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What changed in Trimble Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Trimble Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+384 added−337 removedSource: 10-K (2023-02-17) vs 10-K (2022-02-23)

Top changes in Trimble Inc.'s 2023 10-K

384 paragraphs added · 337 removed · 256 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

98 edited+42 added−42 removed50 unchanged
Biggest changeOur representative products include equipment that automates and enables increased precision within large industrial machines such as tractors and bulldozers; integrated systems that track and manage fleets of vehicles and workers and provide real-time information and analytics to the back-office; data collection systems that enable the management of large amounts of geo-referenced information; software solutions that connect all aspects of a construction site or a farm; and building information modeling (“BIM”) software that is used throughout the design, build, and operation of buildings.
Biggest changeOur connected reality capture systems enable the management of large amounts of geo-referenced information, and our software solutions connect all aspects of a fleet, a farm, or a lane, while our collaborative building information modeling (“BIM”) solutions are used throughout the design, build, and operation of the built environment.
The suite of technologies and solutions we provide to the building industry includes program management solutions for construction owners including software for 3D conceptual design and modeling; BIM software that is used in design, engineering, and construction; enterprise resource planning, project management, and project collaboration for general contractors; advanced integrated site layout and measurement systems; cost estimating; scheduling; and project controls solutions for contractors.
The suite of technologies and solutions we provide to the building industry includes program management solutions for construction owners including software for 3D conceptual design and modeling; BIM software that is used in design, engineering, and construction; enterprise resource planning, project management, and project collaboration for general contractors; and advanced integrated site layout and measurement systems, cost estimating, scheduling, and project controls solutions for contractors.
We strive to make Trimble a diverse, equitable, inclusive, and safe workplace and provide opportunities for our employees to grow and develop in their careers, supported by competitive compensation, benefits, and health and wellness programs, and by programs that build connections between our employees and their communities.
We strive to make Trimble a diverse, equitable, inclusive, and safe workplace and provide opportunities for our employees to grow and develop in their careers, supported by competitive compensation, benefits, health and wellness programs, and by programs that build connections between our employees and their communities.
In addition to base salaries, certain roles are eligible to participate in short-term and long-term incentive plans . We offer market competitive benefit programs (which vary by country/region), which include health and wellness benefits, life insurance and disability benefits, flexible savings accounts, paid time off, parental and family leave, employee support programs, retirement plans, and an employee stock purchase plan.
In addition to base salaries, certain roles are eligible to participate in short-term and long-term incentive plans . We offer market competitive benefit programs (that vary by country/region), which include health and wellness benefits, life insurance and disability benefits, flexible savings accounts, paid time off, parental and family leave, employee support programs, retirement plans, and an employee stock purchase plan.
Our precision agriculture solutions can assist farmers throughout every step of their farming process beginning with land preparation and continuing through the planting, nutrient, pest management, and harvesting phases of a crop cycle. We provide manual and automated navigation guidance for tractors and other farm equipment used in spraying, planting, cultivating, and harvesting applications.
Our precision agriculture solutions can assist farmers throughout every step of their farming process beginning with land preparation and continuing through the planting, nutrient, pest management, water management, and harvesting phases of a crop cycle. We provide manual and automated navigation guidance for tractors and other farm equipment used in spraying, planting, cultivating, and harvesting applications.
With this fund, we expect to invest up to $200 million in early- to growth-stage companies that can accelerate innovation and effectively bring new solutions to our customers and the industries that we serve and would give us an early, inside look and stake in emerging business and technology solutions. • Sustainability.
With this fund, we expect to invest up to $200 million in early- to growth-stage companies that can accelerate innovation and effectively bring new solutions to our customers and the industries that we serve and would give us an early, inside look and stake in emerging business and technology solutions.
Our civil engineering and construction portfolio spans the lifecycle of civil infrastructure assets from feasibility and capital budgeting, to planning and design, to construction, through to long-term operation and maintenance. Our solutions serve the key industry stakeholders including the asset owners or clients, design engineers, consultants, contractors, sub-contractors, and suppliers.
Civil Engineering Construction and Asset Management. Our civil engineering and construction portfolio spans the lifecycle of civil infrastructure assets from feasibility and capital budgeting, to planning and design, to construction, through to long-term operation and maintenance. Our solutions serve the key industry stakeholders including the asset owners or clients, design engineers, consultants, contractors, sub-contractors, and suppliers.
The Trimble Foundation Fund is a donor-advised fund that focuses its charitable giving across three areas—natural disaster recovery and relief and climate resilience; female education and empowerment; and diversity, equity, and inclusion—while also supporting the philanthropic efforts of our local offices.
The Trimble Foundation Fund is a donor-advised fund that focuses its charitable giving across three areas—natural disaster recovery and relief and climate resilience; female education and empowerment; and advancing diversity, equity, and inclusion—while also supporting the philanthropic efforts of our local offices.
These pillars are reflective of our commitment to ESG and are fundamentally embedded into our business and culture. We believe this approach creates value that benefits all our stakeholders, including our employees, stockholders, customers, communities, and the world at large.
These pillars are reflective of our commitment to ESG and are fundamentally embedded into our business and culture. We believe this approach creates value that benefits all our stakeholders, including our employees, stockholders, customers, communities, and the world at large. Solutions.
Other benefits include fertility, adoption, and surrogacy education assistance; gender dysphoria, family and caregiver support; flexible work schedules; education assistance; and on-site services such as health centers and fitness centers at some sites. Talent Development We are committed to providing every employee with the opportunity to learn, grow, and excel in a respectful and collaborative workplace.
Other benefits include fertility, adoption, and surrogacy education assistance; gender affirmation, family and caregiver support; flexible work schedules; education assistance; and on-site services such as health centers and fitness centers at some sites. Talent Development We are committed to providing every employee with the opportunity to learn, grow, and excel in a respectful and collaborative workplace.
Shepard 64 Chief Accounting Officer Steven W. Berglund —Steven Berglund was appointed executive chairman of Trimble’s board in January 2020, and previously served as the president and chief executive officer of Trimble since March 1999. Prior to joining Trimble, he was president of Spectra Precision, a group within Spectra Physics AB.
Shepard 65 Chief Accounting Officer Steven W. Berglund —Steven Berglund was appointed executive chairman of Trimble’s board in January 2020, and previously served as the president and chief executive officer of Trimble since March 1999. Prior to joining Trimble, he was president of Spectra Precision, a group within Spectra Physics AB.
Our enterprise transportation management system automates business processes spanning the entire surface transportation life cycle for shippers, carriers and intermediaries, delivering visibility, control, and decision support for the intricate relationships and complex processes involved in the movement of freight. Our products also provide truck routing, mileage, and mapping solutions, as well as a voice guided turn-by-turn navigation solution.
Our enterprise transportation management system automates business processes spanning the entire surface transportation lifecycle for shippers, carriers and intermediaries, delivering visibility, control, and decision support for the intricate relationships and complex processes involved in the movement of freight. Our products also provide truck routing, mileage, and mapping solutions, as well as a voice-guided turn-by-turn navigation solution.
Our internal worldwide training portal, Learn.Trimble.com, provides a set of resources that is easy to access anytime and anywhere, with a range of focus areas from new employees to existing employee development to manager development. Building Connections We believe that building connections between our employees, their families, and our communities creates a more meaningful, fulfilling, and enjoyable workplace.
Our internal worldwide training portal, Learn.Trimble.com, provides a set of resources that is easy to access anytime and anywhere, with a range of focus areas from new employees to existing employee development to manager development. 14 Table of Contents Building Connections We believe that building connections between our employees, their families, and our communities creates a more meaningful, fulfilling, and enjoyable workplace.
Our technological suite is employed across the entire project life cycle to improve productivity, reduce waste and re-work, including reduced carbon emissions, and enable more informed decision making through enhanced situational awareness, data flow, data-driven insights and decision support, and project collaboration. At the same time, our solutions can improve worker safety and reduce environmental impact.
Our technological suite is employed across the entire project lifecycle to improve productivity, reduce waste and re-work, including reduced carbon emissions, and enable more informed decision making through enhanced situational awareness, data flow, data-driven insights and decision support, and project collaboration. At the same time, our solutions can improve worker safety and reduce environmental impact.
We also frequently collaborate with these organizations on volunteer activities for our employees. Lastly, we encourage and provide our employees with a day of service as a benefit to help our communities. 13 Table of Contents Our Trimble Foundation aligns international philanthropic efforts by giving back to the communities where Trimble does business and helping those in need.
We also frequently collaborate with these organizations on volunteer activities for our employees. Lastly, we encourage and provide our employees with a day of service as a benefit to help our communities. Our Trimble Foundation aligns international philanthropic efforts by giving back to the communities where Trimble does business and helping those in need.
Organic growth continues to be our primary focus, while acquisitions serve to enhance our market position. We acquire businesses that bring domain expertise, geographic presence, technology, products, and distribution capabilities that augment our portfolio and allow us to penetrate existing markets more effectively, or to establish a market beachhead.
O rganic growth continues to be our primary focus, while acquisitions serve to enhance our market position. We acquire businesses that bring domain expertise, geographic presence, technology, products, and distribution capabilities that augment our portfolio and allow us to penetrate existing markets more effectively, or to establish a market beachhead.
She is a member of the AICPA, Financial Executives Institute, and the Institute of Management Accounting, where she currently serves on the Sustainable Business Management - Global Task Force. 16 Table of Contents
She is a member of the AICPA, Financial Executives Institute, and the Institute of Management Accounting, where she currently serves on the Sustainable Business Management - Global Task Force. 17 Table of Contents
However, overall, as a company, as a result of diversification of our businesses across segments and the increased impact of software and subscription revenue, we are experiencing less seasonality. Changes in global macroeconomic conditions could also impact the level of seasonality we experience.
However, overall, as a company, as a result of diversification of our businesses across segments and the increased impact of software and subscription revenue, we are experiencing less seasonality. Changes in global macroeconomic 11 Table of Contents conditions could also impact the level of seasonality we experience.
Bisio earned an MBA from the University of Denver, a Master of Regional Planning from the University of Massachusetts, and a Bachelor of Science in Cartography from Salem State University in Salem, Massachusetts. 15 Table of Contents James A. Kirkland —James Kirkland currently serves as Trimble’s senior vice president, general counsel, and secretary.
Bisio earned an MBA from the University of Denver, a Master of Regional Planning from the University of Massachusetts, and a Bachelor of Science in Cartography from Salem State University in Salem, Massachusetts. James A. Kirkland —James Kirkland currently serves as Trimble’s senior vice president, general counsel, and secretary.
Large holds an Ed.D. from Oklahoma State University, a Master of Science in Management from the Stanford University Graduate School of Business, a Postgraduate Diploma in Strategy and Innovation from the University of Oxford, and a Bachelor of Science (Honors) in Surveying and Mapping Science from the University of Newcastle Upon Tyne. Julie A.
