lot of the new entrants or recent entrants, it does seem to be around leveraging their content and their skills and energy management. To your point, that seems like it could be very complementary to what Trimble offers. Would Trimble consider partnering with one of these companies down the road? Or would that make it too exclusive and you're better off keeping things independent and open as you mentioned them earlier?

I don't think those are mutually exclusive. I think you can be open and partner to have a tighter linkage and a more seamless integration or to have higher fidelity and the handover of a model into the, let's say, the rest of the life cycle -- let's just take in a building context. I do think there is some relevancy. I've -- we've certainly met and I know some of the principles and these -- and some of the companies that we've talked about. Ultimately, their ability to, let's say, fulfill a vision to more efficiently and effectively operate a building is quite predicated on actually knowing what that building is. That's the as-built. There's an as-design model, and then there's an as-built. That's actually what's constructed is different than what's designed, and that's what we're really good at doing is understanding that as-built. That -- think about that as a model. And taking that model-based workflow into a facilities management, your ability to manage the facility off a model is going to correlate highly to the quality of that model. And I think that's where we would have a very high level of relevancy in that trade and therefore an ability, I think, to partner or just to play open if that's how the market evolves. I think there's also a separation in the buildings world to understand which buildings are owned and operated versus owned and leased. I think there's a huge distinction that happens there. And I get you the majority of us who are in an office building today are -- have leased it and don't actually own it, and that creates a divergent set of incentives to actually be efficient and effective for that long tail cycle. And so you have to also segment the markets to find the opportunities that are relevant.

Yes, fair point. And I would think that, that varies significantly also depending on where you are geographically. So taking to step back then, Rob, and looking at the different businesses, maybe you could just give us an update of where the businesses are today versus where we were at the end of June. I mean obviously, we're not looking for any kind of new outlook or anything. But maybe just some of the highlights of where things stood at the end of last quarter and whether things are shaping up as you had considered? And maybe where there are some maybe risk factors or upside or downside across the different segments?

Yes. If I reiterate the feedback we provided a few weeks ago, it would be as follows. The underlying health of the macros is -- it is quite healthy, if not strong in some pockets. I would say, if we kind of talk geography a bit, we've seen strength in all the businesses in North America, similar in Europe, Asia Pacific, Japan and Australia have been more positive. We go South America, it would be Brazil has been positive. Commodity prices are healthy in agriculture, think soy, think corn. Construction is healthy. Backlogs are pretty good. Sentiment is reasonably strong in construction and I'd say almost globally in that regard engineering and construction, which impacts and helps with our geospatial and our Buildings and Infrastructure business. The watch-outs are supply chain, and I think that's been a big theme of the JPMorgan conference from what I'm hearing, and we talked about supply chain at our earnings call as it is disruptive. It's dynamic. It almost changes. It feels like it changes on a daily basis. We expect to have challenges well into next year with that. We have increased prices that will flow more into -- or I should say, more really in the fourth quarter, not so much the third quarter. So I'd think nothing has changed for the better or for the worse for that matter on supply chain. I mean we saw this as being difficult already. Labor is certainly difficult. Now that labor can be a good for Trimble, a labor, say, shortage. I'm talking about our customers. Our technology can make a good operator -- or an inexperienced operator good, and a good operator great. You use a Robotic Total Station if you're a surveyor and as opposed to mechanical. You take a 2-person operation to 1 person. So if you got to do more with less and get more utilization out of labor, equipment material, you like technology like ours, where there's opportunities and pressures to build back greener our technology as a fundamental value proposition as it relates to environmental sustainability. So those are positives that we see in the market. And we're certainly paying attention to supply chain, paying attention to inflation, paying attention to the infrastructure bill, here in the U.S. Those are certainly capturing some of my bandwidth to see where that goes as it relates to planning the business going forward.

Yes, certainly interesting times with the unique set of challenges that I think most CEOs would say is unprecedented. You've been through a number of cycles, even as CFO of Trimble. So I would think that you would agree that this downturn in this recovery has been unique, and the recovery is presenting its own unique challenges. On that front, though, your Geospatial business has really surprised with the upside over the last couple of quarters, some of which has been driven by new product introductions. Perhaps you could walk us through that segment and talk us through what some of the new products have been there and where you're seeing the success and how sustainable that recent success is going forward?

