Positioning technologies firm forecasts double-digit sales growth for H2 2013
Trimble Navigation Ltd. Tuesday reported a 7 percent increase in adjusted second-quarter net income to $98.7 million, or $0.38 per share, beating analysts’ estimates by a penny.
Second-quarter revenue came in at $576.3 million, an 11 percent increase that also surpassed analysts’ expectations by over $2 million.
Sunnyvale, Calif.-based, publicly traded (Nasdaq: TRMB) Trimble, with $2 billion in 2012 revenue, uses positioning technologies – GPS, lasers and optics – to focus on applications requiring position or location, including surveying, construction, agriculture, fleet and asset management, public safety and mapping.
“The issues that impacted us in the first quarter remained with us in the second quarter,” Trimble CEO Steven Berglund said in an earnings call discussing the results. “These revolved around inconsistent market conditions in multiple regions, deferrals of investment due to continuing economic uncertainty, harsh weather and confusion around government funding sources.”
Berglund said the economy won’t help with financial results for at least the remainder of the year.
Berglund said regional results for the quarter reflected market uncertainty, particularly in Europe and Asia-Pacific.
European sales were up double digits year-to-year and was virtually all organic growth and reflected comparatively strong agriculture sales, increasing penetration of a difficult construction market with technology and expansion in the mobile space, Trimble said.
Asia-Pacific, which has been a robust market for Trimble, fell 4 percent year-to-year, with the majority of the drop occurring in Australia, which is in recession, with particularly severe ramifications for construction.
Results by industry segment
Trimble’s three operating segments – Engineering and Construction (E&C), Field and Mobile Solutions, and Advanced Devices – all posted year-to-year revenue and margin growth, the company said.
Second quarter E&C revenue was $313.4 million, up 10 percent, primarily due to organic growth in buildings and construction solutions and contributions from acquisitions. Operating income in E&C for the second quarter of 2013 was $66.8 million, or 21.3 percent of revenue.
“The message from worldwide E&C market remains mixed,” said Berglund. While distribution channels are seeing lots of interest and are positive about prospects, the “backlog of signature-ready projects awaiting approval is high against historical standards and reflects uncertainty” in the market.
Berglund said construction generated most of the E&C segment’s revenue for the second quarter.
Heavy civil infrastructure sales grew in the United States and Europe, but fell in Asia due to the slowdown in Australia, which is the second-largest market for machine control after the U.S. Berglund said Australia was an early adopter market, reflecting the market potential for the rest of the world as they catch up to Australia in adoption rates.
Field and Mobile Solutions
Berglund said the “most significant issue” for the company during the second quarter was in the Field Solutions segment.
Second quarter Field Solutions revenue was $115.9 million, down 6 percent, due primarily to softer sales of GIS products impacted by cutbacks in government funding.
Sales of precision agriculture software and products were also down slightly due to market conditions in the U.S., which were partially offset by strong growth in the rest of the world.
Second quarter Mobile Solutions revenue was $115.5 million, up 42 percent on higher transportation and logistics sales primarily due to acquisitions, and operating income was $15.4 million, or 13.4 percent of revenue.
Second quarter Advanced Devices revenue was $31.5 million, up 10 percent, primarily due to stronger sales of military and RFID components and subsystems. Operating income in Advanced Devices for the second quarter was $6.5 million, or 20.7 percent of revenue.
Double-digit revenue growth H2 2013
Berglund said some of the adverse market conditions will continue through 2013, but expects the company to hit “double-digit revenue growth for the second half.”
Trimble also said non-GAAP gross margin exceeded 56 percent for the first time since it started reporting the line item in 2006. Berglund said that reflects the increasing value of content being provided by bundles of hardware, software and services.
Trimble said its financial plan is to “bank the higher gross margins and to work expenses as a percentage of revenue down to historical levels, providing operating margin lift,” the company said, adding it expects to do this without cutting R&D spending, which was at 13 percent in the second quarter.
Trimble expects third-quarter revenue between $555 million and $565 million with non-GAAP earnings per share of $0.36 to $0.38.
Non-GAAP guidance excludes the amortization of intangibles of $42.0 million related to previous acquisitions; anticipated acquisition costs of $4.5 million and the anticipated impact of stock-based compensation expense of $9.3 million