Large holds an Ed.D. from Oklahoma State University, a Master of Science in Management from the Stanford University Graduate School of Business, a Postgraduate Diploma in Strategy and Innovation from the University of Oxford, and a Bachelor of Science (Honors) in Surveying and Mapping Science from the University of Newcastle Upon Tyne. Jennifer K.
We do this by supporting three focus areas, disaster and climate resilience; female education and empowerment; and diversity, equity, and inclusion, as well as by supporting the philanthropic efforts of our local offices. Health, Safety, and Wellness The success of our business is fundamentally connected to the well-being of our people.
We do this by supporting three focus areas, disaster and climate resilience; female education and empowerment; and DEI, as well as by supporting the philanthropic efforts of our local offices. Health, Safety, and Wellness The success of our business is fundamentally connected to the well-being of our people.
They are not intended to be active hyperlinks to websites. The information on such websites, even if it might be accessible through a hyperlink resulting from the URLs or referenced herein, is not and shall not be deemed to be incorporated into this Annual Report on Form 10-K.
They are not intended to be active hyperlinks to websites. The information on such websites, even if it might be accessible through a hyperlink resulting from the URLs or referenced herein, is not and shall not be deemed to be incorporated into this report.
Our platform investments allow us to extend our differentiation in positioning and sensing, modeling, and analytics into emerging industry solutions and to drive ecosystem collaboration across our target industries. This improves our value over the customer life cycle, while enhancing our leadership in software and services, which already account for over 65% of our R&D investment.
Our platform investments allow us to extend our differentiation in positioning and sensing, modeling, and analytics into emerging industry solutions and to drive ecosystem collaboration across our target industries. This improves our value over the customer lifecycle, while enhancing our leadership in software and services, which already account fo r over 65% of our R&D investment.
Our suite of solutions includes field-based data collection systems and field software, real time communications systems, and back-office software for data processing, modeling, monitoring, reporting, and analysis.
Our suite of solutions includes field-based data collection systems and field software, real time 9 Table of Contents communications systems, and back-office software for data processing, modeling, monitoring, reporting, and analysis.
Business Strategy Our growth strategy is centered on multiple elements: • Executing on our Connect and Scale strategy. We continue to focus on executing our multi-year platform strategy. This strategy contains two elements.
Business Strategy Our growth strategy is centered on multiple elements: • Executing on our Connect and Scale strategy. We continue to focus on executing our multi-year platform strategy.
In the technology space, intellectual property and know-how derived from employees fosters innovation and serves as a competitive advantage. To continue producing the innovative technologies for which we are known, it is crucial that we continue to attract, engage, and retain top talent.
Commitment to these behaviors connects our employees. In the technology space, intellectual property and know-how derived from employees fosters innovation and serves as a competitive advantage. To continue producing the innovative technologies for which we are known, it is crucial that we continue to attract, engage, develop, and retain top talent.
We manufacture our laser and optics-based products, as well as some of our GPS products, at our plants in Dayton, Ohio; Danderyd, Sweden; and Shanghai, China. Some of these products or portions of these products are also subcontracted to third parties for assembly.
We manufacture our optics-based products, as well as some of our GPS products, at our plants in Dayton, Ohio; Danderyd, Sweden; and Salzkotten, Germany. Some of these products or portions of these products are also subcontracted to third parties for assembly.
Financial news and reports and related information about our Company, GAAP to non-GAAP reconciliations, as well as our Sustainability report, a re also found on this website. Information contained on our website is not part of this Annual Report on Form 10-K.
Financial news and reports and related information about our Company, GAAP to non-GAAP reconciliations, as well as our Sustainability report and DEI report, a re also found on this website. Information contained on our website is not part of this report.
The first element, Connect, aims to connect more customer workflows, industry life cycles, and solution offerings, so that we can continue to transform the way our customers work. This includes integrating more of our customers’ data through cloud offerings and making more of our solutions available over time on a subscription basis.
This strategy contains two elements. ◦ The first element, Connect, aims to connect more customer workflows, industry lifecycles, and solution offerings, so that we can continue to transform the way our customers work. This includes integrating more of our customers’ data through cloud offerings and making more of our solutions available over time on a subscription basis.
Shepard —Julie Shepard currently serves as Trimble’s chief accounting officer. She joined Trimble in December of 2006 as vice president of finance and was appointed chief accounting officer in May 2017. Prior to joining Trimble, she served as vice president of finance and corporate controller at Quantum Corporation.
She joined Trimble in December of 2006 as vice president of finance and was appointed chief accounting officer in May 2017. Prior to joining Trimble, she served as vice president of finance and corporate controller at Quantum Corporation.
We currently have distribution channels in over 85 countries, and sales are supported by our own offices located in over 40 countries around the world. • Optimized go-to-market strategies to best access our markets. We utilize vertically focused go-to-market strategies that leverage domain expertise to best serve the needs of individual markets both domestically and abroad.
Sales are supported by our own offices located in approximately 40 countries around the world. • Optimized go-to-market strategies to best access our markets. We utilize vertically focused go-to-market strategies that leverage domain expertise to best serve the needs of individual markets both domestically and abroad.
No assurance or representation is given as to the suitability or reliability for any purpose whatsoever of any information on such websites. 14 Table of Contents Information about our Executive Officers The names, ages, and positions of our executive officers as of February 22, 2022, are as follows: Name Age Position Steve W. Berglund 70 Executive Chairman Robert G.
No assurance or representation is given as to the suitability or reliability for any purpose whatsoever of any information on such websites. 15 Table of Contents Information about our Executive Officers The names, ages, and positions of our executive officers as of February 17, 2023, are as follows: Name Age Position Steve W. Berglund 71 Executive Chairman Robert G.
Business Segments and Markets Our segments are distinguished by the markets they serve. Each segment consists of businesses that are responsible for product development, marketing, sales, strategy, and financial performance. We report our financial performance, including revenue and operating income, based on four reportable segments: Buildings and Infrastructure, Geospatial, Resources and Utilities, and Transportation.
Each segment consists of businesses that are responsible for product development, marketing, sales, strategy, and financial performance. We report our financial performance, including revenue and operating income, based on four reportable segments: Buildings and Infrastructure, Geospatial, Resources and Utilities, and Transportation.
Our Vice President of Diversity, Equity, and Inclusion and a DEI core team cascade objectives that are aligned with our Trimble values, while also encouraging local teams to focus on aspects of diversity that foster meaningful inclusion and belonging.
Our Vice President of DEI and her core team cascade objectives that are aligned with our Trimble values and multi-year goals, while also encouraging local teams to focus on aspects of diversity that foster meaningful inclusion and belonging.
We are launching new career growth and development initiatives to empower employees to identify skill development resources, and provide projects and job opportunities to achieve their personal goals and full potential. We encourage employees to nurture a love of continuous learning and a resilience that is essential for accomplishment.
We launched new career growth and development initiatives in 2022 to empower employees to identify internal job opportunities, skill development resources, and projects to achieve their personal development goals and full potential. We encourage employees to nurture a love of continuous learning and a resilience that is essential for accomplishment.
These go-to-market capabilities include independent dealers, joint ventures, original equipment manufacturers (“OEM”), and distribution alliances with key partners, such as CNH Industrial, Caterpillar, and Nikon, as well as direct sales to end users, which provide us with broad market reach and localization capabilities to effectively serve our markets. 6 Table of Contents • Strategic acquisitions.
These go-to-market capabilities include independent dealers, joint ventures, original equipment manufacturers (“OEM”), and 7 Table of Contents distribution alliances with key partners, including Caterpillar and Nikon, as well as direct sales to end users, which provide us with broad market reach and localization capabilities to effectively serve our markets. • Strategic acquisitions and venture fund investments.
We also sell many of our software solutions through our own direct sales force. Competitors in this segment are typically companies that provide optical, laser, or GNSS positioning products as well as companies that produce software specific to the construction process.
We also sell many of our software solutions through our own direct sales force, to asset owners and clients, contractors, sub-contractors, and consulting engineers. Competitors in this segment are typically companies that provide optical, laser, or GNSS positioning products as well as companies that produce software specific to the construction process.
Our agricultural equipment revenue, within our Resources and Utilities segment, has historically been the highest in the first quarter, followed by the second quarter, reflecting buying in anticipation of the spring planting season in the Northern hemisphere.
Seasonality of Business Construction equipment revenue, within our Buildings and Infrastructure segment, historically has been higher in early spring. Our agricultural equipment revenue, within our Resources and Utilities segment, has historically been the highest in the first quarter, followed by the second quarter, reflecting buying in anticipation of the spring planting season in the Northern hemisphere.
Prior to this role, he served as general manager for Trimble’s rail division from January 2011 until April 2015. He joined Trimble in 1996 and has held several marketing, sales, and general management positions since then at Trimble. Mr.
From January 2011 until April 2015, he served as general manager for Trimble’s rail division. He joined Trimble in 1996 and has also held several marketing, sales, and general management positions while at Trimble. Mr.
In addition, you may request a copy of these filings (excluding exhibits) at no cost by writing or telephoning us at our principal executive offices at the following address or telephone number: Trimble Inc. 935 Stewart Drive, Sunnyvale, CA 94085 Attention: Investor Relations Telephone: (303) 635-8551 The URLs in this Annual Report on Form 10-K are intended to be inactive textual references only.
In addition, you may request a copy of these filings (excluding exhibits) at no cost by writing or telephoning us at our principal executive offices at the following address or telephone number: Trimble Inc. 10368 Westmoor Drive, Westminster, CO 80021 Attention: Investor Relations Telephone: (303) 635-8551 The URLs in this report are intended to be inactive textual references only.
Initiative s include modifications to our recruiting process to ensure the inclusion of diverse, underrepresented candidates, developing relationships with universities with higher underrepresentation, creating diverse talent pools, and increasing networking and referrals with diverse professional organizations.
Initiative s include modifications to our recruiting process to ensure the inclusion of diverse, underrepresented candidates, developing relationships with universities with higher underrepresented student populations, creating diverse talent networks to promote Trimble job opportunities, and increasing networking and referrals with diverse professional organizations.
He is also a member of the board of directors and audit committee of Belden Inc., a global provider of end-to-end signal transmission solutions. Robert G. Painter —Robert Painter was appointed Trimble’s president and chief executive officer in January 2020. From 2016 through 2019, he served as our chief financial officer, where he was responsible for Trimble’s worldwide finance operations.
He is also a member of the board of directors and audit committee of Belden Inc., a global provider of end-to-end signal transmission solutions. Robert G. Painter —Robert Painter became Trimble’s president and chief executive officer in January 2020. From 2016 through 2019, he served as the Company’s chief financial officer. Prior to that, Mr.
The second element, Scale, aims to invest in the people, processes, and technologies that are necessary to streamline and standardize our internal processes, provide a seamless experience for our customers as they engage with our connected solutions, and enable us to continue to grow our business efficiently and effectively for many years into the future. • Increasing focus on software and services.