Sure. I'm really proud of the entire team in this business. They have certainly defied our, I'll say, our general logic or conventional wisdom that this is the most mature of the 4 segments at Trimble. And I really -- I think the team has done an outstanding job on innovation. Also I think the team has done an outstanding job of managing the go-to-market channel. From an innovation perspective -- and these things are years in the making. They don't happen overnight. But we -- some of the things we're contributing to our recent growth include introduction of 3D laser scanner, that's our X7. We've launched a new mobile mapping system. That's essentially, I think, a field to finish mobile mapping solution for asset management mapping and road maintenance. It's called the MX50. We have a new handheld data collector, TSC5, that is built on an Android platform. The product, it's probably been the biggest success for us in these last quarters, has been what's called the R12i. It's basically a new GNSS receiver. And what that does is it creates -- essentially has improved the performance in challenging environments. So a challenging environment for GPS is in an urban canyon or under canopy with trees. And then -- and we've integrated an inertial compensation into this. So you get better, faster results in the field. And so these are all catalysts to innovation and to growth. And that's so important if you're our go-to-market channel to have new innovation, new product, new value proposition to go out and talk to customers about, and that's timed very well with, yes, some positive underlying conditions as it relates to construction. So think residential, think warehouses, think data centers, even a little bit of oil and gas coming back. So it's been a real nice timing of innovation meets the markets. And the team has also done a great job though of managing the channel and really raising the bar on the -- within the dealer network and getting that much better segmenting customers and finding the opportunities and knowing how to reach them with the right value proposition. So very happy with this team. We do think we've got legs in terms of continued growth and opportunity, especially if there's more infrastructure that's to come. I wouldn't expect the growth to continue at the growth that we've had. It was extraordinary growth in the second quarter, but it certainly looks like we've got the opportunity to grow well within those Investor Day -- the last Investor Day models that we had put forward.

As a reminder for investors who might be listening organic growth was up 48% year-over-year in the last quarter for Geospatial. So will it be hard to sustain that level of growth in...

Very hard.

Yes, you are right. Yes, I think it has taken us all by surprise. I mean we all did assume that, that was a mature business and yet I think there are some great lessons to be learned as you look at the success of what they have done and what they've been able to accomplish, and particularly if they can sustain it for any length of time at all. I mean, I think years from now, we've been like [ Max ] saying, wow, did that business segment prove us wrong in terms of by calling something a mature business. I mean just that innovation is required, right?

That's true. Very true.

Okay. I wanted to maybe pose a similar question, but with a slightly different focus on the resource side, the agricultural side. And I'd like your perspective on this. We -- obviously, when we attend events like farm progress or some of the trade shows in agriculture everybody and most particularly maybe the green brand name that's out there, and they're talking at Precision Ag, everybody's stuck in Precision Ag. But more recently, it's been around Blue River Technologies, and technologies that are using video primarily. And then taking the video and send some plant locations, and we sending that data up to the cloud and then spraying only where the weeds are and not spraying the sand. And I'm just curious for a company that like yours is based on your spatial jet based on GPS, what's your company thinking about in terms of video technologies? Is this something that really can be commercially viable? Or do you think that the base technologies will improve sufficiently and significantly enough that there'll be no need for video that we can get there through other means with the speed and data analytics that are needed to provide the same solutions.

Yes, it's a great question. And I think -- honestly, I think time is going to tell where this goes. I mean I think there's the old adage of perfect is the enemy of good. And at least today, let's talk about today. I'd say today, it's too slow, and that's the feedback I get on the system you're referring to. And so it's not being adopted by -- sorry, there is some adoption. I mean first say that. But in terms of like really wide scale adoption, I'm talking to customers and dealers who are saying it's not being used because you can't -- if you're going to have to go 2-mile of overstating this. But if you're going 2 miles an hour, you don't have time for it to go that slow. How much is going to be able to be processed eventually in the cloud versus on the edge, I think, it's going to be an important technology distinction what's going to be the level of quality of connectivity in the field. I mean, hey, the infrastructure bill has rural broadband associated with it. If rural broadband picks up and you get more ubiquitous connectivity, high-speed connectivity, then yes, doing more processing in the cloud is viable. Until then, I think simple is a winning value proposition. And I would argue what we have with the WeedSeeker 2 as a simpler system that's just as effective. Now if we go forward in time, I do believe all these things will change. And okay, what's going to be the nature of how the libraries work. There are other companies who have the libraries to the -- if it's not our proprietary data, I think we could license some of this in the future and integrate the technology as it's there. So in this case, we're talking about the see and spray, the weeding technology, but I know you could broaden that -- we could broaden that up. I'm sure you want to sort of probably talk about a Precision Ag offering. I was also at Farm Progress, probably just trailing right behind you going from meeting to meeting.