Meanwhile in our Transportation business, the Trimble Transportation Cloud, for example, provides shippers and carriers with the critical information they need to make more informed bid and contract award decisions. ◦ The second element, Scale, aims to invest in the people, processes, and technologies that are necessary to streamline and standardize our internal processes, provide a seamless experience for our customers as they engage with our connected solutions, and enable us to continue to grow our business efficiently and effectively for many years into the future. • Increasing focus on software and services.
He re-joined Trimble in December 2020 as vice president responsible for Trimble’s construction field solutions businesses. He previously served in a number of leadership roles within the company between 1996 and 2014, including vice president of channel development; as general manager for the mapping, GIS and utilities business; and in a variety of product management, marketing and sales management roles.
Between 1996 and 2014, he served in a number of leadership roles at Trimble, including as vice president of channel development; as general manager for the mapping, GIS, and utilities business; and in a variety of product management, marketing, and sales management roles.
As we extend our software and services offerings to cover the full set of construction life cycle management solutions used by construction owners, designers, and construction companies, we increasingly compete with large established companies that offer similar systems across all industries.
As we extend our software and services offerings to cover the full set of construction lifecycle management solutions used by construction owners, designers, and construction companies, we increasingly compete with large established companies that offer similar systems across all industries. We compete principally on the basis of innovation, differentiated products, domain expertise, service, quality, and geographic reach.
We currently have over 1,000 unique patents reflective of our technology portfolio and deep domain knowledge to deliver specific, targeted solutions quickly and cost-effectively to each of the vertical markets we serve.
We currently have over 1,000 unique patents reflective of our technology portfolio and deep domain knowledge to deliver specific, targeted solutions quickly and cost-effectively to each of the vertical markets we serve. Our patent portfolio is continuously updated with new patent grants that emerge from our investments in research and development.
At the end of 2021, we employed 11,931 full-time and part-time employees, the overwhelming majority of which were full-time employees. Approximately 49%, 30%, 17%, and 4% of employees reside in North America, Europe, Asia-Pacific, and the rest of the world, respectively. Our employees are working in over 200 locations in over 40 countries.
At the end of 2022, we employed 11,825 full-time and part-time employees, the overwhelming majority of which were full-time employees. Approximately 48%, 30%, 18%, and 4% of employees reside in North America, Europe, Asia-Pacific, and the rest of the world. Our employees are working in around 200 locations in over 40 countries. Collectively, we speak more than 45 different languages.
Diversity, Equity, and Inclusion (“DEI”) We value diversity in our workforce, including various cultures, backgrounds, ages, genders, races and ethnicities, nationalities, sexual orientations, religions, people with different abilities, parents and caregivers, and many other characteristics, knowing that it drives our best thinking. Our focus on diversity starts at the top.
We believe our diversity makes us stronger and better able to solve complex problems for our customers. Diversity, Equity, and Inclusion (“DEI”) We value diversity in our workforce, including various cultures, backgrounds, ages, genders, races and ethnicities, nationalities, sexual orientations, religions, people with different abilities, parents and caregivers, and many other characteristics, knowing that it drives our best thinking.
Our subscription-based offerings are also increasingly being extended into offerings that include both hardware and software, providing a complete customer solution together with customer technology assurance as new generations of hardware become available.
Our tiered subscription offerings can include both hardware and software, providing a complete customer solution with technology assurance as new generations of hardware become available.
We also own numerous trademarks and service marks that contribute to the identity and recognition of Trimble and that of its global products and services.
We actively manage the intellectual property used in the development, operations, and sales of our products and services. We also own numerous trademarks and service marks that contribute to the identity and recognition of Trimble and that of its global products and services.
Environmental, Social, and Governance We recognize that we are living in a time of increasing urgency for action on sustainability, and we are intent on moving quickly and harnessing our potential to address global challenges, including further developing our own strategic approach and process for managing the material ESG aspects of our business.
Environmental, Social, and Governance We recognize that we are living in a time of increasing urgency for action on sustainability, and we are moving quickly and harnessing our potential to address global challenges.
Painter 50 President and Chief Executive Officer David G. Barnes 60 Chief Financial Officer Ronald J. Bisio 53 Senior Vice President James A. Kirkland 62 Senior Vice President, General Counsel and Secretary Manolis E. Kotzabasakis 62 Senior Vice President James Langley 47 Senior Vice President Darryl R. Matthews 54 Senior Vice President Peter Large 52 Senior Vice President Julie A.
Painter 51 President and Chief Executive Officer David G. Barnes 61 Chief Financial Officer Ronald J. Bisio 54 Senior Vice President James A. Kirkland 63 Senior Vice President, General Counsel and Secretary Peter Large 53 Senior Vice President Jennifer K. Lin 52 Chief Platform Officer Darryl R. Matthews 55 Senior Vice President Julie A.
Item 1. Business Trimble Inc. (“Trimble” or “the Company” or “we” or “our” or “us”) is a leading provider of technology solutions that enable professionals and field mobile workers to improve or transform their work processes and drive a more sustainable future.
Item 1. Business Trimble Inc. (“Trimble” or “the Company” or “we” or “our” or “us”) is a leading technology solutions provider that enables office and mobile professionals to connect their workflows and asset lifecycles to drive a more productive, sustainable future.
We use multiple distribution approaches to access the agricultural market including independent dealers and direct selling to enterprise accounts. A significant portion of our sales are through CNH Industrial and affiliated dealer networks.
We use multiple distribution approaches to access the mixed fleet agricultural market including independent dealers and direct selling to enterprise accounts. A significant portion of our aftermarket sales have historically been generated through CNH Industrial (“CNH”), which resells our aftermarket products through its dealer network.
This mindset shapes how we treat one another and how we serve our customers, colleagues, and stockholders. These attributes serve as a common foundation across the global organization and also adapt locally to diverse geographic and operational business models. Commitment to these behaviors unites our employees.
Our leaders inspire purpose and vision, engage to draw out the best from each other, and strive to achieve meaningful results. This mindset shapes how we treat one another and how we serve our customers, colleagues, and stockholders. These attributes serve as a common foundation across the global organization and also adapt locally to diverse geographic and operational business models.
We hold over 1,000 unique issued and enforceable patents covering key technology areas, including precision GNSS, optical and inertial positioning solutions, artificial intelligence and machine learning, IoT, cloud computing, laser scanning, 3D modeling, point cloud processing, augmented reality, and many others. We actively manage the intellectual property used in the development, operations, and sales of our products and services.
We hold over 1,000 unique issued and enforceable patents covering key technology areas, including precision GNSS, optical and inertial positioning solutions, artificial intelligence and machine learning, IoT, cloud computing, laser scanning, 3D modeling, point cloud processing, augmented reality, and many others. Our patent portfolio is continuously updated with new patent grants that emerge from our investments in research and development.
We compete principally on the basis of innovation, differentiated products, domain expertise, service, quality, and geographic reach. 8 Table of Contents Geospatial The Geospatial segment primarily serves customers working in surveying, engineering, and government. Within this segment our most substantial product portfolios are focused on surveying and geospatial and geographic information systems (“GIS”). Surveying and Geospatial.
Geospatial The Geospatial segment primarily serves customers working in surveying, engineering, and government. Within this segment, our most substantial product portfolios are focused on surveying and geospatial and geographic information systems (“GIS”). Surveying and Geospatial.
Our agricultural software is used by farmers to help integrate all of the information on the farm, and is also used by advisors, suppliers, and purchasers to share information to help improve efficiencies.
Our agricultural software is used by farmers to help integrate all of the information on the farm, and is also used by advisors, suppliers, and purchasers to share information to help improve efficiencies. Our agricultural software enables farmers to make more informed decisions leading to higher yields, better quality crops, increased profitability, and increased environmental sustainability.
Research and Development and Intellectual Property We believe that our competitive position is maintained through the development and introduction of new products, including software and services. Trimble delivers digital technologies that enhance the physical world by integrating and connecting industry workflows, stakeholders, and data, while modernizing its interfaces and business models to make it easier for customers to do business.
Trimble delivers digital technologies that enhance the physical world by integrating and connecting industry workflows, stakeholders, and data, while modernizing its interfaces and business models to make it easier for customers to do business.
From 2010 to 2015, he served as president and general manager of the NAFTA Region for Nufarm Americas, Inc., a subsidiary of Nufarm Limited, a publicly-traded multinational agricultural chemical company. From 2008 to 2010, he served as general manager of Nufarm Agriculture Inc., the Canadian subsidiary of Nufarm Limited.
Matthews —Darryl Matthews currently serves as senior vice president responsible for Trimble’s natural resources businesses, which includes agriculture, forestry, and global services divisions. From 2010 to 2015, he served as president and general manager of the NAFTA Region for Nufarm Americas, Inc., a subsidiary of Nufarm Limited, a publicly-traded multinational agricultural chemical company.
Our focus on these growth drivers has led over time to growth in revenue and profitability and an increasingly diversified business model. As our solutions have expanded, our go-to-market model has also evolved, with a balanced mix between direct, distribution, and OEM customers, as well as an increasing number of enterprise-level customer relationships.
As our solutions have expanded, our go-to-market model has also evolved, with a balanced mix between direct, distribution, and OEM customers, as well as an increasing number of enterprise-level customer relationships. Business Segments and Markets Our segments are distinguished by the markets they serve.
He began his career at Dow AgroSciences in Canada, where he held management roles in sales and marketing. From 2010 to 2015, he served on the Board of Directors for CropLife America. Mr. Matthews received an Honors Bachelor of Science in Agriculture majoring in Horticultural Science and Business from the University of Guelph in Ontario, Canada.
From 2008 to 2010, he served as general manager of Nufarm Agriculture Inc., the Canadian subsidiary of Nufarm Limited. He began his career at Dow AgroSciences in Canada, where he held management roles in sales and marketing. From 2010 to 2015, he served on the Board of Directors for CropLife America. Mr.
Our agricultural software enables farmers to make more informed decisions leading to higher yields, better quality crops, increased profitability, and increased environmental sustainability. 9 Table of Contents For many of our end-market applications and customer needs, the positional accuracy that can be derived from GNSS satellite signals alone is insufficient. In these applications, higher levels of positional accuracy are required.
For many of our end-market applications and customer needs, the positional accuracy that can be derived from GNSS satellite signals alone is insufficient. In these applications, higher levels of positional accuracy are required.
He is also a member of the Association of Equipment Manufacturers. Peter Large —Peter Large was appointed in July 2021 as senior vice president responsible for Trimble’s construction field solutions businesses, which includes Trimble’s civil engineering, construction field systems and software, as well as Trimble’s joint ventures with Caterpillar and Hilti.
From July 2021 to October 2022, he was senior vice president responsible for civil infrastructure solutions businesses, which includes Trimble’s civil engineering, construction field systems and software, as well as Trimble’s joint ventures with Caterpillar and Hilti. Prior to that, he was vice president responsible for Trimble’s construction field solutions businesses.