Yes. And for those who may not be as familiar with the technology, this see and spray, again, use video technology to actually detect the difference between a plant and a weed and then only spray weed plus saving potentially up to 70% of the amount of pesticides or [indiscernible] 2 mixed up that a farmer would normally need to spray. So what I'm hearing to your point, Rob, is that right now, you can go about 8 miles an hour versus a professional contract sprayer operates at about 16 miles an hour. So yes, you can accomplish anything if you're willing to for something is the nature of technology. So it would be interesting to see how that all plays out. What are -- across the different businesses then touching a little bit on technology because we don't have that much time left. And maybe this can lead into my final question, which would be about capital allocation. Where do you see some of the leading edge or bleeding-edge technologies emerging? Again, is it something like video technology? Is it [ seed of ] data, amount of data, data availability? Where do you see the actual trends in the different segments? And where would that lead you without having to tell us your next acquisition, but where do you see the opportunities as we go forward for capital allocation and in particular, when it comes to M&A?

So if I think about -- I'm trying to think about how to best answer your question. So from a capital allocation standpoint, I'll start kind of high level and then work down at a high level. We always look to invest first back into the business, and we've got a long track record of that. You can look at our R&D. We've put 14% to 15% of our revenue into research and development. So we don't just talk about innovation, we actually do spend and invest behind that. I'll take an opportunity to advertise our Trimble Ventures, which is -- we committed $200 million to a corporate venture capital fund because go back to that platform strategy I talk about -- industry platform, industry cloud strategy is that we want to partner with organizations that can develop innovative solutions that are built on top of our industry clouds. And we think also about new areas of emerging technology that have relevance to Trimble, some of which could be done through a venture, some of which could be done through internal resources, some of which could be acquired. I'll give you a few flavors of things that we pay attention to, but I'll have to say there's a lot we pay attention to on the technology front. Certainly, in the world of autonomy, I think a big area to watch is around perception technologies. So if you're not familiar on the perception side, that's the ability to know that it's a corner stock or that Ann that you're about to run over. And construction and ag run in dirty environments. It's very challenging for cameras for LiDAR sensors to operate in this environment. And actually -- so to the extent to which there's real innovation that takes place there, and it will come, that for us is sensors that can be integrated into our tech stack. I don't think we'll be the primary inventors of that perception technology. I think we'll -- I would think we would leverage that to build the solutions. I think in the area of, I'll call it, vision, we've had significant efforts for years around augmented or mixed reality. And as a company who thrives at the intersection of the physical and digital worlds, the hardware, the software, the office to field, mixed reality, think HoloLens, where we have a partnership with Microsoft around that, that's a brilliant example of bringing that digital into the physical world to see what that model is going to -- or you bring the model into its physical context of what it's going to look like in the real world or to do quality control to compare the as is to the as engineered model. We think that there's interesting things coming there. And certainly, in the realm of data, I go back to my earlier comment that I think the 10-year view as a data play is, okay, that gets into AI and machine learning and really finding some, I'll say, the killer apps on that, that drive significant customer value. We think that there's a set of horizontal technologies in all of these fields would take our artificial intelligence. What we bring is a deep understanding of that domain of the customer and the problems they're trying to solve. And so to the extent to which, I'll say, the technology enables a tighter connection between the problem that's trying to be solved at the vertical with the underlying technology stack, that's an area that we would want to play in from a -- and I'm talking technology capabilities, Ann, here when I answered that question.

Yes. Excellent. Yes. Great insight, Rob. I really appreciate that. I know you have some interesting insights for us. Great to have your brain power behind those answers. I think with that, we're actually out of time. So we're going to leave it there. And Obviously, if anybody has any questions and would like to follow up, just e-mail us, and we're happy to answer questions off-line or hand over then to our partners at Trimble and have them answered on your behalf. So with that, we would like to go. Rob, we really appreciate having you here, and we look forward to your analyst meeting next spring where we'd be talking about, I presume, the next 5 years. So good luck for that, and hopefully, we'll all be able to do that in real life and not via Zoom.

Fingers crossed. Thanks, Ann.

Fingers crossed. That's right. Okay. Thank you.