We continue to manage product design through pilot production for the subcontracted products, and we are directly involved in qualifying suppliers and key components used in all our products. Our current contract with Flex Ltd. continues in effect until either party gives the other ninety days written notice. We also utilize original design manufacturers for some of our products.
Our contract manufacturing partners are responsible for significant material procurement, assembly, and testing. We continue to manage product design through pilot production for the subcontracted products, and we are directly involved in qualifying suppliers and key components used in all our products. We also utilize original design manufacturers for some of our products.
We focus on integrating our broad technological and application capabilities to create vertically-focused, system-level solutions that transform how work is done within the industries we serve. The integration of sensors, software, connectivity, and information in our portfolio gives us the unique ability to provide an information model specific to the customer’s workflow.
We focus on integrating our software application and cloud capabilities to create vertically-focused, system-wide solutions that transform how work is done. The integration of sensors, software, hardware, and data in our portfolio gives us a unique ability to provide detailed insights for our customers to improve their specific workflows.
The global economy is experiencing a fundamental shift toward sustainability driven through broad stakeholder engagement, with a focus on decarbonization.
To date, we have invested a total of $20.5 million in early stage companies. • Sustainability. The global economy is experiencing a fundamental shift toward sustainability driven through broad stakeholder engagement, with a focus on decarbonization.
Historically, through delivering productivity and efficiency gains, Trimble products have delivered sustainability for our customers, and we envision more opportunities to deliver expanded carbon reductions and other sustainability benefits, such as water management in agriculture and utilities, for our customers through our Connect and Scale and the other strategies we have described.
Historically, through delivering productivity and efficiency gains, Trimble products have delivered sustainability for our customers, and we envision more opportunities to deliver expanded carbon reductions and other sustainability benefi ts, such as water management in agriculture and utilities. Our focus on these growth drivers has led over time to growth in revenue and profitability and an increasingly diversified business model.
We engaged in new relationships with the National Society of Black Engineers, participated in national and local diversity career fairs, and sponsored new engagements focused on increasing gender and race/ethnic diversity in the industries we serve through groups like Construction and Transportation Girl. We announced the Dr.
We participated in many new national and local diversity career fairs and sponsored engagements focused on increasing gender and race/ethnic diversity in the industries we serve through groups like Transportation and Construction Girl. We also increased our investments in education through new Trimble technology labs at Minority Serving Institutions and the Dr.
Building Construction. Our building construction portfolio of solutions for the residential, commercial, and industrial building industry spans the entire life cycle of a building and is used by construction owners, architects, designers, general contractors, sub-contractors, and engineers.
Within this segment, our most substantial product portfolios are focused on building and civil engineering construction, design, capital planning, and asset management. Building Construction. Our building construction portfolio of solutions for the residential, commercial, and industrial building industry spans the entire lifecycle of a building and is used by construction owners, architects, designers, general contractors, sub-contractors, and engineers.
Our primary design, manufacturing, and distribution sites in Dayton, Ohio; Sunnyvale, California; Danderyd, Sweden; Eindhoven, Netherlands; Auckland, New Zealand, and Shanghai, China are registered to ISO9001:2015 covering the design, production, distribution, and servicing of our products.
Our primary design, manufacturing, and distribution sites in Dayton, Ohio; Sunnyvale, California; Danderyd, Sweden; Eindhoven, Netherlands; and Salzkotten, Germany are registered to ISO9001:2015 covering the design, production, distribution, and servicing of our products. Research and Development and Intellectual Property We believe that our competitive position is maintained through the development and introduction of new products, including software and services.
Colleges and universities remain an important source of talented recruits. We aim to transform and re-invent the way Trimble attracts and hires employees to increase diversity.
In addition, our increasing focus on technologies, such as cloud and autonomy, requires us to compete against leading companies in the technology sector. Colleges and universities remain an important source of talented recruits. We aim to transform and re-invent the way Trimble attracts and hires employees to increase diversity.
Our software products and services range from embedded real-time firmware to application software that integrates field data with large-scale enterprise back-office applications. Many of our software solutions are built on configurable and enterprise-grade scalable platforms that can be tailored to the workflows that our customers follow to implement their customized business processes.
Ranging from embedded, real-time firmware to software that integrates data with large-scale enterprise back-office systems, many of our solutions are extensible and can be tailored by users for customized business processes and workflows.
We view international expansion as an important element of our strategy, and we continue to position ourselves in geographic markets that will serve as important sources of future growth.
We view international expansion as an important element of our strategy, and we continue to position ourselves in geographic markets that will serve as important sources of future growth. Products are sold in more than 150 countries, through dealers, representatives, joint ventures, and other channels throughout the world, as well as direct sales to end users.
Compensation and Benefits We believe people should be paid for the role they perform and their skills and experience, regardless of their gender, race, age, or other personal characteristics.
Gladys West Scholarship Program through the Trimble Foundation, which honors a GPS technology pioneer and woman of color, and we award scholars at three universities serving underrepresented students. Compensation and Benefits We believe people should be paid for the role they perform and their skills and experience, regardless of their gender, race, age, or other personal characteristics.
In quarterly business reviews, we review gender and U.S. ethnicity demographics and trends for every business within Trimble, as well as region and business-led initiatives that will lead toward future progress. 12 Table of Contents We have a number of employee resource networks that enhance our inclusive and diverse culture, including networks that support women, caregivers, Black, Hispanic/Latinx and Indian professionals, veterans, employees with disabilities, and our LGBTQ+ community.
We have a number of employee resource networks that enhance our inclusive and diverse culture, including networks that support women, caregivers, Black, Hispanic/Latinx and Indian professionals, veterans, employees with disabilities, and our LGBTQ+ community.
For further financial information about our segments, see Note 5 to the Consolidated Financial Statements in this Annual Report on Form 10-K. Buildings and Infrastructure The Buildings and Infrastructure segment primarily serves customers working in architecture, engineering, construction, and operations and maintenance. Within this segment, our most substantial product portfolios are focused on building construction and civil engineering and construction.
For further financial information about our segments, see Note 6 “ Reporting Segment and Geographic Information ” of this report. Buildings and Infrastructure The Buildings and Infrastructure segment primarily serves customers working in architecture, engineering, construction, design, asset management, operations, and maintenance.
Following the sale of MWH to Stantec Inc., he assumed operational responsibility for Stantec’s businesses outside North America from September 2017 to January 2019. He also served as a leader on the committee overseeing the integration of MHW into Stantec from May 2016 to July 2017.
At MWH, he served on the board of directors and had responsibility for information technology and procurement in addition to his financial role. Following the sale of MWH to Stantec Inc., he assumed operational responsibility for Stantec’s businesses outside North America from September 2017 to January 2019.
Prior to MWH, he held financial leadership positions at Western Union, Coors, and YUM Brands. He began his career as a strategy consultant at Bain & Company. Mr. Barnes received a Bachelor of Science in Applied Mathematics from Yale University and an MBA in Finance and Marketing from the University of Chicago. Mr.
He also served as a leader on the committee overseeing the integration of MHW into Stantec from May 2016 to July 2017. Prior to MWH, he held financial leadership positions at Western Union, Coors, and YUM Brands. He began his career as a strategy consultant at Bain & Company. Mr.
In response to the COVID-19 pandemic, we implemented changes that we determined were in the best interest of our employees, as well as the communities in which we operate, and which comply with government regulations. This includes having the vast majority of our employees work from home, while implementing additional safety measures for employees continuing critical on-site work.
In response to the COVID-19 pandemic, we implemented changes that we determined were in the best interest of our employees, as well as the communities in which we operate, and which comply with government regulations. As COVID-related lockdowns subsided, we are supporting employees in transition to return to office and flexible working arrangements.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeA reduction in the number of operating satellites below the 24-satellite standard established for GPS may impair the utility of the GPS system and the growth of current and additional market opportunities. In addition, software updates to GPS satellites and ground control segments, and infrequent known events such as GPS week number rollover, may adversely affect our products and customers.
Biggest changeIn addition, software updates to GPS satellites and ground control segments, and infrequent known events such as GPS week number rollover, may adversely affect our products and customers. We depend on public access to open technical specifications in advance of system updates to mitigate these problems, which may not be available or complete.
Because the techniques used by computer hackers who may attempt to penetrate and sabotage our network security or our website change frequently, they may take advantage of weaknesses in third party technology or standards of which we are unaware or that we do not control and may not be recognized until long after they have been launched against a target.
Because the techniques used by computer hackers who may attempt to penetrate and sabotage our network security or our website change frequently, they may take advantage of weaknesses in third party technology or standards of which we are unaware or that we do not control and may not be recognized until after they have been launched against a target.
As a result, our operations, and our financial results, including our ability to design, develop, or sell products, may be adversely affected by a number of factors outside of our control, including: • global and local economic conditions; • the demand and cost of commodities, such as corn and oil; • the strength of the agricultural, engineering, and construction markets; • inadequate infrastructure and other disruptions, such as supply chain interruptions and large-scale outages or unreliable provision of services from utilities, transportation, data hosting, or telecommunications providers; • government restrictions on our operations in any country, or restrictions on our ability to repatriate earnings from a particular country; • differing employment practices and labor issues; • formal or informal imposition of new or revised export and/or import and doing-business regulations, including trade sanctions, tariffs, and import or export licensing requirements, which could be changed without notice; • ineffective legal protection of our IP rights in certain countries; • uncertain economic and political conditions in countries where we do business; • local business and cultural factors that differ from our normal standards and practices; • differing regional responses and restrictions related to global pandemics, like the COVID-19 pandemic; and • uncertainty regarding social, political, immigration, and trade policies in the U.S. and abroad.
As a result, our business, financial condition, and results of operations, including our ability to design, develop, or sell products, may be adversely affected by a number of factors outside of our control, including: • global and local economic conditions, such as inflation and recession; • the demand and cost of commodities, such as corn and oil; • the strength of the agricultural, engineering, and construction markets; • inadequate infrastructure and other disruptions, such as supply chain interruptions and large-scale outages or unreliable provision of services from utilities, transportation, data hosting, or telecommunications providers; • government restrictions on our operations in any country, or restrictions on our ability to repatriate earnings from a particular country; • differing employment practices and labor issues; • formal or informal imposition of new or revised export and/or import and doing-business regulations, including trade sanctions, tariffs, and import or export licensing requirements, which could be changed without notice; • ineffective legal protection of our IP rights in certain countries; • uncertain economic and political conditions in countries where we do business; • local business and cultural factors that differ from our normal standards and practices; • differing regional responses and restrictions related to global pandemics, like the COVID-19 pandemic; and • uncertainty regarding social, political, immigration, and trade policies in the U.S. and abroad.
Our annual and quarterly performance may fluctuate, which could adversely impact our operations, financial results, and stock price Our operating results have fluctuated and can be expected to continue to fluctuate in the future on a quarterly and annual basis as a result of a number of factors, many of which are beyond our control.
Our annual and quarterly performance may fluctuate, which could adversely impact our financial condition, results of operations, and stock price Our operating results have fluctuated and can be expected to continue to fluctuate in the future on a quarterly and annual basis as a result of a number of factors, many of which are beyond our control.
We also conduct certain investing and financing activities in local currencies. Our foreign exchange forward contracts reduce, but do not eliminate, the impact of currency exchange rate movements; therefore, changes in exchange rates could harm our financial condition and results of operations.
We also conduct certain investing and financing activities in local currencies. Our foreign exchange forward contracts reduce, but do not eliminate, the impact of currency exchange rate movements; therefore, changes in exchange rates could harm our business, financial condition, and results of operations.
A material adverse impact on our consolidated financial statements could occur for the period in which the effect of an unfavorable final outcome becomes probable and reasonably estimable which, if not expected, could harm our financial condition and results of operations.
A material adverse impact on our consolidated financial statements could occur for the period in which the effect of an unfavorable final outcome becomes probable and reasonably estimable which, if not expected, could harm our business, financial condition, and results of operations.
Any such violations could include prohibitions or conditions on our ability to offer our products in one or more countries and could materially damage our reputation, our brand, our international expansion efforts, our ability to attract and retain employees, our business, and our results of operations.
Any such violations could include prohibitions or conditions on our ability to offer our products in one or more countries and could materially damage our reputation, our brand, our international expansion efforts, our ability to attract and retain employees, our business, financial conditions, and results of operations.
Acquisitions entail numerous risks, including: • potential inability to successfully integrate acquired operations and products or to realize cost savings or other anticipated benefits from integration; • loss of key employees or customers of acquired operations; • difficulty of assimilating geographically dispersed operations and personnel of the acquired companies; • potential disruption of our business or the acquired business; • unanticipated expenses related to acquisitions; • unanticipated difficulties in conforming business practices, policies, procedures, internal controls, and financial records of acquisitions with our own business; • impairment of relationships with employees, customers, vendors, distributors or business partners of either an acquired company or our own business; • inability to accurately forecast the performance of recently acquired businesses, resulting in unforeseen adverse effects on our operating results; • potential liabilities, including liabilities resulting from known or unknown compliance or legal issues, associated with an acquired business; and • adverse accounting impact to our results of operations because of purchase accounting treatment and the business or accounting practices of acquired companies.
Acquisitions entail numerous risks, including: • potential inability to successfully integrate acquired operations and products or to realize cost savings or other anticipated benefits from integration; • loss of key employees or customers of acquired operations; 20 Table of Contents • difficulty of assimilating geographically dispersed operations and personnel of the acquired companies; • potential disruption of our business or the acquired business; • unanticipated expenses related to acquisitions; • unanticipated difficulties in conforming business practices, policies, procedures, internal controls, and financial records of acquisitions with our own business; • impairment of relationships with employees, customers, vendors, distributors or business partners of either an acquired company or our own business; • inability to accurately forecast the performance of recently acquired businesses, resulting in unforeseen adverse effects on our operating results; • potential liabilities, including liabilities resulting from known or unknown compliance or legal issues, associated with an acquired business; and • adverse accounting impact to our results of operations because of purchase accounting treatment and the business or accounting practices of acquired companies.
We are subject to evolving privacy laws in the United States and other jurisdictions that are subject to potentially differing interpretations and which could adversely impact our business and require that we incur substantial costs Existing privacy-related laws and regulations in the United States and other countries are evolving and are subject to potentially differing interpretations, and various U.S. federal and state or other international legislative and regulatory bodies may expand or enact laws regarding privacy and data security-related matters.
We are subject to evolving and potentially conflicting privacy laws in the United States and other jurisdictions, which could adversely impact our business and require that we incur substantial costs Existing privacy-related laws and regulations in the United States and other countries are evolving and are subject to unclear or potentially differing interpretations, and various U.S. federal and state or other international legislative and regulatory bodies may expand or enact laws regarding privacy and data security-related matters.
Lastly, dealers who carry products that compete with our products may focus their inventory purchases and sales efforts on goods provided by competitors due to industry demand or profitability. Such sourcing decisions can adversely impact our sales, financial condition, an d results of operations.
Dealers who carry products that compete with our products may focus their inventory purchases and sales efforts on goods provided by competitors due to industry demand or profitability. Such sourcing decisions can adversely impact our business, financial condition, an d results of operations.
Changes in our software and subscription businesses may adversely impact our operations and financial results An increasing portion of our revenue is generated through software maintenance and subscription revenue, which includes Software as a Service (“SaaS”) and new subscription services for integrated solutions.
Changes in our software and subscription businesses may adversely impact our business, financial condition and results of operations An increasing portion of our revenue is generated through software maintenance and subscription revenue, which includes Software as a Service (“SaaS”) and new subscription services for integrated solutions.
Any disruptions or unexpected incompatibilities in our information systems and those of the third parties upon whom we rely could have a significant impact on our business. 22 Table of Contents An increasing portion of our revenue comes from SaaS solutions and other hosted services in which we store, retrieve, communicate, and manage data that is critical to our customers’ business systems.
Any disruptions or unexpected incompatibilities in our information systems and those of the third parties upon whom we rely could have a significant impact on our business. An increasing portion of our revenue comes from SaaS solutions and other hosted services in which we store, retrieve, communicate, and manage data that is critical to our customers’ business systems.
The CCPA and CPRA, among other things, gives California residents expanded rights to access and delete their personal information, opt out of certain personal information sharing, and receive detailed information about how their personal information is used. Other U.S. states and the U.S.
The CCPA and CPRA, among other things, give California residents expanded rights to access and delete their personal information, opt out of certain personal information sharing, and receive detailed information about how their personal information is used. Other U.S. states and the U.S.
Customer satisfaction with our services is affected by a variety of factors, including but not limited to security, reliability, performance, concerns about data privacy, current subscription terms, customer preference, and industry adoption. If customers do not renew their contracts for our products, our maintenance and subscription revenue will decline, and our financial results will suffer.
Customer satisfaction with our services is affected by a variety of factors, including but not limited to security, reliability, performance, concerns about data privacy, current subscription terms, customer preference, and industry adoption. If customers 19 Table of Contents do not renew their contracts for our products, our maintenance and subscription revenue will decline, and our financial results will suffer.
Changing market dynamics, global policy developments, and the increasing frequency and impact of extreme weather events on critical infrastructure in the U.S. and elsewhere have the potential to disrupt our business, the business of our third-party suppliers, and the business of our customers, and may cause us to experience higher attrition, losses, and additional costs to maintain or resume operations.
Changing market dynamics, global policy developments, and the increasing frequency and impact of extreme weather events on critical infrastructure in the U.S. and elsewhere have the 30 Table of Contents potential to disrupt our business, the business of our third-party suppliers, and the business of our customers, and may cause us to experience higher attrition, losses, and additional costs to maintain or resume operations.
Changes to our licensing programs and subscription programs, including the introduction of new subscription services for integrated solutions that include hardware, the timing of the release of enhancements, upgrades, maintenance releases, the term of the contract, discounts, and promotions, could impact the timing of the recognition of revenue for our products, and adversely affect our cash flow, operating results, and financial condition.
Changes to our licensing programs and subscription programs, including the introduction of new subscription services for integrated solutions that include hardware, the timing of the release of enhancements, upgrades, maintenance releases, the term of the contract, discounts, and promotions, could impact the timing of the recognition of revenue for our products, and adversely affect our cash flow, business, financial condition, and results of operations.
Investing in and integrating new acquisitions or divesting businesses could be costly, place a significant strain on our management systems and resources, or fail to deliver expected outcomes, which could adversely impact our results of operations We typically acquire a number of businesses each year and intend to continue to acquire other businesses.
Investing in and integrating new acquisitions or divesting businesses could be costly, place a significant strain on our management systems and resources, or fail to deliver expected outcomes, which could adversely impact our business, financial conditions, and results of operations We typically acquire a number of businesses each year and we intend to continue to acquire other businesses.
If we are not able to develop software and other solutions that address the increasingly sophisticated needs of our customers, or if we are unable to adapt to new platforms, technologies, or new industry standards that impact our markets, our ability to retain or increase market share and results of operations could be adversely affected.
If we are not able to develop software and other solutions that address the increasingly sophisticated needs of our customers, or if we are unable to adapt to new platforms, technologies, or new industry standards that impact our markets, our ability to retain or increase market share, business, financial condition, and results of operations could be adversely affected.
International allocations of radio frequency are made by the International Telecommunications Union (“ITU”), a specialized technical agency of the United Nations. These allocations are further governed by radio regulations that have treaty status and which may be subject to modification every two to three years by the World Radio Communication Conference.
International allocations of radio frequency are made by the International Telecommunications Union (“ITU”), a specialized technical agency of the United Nations. These allocations are further governed by radio regulations that have treaty status and which 24 Table of Contents may be subject to modification every two to three years by the World Radio Communication Conference.
Future disruptions could occur as a result of any number of events, including, but not limited to, the continuing impacts of the COVID-19 pandemic, increases in wages that drive up prices or labor, the imposition of new regulations, quotas or embargoes on components, a scarcity of, or significant increase in the price of, required components for our products, trade restrictions, tariffs or duties, fluctuations in currency exchange rates, transportation failures affecting the supply chain and shipment of materials and finished goods, third party interference in the integrity of the products sourced through the supply chain, the unavailability of raw materials, severe weather conditions, natural disasters, civil unrest, military conflicts, geopolitical developments, war or terrorism, and disruptions in utility and other services.
Future disruptions could occur as a result of any number of events, including, but not limited to, inflationary cost increases, increases in wages that drive up prices or labor, the imposition of new regulations, quotas or embargoes on components, a scarcity of, or significant increase in the price of, required components for our products, trade restrictions, tariffs or duties, fluctuations in currency exchange rates, transportation failures affecting the supply chain and shipment of materials and finished goods, third party interference in the integrity of the products sourced through the supply chain, the unavailability of raw materials, severe weather conditions, natural disasters, civil unrest, military conflicts, geopolitical developments, war or terrorism, and disruptions in utility and other services.
In such event, we could be required to seek licenses from third parties in order to continue offering our products, to disclose and offer royalty-free licenses in connection with our own source code, to re-engineer our products, or to discontinue the sale of our products in the event re-engineering cannot be accomplished on a timely basis, any of which could adversely affect our business.
In such event, we could be required to seek licenses from third parties in order to continue offering our products, to disclose and offer royalty-free licenses in connection with our own source code, to re-engineer our products, or to discontinue the sale of our products in the event re-engineering cannot be accomplished on a timely basis, any of which could adversely affect our business, financial condition, and results of operations.
The software industry is characterized by rapidly changing customer preferences, which require us to address multiple delivery platforms, new mobile devices, and cloud computing. Life cycles of software products can be short, and this can exacerbate the risks associated with developing new products.
The software industry is characterized by rapidly changing customer preferences, which require us to address multiple delivery platforms, new mobile devices, and cloud computing. Lifecycles of software products can be short, and this can exacerbate the risks associated with developing new products.
The timely availability and cost-effective production of these products in volume and their acceptance by customers are important to our future success. This has been and may continue to be negatively impacted by the global supply chain shortage.
The timely availability and cost-effective production of these products in volume and their acceptance by customers are important to our future success. This has been and may 23 Table of Contents continue to be negatively impacted by the global supply chain shortage.
We have experienced disruption in our supply chain as a result of the effects of COVID-19 and related events, and are subject to ongoing supply chain risks, which adversely affect our revenue and results of operations We are dependent upon a limited number of contract manufacturers for the manufacture, testing, and assembly of certain products and specific suppliers for a number of our critical components.
We have experienced disruption in our supply chain including the effects of COVID-19 and related events, and are subject to ongoing supply chain risks, which could adversely affect our revenue and results of operations We are dependent upon a limited number of contract manufacturers for the manufacture, testing, and assembly of certain products and specific suppliers for a number of our critical components.
Results in any period could be affected by: • changes in market demand; • competitive market conditions; • supply chain disruptions; • the timing of recognizing revenue; • fluctuations in foreign currency exchange rates; • the cost and availability of components; • the mix of our customer base and sales channels; • the mix of products sold; • pricing of products; • changes in the U.S. or foreign policies on taxes, trade, or spending; • regional responses and restrictions related to global pandemics, like the COVID-19 pandemic; and • other risks, including those described below.
Results in any period could be affected by: • changes in market demand; • competitive market conditions; • supply chain disruptions; • the amount of inventory that our dealer networks carry; • the timing of recognizing revenue; • fluctuations in foreign currency exchange rates; • the cost and availability of components; • the mix of our customer base and sales channels; • the mix of products sold; • pricing of products; • changes in the U.S. or foreign policies on taxes, trade, or spending; • regional responses and restrictions related to global pandemics, like the COVID-19 pandemic; and • other risks, including those described below.
Some of our products that use integrated radio communication technology require product type certification and some products require an end user to obtain licensing from the FCC and other national authorities for frequency-band usage.
Some of our products that use integrated radio communication technology require product type certification and some products require an end user to obtain licensing from the 26 Table of Contents FCC and other national authorities for frequency-band usage.
CE certification is required for GNSS receivers and data communications products, which must also conform to the European harmonized GNSS receiver requirements and the radio equipment directive to be sold in the European community.
Conformité Européenne (CE) certification is required for GNSS receivers and data communications products, which must also conform to the European harmonized GNSS receiver requirements and the radio equipment directive to be sold in the European community.
If we are unable to attract and retain qualified personnel, our business, operating results, financial condition, and cash flows could be harmed Our continued success depends, in part, on our ability to hire and retain qualified personnel and to advance our corporate strategy, and preserve the key aspects of our corporate culture.
If we are unable to attract and retain qualified personnel, our business, financial condition, and results of operations could be harmed Our continued success depends, in part, on our ability to hire and retain qualified personnel and to advance our corporate strategy, and preserve the key aspects of our corporate culture.
We believe that a variety of factors could cause the price of our common stock to fluctuate, perhaps substantially, including: • general conditions in the worldwide economy; • quarterly fluctuations in our actual or anticipated operating results and order levels; • announcements and reports of developments related to our business, our major customers and partners, and the industries in which we compete, or the industries in which our customers compete; • security breaches; • acquisition announcements; • new products or product enhancements announced or introduced by us or our competitors; • disputes with respect to developments in patents or other intellectual property rights; • developments in our relationships with our partners, customers, and suppliers; • the imposition of tariffs or other trade barriers; 27 Table of Contents • political, economic, or social uncertainty; • global pandemics, like the COVID-19 pandemic; and • acts of terrorism.
We believe that a variety of factors could cause the price of our common stock to fluctuate, perhaps substantially, including: • general conditions in the worldwide economy; • quarterly fluctuations in our actual or anticipated operating results and order levels; • announcements and reports of developments related to our business, our major customers and partners, and the industries in which we compete, or the industries in which our customers compete; • security breaches; • acquisition announcements; 28 Table of Contents • new products or product enhancements announced or introduced by us or our competitors; • disputes with respect to developments in patents or other intellectual property rights; • developments in our relationships with our partners, customers, and suppliers; • the imposition of tariffs or other trade barriers; • political, economic, or social uncertainty, such as the ongoing military conflict between Russia and Ukraine; • global pandemics, like the COVID-19 pandemic; and • acts of terrorism.
If we decide to refinance the senior notes, we may be required to do so on different or less favorable terms, or we may be unable to refinance the senior notes at all, both of which may adversely affect our financial condition.
If we decide to refinance the senior notes, we may be required to do so on different or less favorable terms, or we may be unable to refinance the senior notes at all, both of which may adversely affect our business, financial condition, and results of operation.
Our inability to hire and retain qualified management and skilled personnel, particularly engineers, salespeople, and key executive management, could disrupt our development efforts, sales results, business relationships, and our ability to execute our business plan and strategy on a timely basis and could materially and adversely affect our operating results, financial condition, and cash flows.
Our inability to hire and retain qualified management and skilled personnel, particularly engineers, salespeople, and key executive management, could disrupt our development efforts, sales results, business relationships, and our ability to execute our business plan and strategy on a timely basis and could materially and adversely affect our business, financial condition, and results of operations.
Our business may face increased scrutiny related to these activities, including from the investment community, and our failure to achieve progress in these areas on a timely basis, or at all, could adversely affect our reputation, business, financial performance, and growth.
Our business may face increased scrutiny related to these activities, including from the investment community, and our failure to achieve progress in these areas on a timely basis, or at all, could adversely affect our reputation, growth, business, financial condition, and results of operations.
If we do not accurately forecast seasonal demand, we may be left with unsold inventory or have a shortage of inventory, which could adversely impact our results of operations.
If we do not accurately forecast seasonal demand, we may be left with unsold inventory or have a shortage of inventory, which could adversely impact our business, financial conditions, and results of operations.
Civil unrest, local conflicts, or other political instability may adversely impact regional economies, cause work stoppages, or result in limitations on business transactions with the affected jurisdictions.
Civil unrest, local conflicts, or other 29 Table of Contents political instability may adversely impact regional economies, cause work stoppages, or result in limitations on business transactions with the affected jurisdictions.
Failure to comply with evolving requirements could result in fines and limitations on sales of our products. Financial and tax risks Our debt could adversely affect our cash flow and prevent us from fulfilling our financial obligations At the end of 2021, our total debt was comprised primarily of senior notes of approximately $1.3 billion.
Failure to comply with evolving requirements could result in fines and limitations on sales of our products. Financial and tax risks Our debt could adversely affect our cash flow and prevent us from fulfilling our financial obligations At the end of 2022, our total debt was $1.5 billion, of which $1.3 billion was senior notes.
Our outstanding indebtedness could have other important consequences, such as: • requiring us to dedicate a portion of our cash flow from operations and other capital resources to debt service, thereby reducing our ability to fund working capital, capital expenditures, general corporate purposes, and other cash requirements, particularly if the ratings assigned to our debt securities by rating organizations were revised downward; • increasing our vulnerability to adverse economic and industry conditions; • reducing our ability to make investments and acquisitions, which support the growth of the company, or to repurchase shares of our common stock; and • limiting our flexibility in planning for, or reacting to changes and opportunities in our industry, which may place us at a competitive disadvantage.
Our outstanding indebtedness, including the substantial indebtedness we plan to incur in connection with the pending acquisition of Transporeon, could have other important consequences, such as: • decreasing our business flexibility, limiting access to capital, and/or increasing our borrowing costs; • requiring us to dedicate a portion of our cash flow from operations and other capital resources to debt service, thereby reducing our ability to fund working capital, capital expenditures, general corporate purposes, and other cash requirements, particularly if the ratings assigned to our debt securities by rating organizations were revised downward; • increasing our vulnerability to adverse economic and industry conditions; • reducing our ability to make investments and acquisitions, which support the growth of the company, or to repurchase shares of our common stock; and • limiting our flexibility in planning for, or reacting to changes and opportunities in our industry, which may place us at a competitive disadvantage.
Any of our primary locations may be vulnerable to the adverse effects of climate change. The recent wildfires in Colorado occurred in close proximity to our offices in Westminster, Colorado.
Any of our primary locations may be vulnerable to the adverse effects of climate change. The 2021 wildfires in Colorado occurred in close proximity to our headquarters in Westminster, Colorado.
Our current reliance on a limited group of contract manufacturers and suppliers involves risks, including the potential inability to obtain products or components to meet customers’ delivery requirements, reduced control over pricing and delivery schedules and discontinuation of or increased prices for certain components.
These arrangements can generally be terminated with a limited notice. Our current reliance on a limited group of contract manufacturers and suppliers involves risks, including the potential inability to obtain products or components to meet customers’ delivery requirements, reduced control over pricing and delivery schedules and discontinuation of or increased prices for certain components.
Others may develop technologies that are similar or superior to our technology, duplicate our technology, or design around the patents owned by us. In addition, effective copyright, patent, and trade secret protection may be unavailable, limited, or not applied for in certain countries.
Others may develop technologies that are similar or superior to our technology, duplicate our technology, or design around the patents owned by us. In addition, effective copyright, patent, and trade secret protection may be unavailable, limited, or not applied for in certain countries. The steps taken by us to protect our technology might not prevent the misappropriation of such technology.
Congress have introduced, and some states like Virginia and Colorado have enacted in 2021, data privacy legislation, which may impact our business.
Congress have introduced, and some states like Virginia, Colorado, Connecticut and Utah have enacted, data privacy legislation, which may impact our business.
We may not be able to enter into or maintain important alliances and distribution relationships We believe that in certain business opportunities, our success will depend on our ability to form and maintain alliances with industry participants, such as Caterpillar, Nikon, Hilti, and CNH Industrial.
We may not be able to enter into or maintain important alliances and distribution relationships We believe that in certain business opportunities, our success will depend on our ability to form and maintain alliances with industry participants.
Data privacy legislation, amendments and revisions to existing data privacy legislation, and other developments impacting data privacy and data protection may require us to modify our data processing 25 Table of Contents practices and policies, increase the complexity of providing our products and services, and cause us to incur substantial costs in an effort to comply.
Such legislation, amendments and revisions to existing data privacy legislation, and other developments impacting data privacy and data protection may contain unclear and conflicting requirements, and may require us to modify our data processing practices and policies, increase the complexity of providing our products and services, and cause us to incur substantial costs in an effort to comply.
Our ability to effectively compete and to manage our planned future growth will depend on, among other things, the following: • maintaining continuity in our senior management and key personnel; • increasing the productivity of our existing employees; • attracting, retaining, training, and motivating our employees, particularly our technical and management personnel; • deploying our solutions using third party information systems, which may require changes to our applications, documentation, and operational processes; • improving our operational, financial, and management controls; and • improving our information reporting systems and procedures. 18 Table of Contents We have increasingly diversified the nature of our businesses both organically and by acquisition.
Our ability to effectively compete and to manage our planned future growth will depend on, among other things, the following: • maintaining continuity in our senior management and key personnel; • increasing the productivity of our existing employees; • attracting, retaining, training, and motivating our employees, particularly our technical and management personnel; • deploying our solutions using third party information systems, which may require changes to our applications, documentation, and operational processes; • improving our operational, financial, and management controls; and • improving our information reporting systems and procedures.
Many of the GPS satellites currently in orbit were originally designed to have lives of 7.5 years and are subject to damage by the hostile space environment in which they operate. However, of the current deployment of operational satellites in orbit, some have been in operation for 15 years or more.
Many of the GPS satellites currently in orbit were originally designed to have lives of 7.5 years and are subject to damage by the hostile space environment in which they operate. However, of the current deployment of operational satellites in orbit, some have been in operation for much longer. Repair of damaged or malfunctioning satellites is currently not economically feasible.
The number of these types of claims has increased in recent years. As new patents are issued or are brought to our attention by the holders of such patents, it may be necessary for us to secure a license from such patent holders, redesign our products, or withdraw products from the market.
As new patents are issued or are brought to our attention by the holders of such patents, it may be necessary for us to secure a license from such patent holders, redesign our products, or withdraw products from the market.
Risks related to ownership of our stock The volatility of our stock price could adversely affect an investment in our common stock The market price of our common stock has been, and may continue to be, highly volatile. During 2021, our stock price ranged from $65.91 to $95.72.
Risks related to ownership of our stock The volatility of our stock price could adversely affect an investment in our common stock The market price of our common stock has been, and may continue to be, highly volatile. During 2022, our stock price ranged from $47.52 to $88.06.
As a result, an increasing amount of our business involves business models that require managerial techniques and skill sets that are different from those required to manage our historical core businesses.
We have increasingly diversified the nature of our businesses both organically and by acquisition. As a result, an increasing amount of our business involves business models that require managerial techniques and skill sets that are different from those required to manage our historical core businesses.
Our ability to incur additional indebtedness over time may be limited due to applicable financial covenants and restrictions, and due to the risk that significantly increasing our level of indebtedness could impact the ratings assigned to our debt securities by rating organizations, which in turn would increase the interest rates and fees that we pay in connection with our indebtedness. 26 Table of Contents Changes in our effective tax rate may reduce our net income in future periods We are subject to income and other taxes in the United States and numerous foreign jurisdictions.
Significant increases in our level of indebtedness could impact the ratings assigned to our debt securities by rating organizations, which in turn would increase the interest rates and fees that we pay in connection with our indebtedness. 27 Table of Contents Changes in our effective tax rate may reduce our net income in future periods We are subject to income and other taxes in the United States and numerous foreign jurisdictions.
We have experienced disruption in our supply chain as a result of the effects of COVID-19 related events and their impact on our suppliers and on international trade in general, leading to shortfalls in available components we need to make products as well as increased costs to obtain components, to make products, and to transport components and products.
In the first half of 2022, we have 18 Table of Contents experienced disruption in our supply chain as a result of the effects of COVID-19 and the geopolitical conditions such as the ongoing military conflict between Russia and Ukraine and related events and their impact on our suppliers and on international trade in general, leading to shortfalls in available components we need to make products as well as increased costs to obtain components, to make products, and to transport components and products.
Any such divestiture may result in: • a disruption of our business; • reduced synergies, including the loss of scale or key employees; • impairment of customer relationships; and • reductions in the breadth of our product offerings.
From time to time we have divested businesses, and we expect to do so in the future. Any such divestiture may result in: • a disruption of our business; • reduced synergies, including the loss of scale or key employees; • impairment of customer relationships; and • reductions in the breadth of our product offerings.
Item 1A. Risk Factors RISKS AND UNCERTAINTIES You should carefully consider the following risk factors, in addition to the other information contained in this Annual Report on Form 10-K and in any other documents to which we refer you in this Annual Report on Form 10-K, before purchasing our securities.
Item 1A. Risk Factors RISKS AND UNCERTAINTIES You should carefully consider the following risk factors, in addition to the other information contained in this report and in any other documents to which we refer you in this report, before purchasing our securities. The risks and uncertainties described below are not the only ones we face.
The time and expense required for sales and marketing organizations of our channel partners to become familiar with our product offerings, including our new product developments, and newer types of offering, such as subscription programs for integrated solutions that include hardware, software maintenance, and other recurring services, may make it more difficult to introduce those products to end users and delay end-user adoption, which could result in lower revenue. 19 Table of Contents Disruption of dealer coverage within specific geographic or end-user markets could cause difficulties in marketing, selling, or servicing our products and have an adverse effect on our business, financial condition, and results of operations.
The time and expense required for sales and marketing organizations of our channel partners to become familiar with our product offerings, including our new product developments, and newer types of offering, such as subscription programs for integrated solutions that include hardware, software maintenance, and other recurring services, may make it more difficult to introduce those products to end users and delay end-user adoption, which could result in lower revenue.
Any curtailment of the operating capability of these systems or limitations on access to, or use of the signals, or discontinuance of service could result in degradation of our services or product performance, with an adverse effect on our business. Many of our products use satellite signals from the Russian GLONASS, China’s BeiDou, and the European Galileo GNSS Systems.
Any curtailment of the operating capability of these systems or limitations on access to, or use of the signals, or discontinuance of service could result in degradation of our services or product performance, with an adverse effect on our business, financial condition, and results of operations.
We could also experience higher than expected transaction costs and write-offs of significant amounts of goodwill. 20 Table of Contents We face substantial competition in our markets, which could decrease our revenue and growth rates or impair our financial condition and results of operations Our markets are highly competitive, and we expect that both direct and indirect competition will increase in the future.
We face substantial competition in our markets, which could decrease our revenue and growth rates or impair our business, financial condition, and results of operations Our markets are highly competitive, and we expect that both direct and indirect competition will increase in the future.
Our internal and customer-facing systems, and systems of third parties we rely upon, may be subject to cybersecurity breaches, disruptions, or delays A cybersecurity incident in our own systems or the systems of our third-party providers may compromise the confidentiality, integrity, or availability of our own internal data, the availability of our products and websites designed to support our customers, or our customer data.
Actual or perceived security vulnerabilities in our products could harm our reputation and lead some customers to return products, to reduce or delay future purchases, or use competitive products. 22 Table of Contents Our internal and customer-facing systems, and systems of third parties we rely upon, may be subject to cybersecurity breaches, disruptions, or delays A cybersecurity incident in our own systems or the systems of our third-party providers may compromise the confidentiality, integrity, or availability of our own internal data, the availability of our products and websites designed to support our customers, or our customer data.
Regulatory risks We face risks inherent in conducting business internationally, including compliance with international and U.S. laws and regulations that apply to our international operations These laws and regulations include data privacy requirements, labor relations laws, tax laws, anti-competition regulations, import and trade restrictions, export control laws, and laws that prohibit corrupt payments to governmental officials or certain payments or remunerations to customers, including the U.S.
If we are unable to develop timely and competitive commercial products using these systems, or obtain timely and equal access to service signals, this could result in lost revenue. 25 Table of Contents Regulatory risks We face risks inherent in conducting business internationally, including compliance with international and U.S. laws and regulations that apply to our international operations These laws and regulations include data privacy requirements, labor relations laws, tax laws, anti-competition regulations, import and trade restrictions, export control laws, and laws that prohibit corrupt payments to governmental officials or certain payments or remunerations to customers, including the U.S.
Third parties may claim that we or our customers (some of whom are indemnified by us) are infringing their intellectual property rights. For example, individuals and groups may purchase intellectual property assets for the purpose of asserting claims of infringement and attempting to extract settlements from us or our customers.
For example, individuals and groups may purchase intellectual property assets for the purpose of asserting claims of infringement and attempting to extract settlements from us or our customers.
Some countries are considering or have passed legislation that requires local storage and processing of data, including geospatial data, which could impact our ability to deliver cloud-based solutions in an efficient manner. The U.S. and European Union have not yet managed to replace the EU-U.S. Privacy Shield as a basis for data transfers from the EU to the U.S.
Some countries are considering or have passed legislation that requires local storage and processing of data, including geospatial data, which could impact our ability to deliver cloud-based solutions in an efficient manner.
Our California headquarters has historically experienced, and is projected to continue to experience, climate-related events at an increasing frequency including drought, water scarcity, heat waves, wildfires and resultant air quality impacts and power shutoffs associated with wildfire prevention.
Our California office has historically experienced, and is projected to continue to experience, climate-related events at an increasing frequency including drought, heat waves, wildfires including resultant air quality impacts, flooding, and power shutoffs associated with wildfire prevention and flooding. Furthermore, it is more difficult to mitigate the impact of these events on our employees while they work from home.
Our customers’ proprietary software and network firewall protections may corrupt data from our products and create difficulties in implementing our solutions. Changes to third-party software or hardware that our customers use in conjunction with our software could also render our applications inoperable.
Errors, viruses, or bugs may be present in software or hardware that we acquire or license from third parties and incorporate into our products or in third-party software or hardware that our customers use in conjunction with our products. Our customers’ proprietary software and network firewall protections may corrupt data from our products and create difficulties in implementing our solutions.
If supporting policies were to change, or if user fees were imposed, it could have an adverse effect on our business, financial condition, and results of operations. 24 Table of Contents Many of our products also use signals from systems that augment GPS, such as the Wide Area Augmentation System and National Differential GPS System, and satellites transmitting signal corrections data on mobile satellite services frequencies utilized by our RTX corrections services.
Many of our products also use signals from systems that augment GPS, such as the Wide Area Augmentation System and National Differential GPS System, and satellites transmitting signal corrections data on mobile satellite services frequencies utilized by our RTX corrections services.
To the extent that such interruptions result in delays or the cancellation of orders, disruption of the manufacturing or shipment of our products, or reduced demand for our products, these interruptions could have a material adverse effect on our business, financial condition, and results of operations. 28 Table of Contents Future public health crises and epidemics could impact our international operations and sales Our results of operations could be adversely affected to the extent that future pandemics, similar to COVID-19 or any other epidemic, harm any significant market where we do business.
Future public health crises and epidemics could impact our international operations and sales Our results of operations could be adversely affected to the extent that future pandemics, similar to COVID-19 or any other epidemic, harm any significant market where we do business.
Our integrated hardware and software products may be subject to increasing competition from mass market devices such as smartphones and tablets used in conjunction with relatively inexpensive applications, which have not been heavily used for commercial applications in the past.
Our integrated hardware and software products may be subject to increasing competition from mass market devices such as smartphones and tablets used in conjunction with relatively inexpensive applications, which have not been heavily used for commercial applications in the past. 21 Table of Contents These competitive developments may require us to rapidly adapt to technological and customer preference changes that we have not previously been exposed to, including those related to cloud computing, mobile devices, and new computing platforms.
In October 2021, the Organization of Economic Cooperation and Development (“OECD”) announced that many world leaders tentatively signed on to a framework that imposes a minimum tax of 15% to certain multinational enterprises. We will continue to monitor and assess how this may impact our financial results if and when implemented.
The Organization of Economic Cooperation and Development (“OECD”) introduced and member countries agreed to a framework that imposes a minimum tax of 15% to certain multinational enterprises. We will continue to monitor and assess how this may impact our financial results when implemented. We are currently in various stages of multiple year examinations by state and foreign taxing authorities.
Our relationships with substantial industry participants such as Caterpillar and CNH Industrial are complex and multifaceted and are likely to evolve over time based upon the changing business needs and objectives of the parties. Evolution of our respective business strategies and diversification of product portfolios may lead to increased competition with our strategic allies, placing additional pressure on these relationships.
Our relationships with substantial industry participants such as Caterpillar, Nikon, and Hilti are complex and multifaceted and are likely to evolve over time based upon the changing business needs and objectives of the parties.
Companies that we acquire may operate with different cost and margin structures, which could further cause fluctuations in our operating results and adversely affect our business, financial condition, and results of operations. From time to time we have divested businesses, and we expect to do so in the future.
Companies that we acquire may operate with different cost and margin structures, which could further cause fluctuations in our operating results and adversely affect our business, financial condition, and results of operations. In December 2022, we signed a definitive agreement to acquire Transporeon, a leading European cloud-based transportation management software platform.
We are currently in various stages of multiple year examinations by state and foreign taxing authorities. If taxing authorities of any jurisdiction were to successfully challenge a material tax position, we could become subject to higher taxes and our earnings could be adversely affected.
If taxing authorities of any jurisdiction were to successfully challenge a material tax position, we could become subject to higher taxes and our earnings could be adversely affected. We may be affected by fluctuations in currency exchange rates Over half of our revenue is derived from sales to customers outside of the U.S.
For example, the retention value of our compensation plans decreases after the payment of periodic bonuses or the vesting of equity awards.
In addition, because of our sales structure, cash, and equity incentive compensation plans, we may be at increased risk of losing employees at certain times. For example, the retention value of our compensation plans decreases after the payment of periodic bonuses or the vesting of equity awards.
Other countries, such as India, are in the process of creating their own GNSS systems, and we either have developed or will develop products that use GNSS signals from these systems. National or European authorities may provide preferential access to signals to companies associated with their markets, including our competitors, which could harm our competitive position. Use of non-U.S.
National or European authorities may provide preferential access to signals to companies associated with their markets, including our competitors, which could harm our competitive position. Geopolitical tensions between the United States and Russia and China could also result in the restriction of our usage of such satellite signals. Use of non-U.S.
If invoked, these clauses may entitle the customer to return or obtain credits for products and inventory, or to cancel outstanding purchase orders even if the products themselves are not defective. 21 Table of Contents Errors, viruses, or bugs may be present in software or hardware that we acquire or license from third parties and incorporate into our products or in third-party software or hardware that our customers use in conjunction with our products.
If invoked, these clauses may entitle the customer to return or obtain credits for products and inventory, or to cancel outstanding purchase orders even if the products themselves are not defective.
International transfers of personal data present ongoing compliance challenges and complicate our business transactions and operations. In addition, the California Consumer Privacy Act (the “CCPA”), which took effect in January 2020, was amended by the California Privacy Rights Act (“the “CPRA”) and will take full effect in January 2023.
In addition, the California Consumer Privacy Act (the “CCPA”), which took effect in January 2020, was amended by the California Privacy Rights Act (“the “CPRA”) and took full effect in January 2023, with enforcement to begin on July 1, 2023.
Lastly, due to supply chain issues, we may accumulate excess inventories if we inaccurately forecast demand for our products. 17 Table of Contents We operate globally and are subject to significant risks in many jurisdictions We have operations in many countries, and a significant portion of our revenue is derived from countries outside of the United States.
Risks related to our business We operate globally and are subject to significant risks in many jurisdictions, and our business, financial condition, and results of operations have been and may continue to be impacted by adverse global and regional economic conditions We have operations in many countries, and a significant portion of our revenue is derived from countries outside of the United States.
GNSS signals are also subject to FCC waiver requirements and to restrictions based upon international trade or geopolitical considerations. If we are unable to develop timely and competitive commercial products using these systems, or obtain timely and equal access to service signals, this could result in lost revenue.
GNSS signals are also subject to FCC waiver requirements and to restrictions based upon international trade or geopolitical considerations.
We may be affected by fluctuations in currency exchange rates We are potentially exposed to adverse as well as beneficial movements in currency exchange rates. Although the majority of our sales are transacted in U.S. dollars, expenses may be paid in local currencies.
We are potentially exposed to adverse as well as beneficial movements in currency exchange rates. Historically, the majority of our revenue contracts are denominated in U.S. Dollars, with the most significant exception being Europe, where we invoice primarily in Euro.
Equity grants are a critical component of our current compensation programs. If we fail to grant equity competitively, we may have difficulty attracting and retaining critical employees. In addition, because of our sales structure, cash, and equity incentive compensation plans, we may be at increased risk of losing employees at certain times.
In addition, any future reductions in force or other restructuring intended to improve operational efficiencies and operating costs, may adversely affect our ability to attract and retain qualified personnel. Equity grants are a critical component of our current compensation programs. If we fail to grant equity competitively, we may have difficulty attracting and retaining critical employees.
We depend on public access to open technical specifications in advance of system updates to mitigate these problems, which may not be available or complete. We are dependent on continued operation of GPS, the principal GNSS currently in operation. The GPS constellation is operated by the U. S. Government, which is committed to maintenance and improvement of GPS.
We are dependent on continued operation of GPS, the principal GNSS currently in operation. The GPS constellation is operated by the U. S. Government, which is committed to maintenance and improvement of GPS. If supporting policies were to change, or if user fees were imposed, it could have an adverse effect on our business, financial condition, and results of operations.
The steps taken by us to protect our technology might not prevent the misappropriation of such technology. 23 Table of Contents The value of our products relies substantially on our technical innovation in fields in which there are many current patent filings.
The value of our products relies substantially on our technical innovation in fields in which there are many current patent filings. Third parties may claim that we or our customers (some of whom are indemnified by us) are infringing their intellectual property rights.
Repair of damaged or malfunctioning satellites is currently not economically feasible. If a significant number of satellites were to become inoperable, there could be a substantial delay before they are replaced with new satellites.
If a significant number of satellites were to become inoperable, there could be a substantial delay before they are replaced with new satellites. A reduction in the number of operating satellites below the 24-satellite standard established for GPS may impair the utility of the GPS system and the growth of current and additional market opportunities.
As a result, we are making binding commitments with longer lead times and procuring components at higher prices, which may impact our flexibility to adapt to changing market conditions and product demand. These disruptions have had an adverse effect on our ability to meet customer demand and have resulted in delays in shipping products to customers and dealers.
The disruptions include extended delivery times for certain components of our hardware products and increased freight costs. These disruptions have had an adverse effect on our ability to meet customer demand and have resulted in delays in shipping products to customers and dealers.
Since these strategic relationships contribute to significant ongoing business in certain of our important markets, changes in these relationships could adversely affect our sales. In addition, we utilize dealer networks, including those affiliated with some of our strategic allies such as Caterpillar and CNH Industrial to market, sell, and service many of our products.
Evolution of our respective business strategies and diversification of product portfolios may lead to increased competition with our other strategic allies, placing additional pressure on these relationships. Since these strategic relationships contribute to significant ongoing business in certain o f our important markets, changes in these relationships could adversely affect our sales.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Properties Our corporate headquarters is located in Sunnyvale, California where we lease approximately 139 thousand square feet. We also currently own approximately 316 thousand square feet in Dayton, Ohio, and 250 thousand square feet in Westminster, Colorado. These facilities are used by all reporting segments.
Biggest changeItem 2. Properties Our corporate headquarters is located in Westminster, Colorado where we own approximately 250 thousand square feet. We also currently own approximately 500 thousand square feet in Dayton, Ohio. These facilities are used by all reporting segments. For financial information regarding leases, refer to Note 8 “Leases” of this report.
For financial information regarding leases, refer to Note 7 of this Annual Report on Form 10-K. We believe that our existing facilities are adequate to support current and near-term operations.
We believe that our existing facilities are adequate to support current and near-term operations.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeDuring 2021, we repurchased approximately 2.1 million shares of common stock in open market purchases under our 2017 and 2021 Stock Repurchase Programs, at an average price of $85.75 per share, for a total of $180.0 million. At the end of 2021, the 2021 Stock Repurchase Program had remaining authorized funds of $610.0 million.
Biggest changeThere were no purchases of equity securities in the fourth quarter of 2022. During 2022, we repurchased approximately 6.0 million shares of common stock in open market purchases under the 2021 Stock Repurchase Programs, at an average price of $65.90 per share, for a total of $394.7 million.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Company Stock Performance Our common stock trades on NASDAQ under the symbol “TRMB.” The following graph compares the cumulative five-year total return provided stockholders on our common stock relative to the cumulative total returns of the S&P 500 Index, the S&P 500 Information Technology Index, the S&P 500 Industrials Index, and the NASDAQ Composite Index.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Company Stock Performance Our common stock trades on NASDAQ under the symbol “TRMB.” The following graph compares the cumulative five-year total return provided stockholders on our common stock relative to the cumulative total returns of the S&P 500 Index, the S&P 500 Information Technology Index, and the S&P 500 Industrials Index.
At this time, we intend to retain future earnings, if any, to fund the development and growth of our business and do not anticipate paying any cash dividends on our common stock in the foreseeable future.
At this time, we intend to retain future earnings, if any, to fund the development and growth of our business and do not anticipate paying any cash dividends on our common stock in the foreseeable future. 32 Table of Contents
An investment of $100 (with reinvestment of all dividends) is assumed to have been made in our common stock and in each of the indexes on December 31, 2016, and its relative performance is tracked through December 31, 2021. Trimble was added to the S&P 500 during 2021.
An investment of $100 (with reinvestment of all dividends) is assumed to have been made in our common stock and in each of the indexes on December 31, 2017, and its relative performance is tracked through December 31, 2022.
As of February 18, 2022, there were approximately 520 holders of record of our common stock. Dividend Policy We have not declared or paid any cash dividends on our common stock during any period for which financial information is provided in this Annual Report on Form 10-K.
Dividend Policy We have not declared or paid any cash dividends on our common stock during any period for which financial information is provided in this report.
Removed
We also added the S&P 500 Industrials Index, as both S&P 500 Information Technology and S&P 500 Industrials provide a better comparison with Trimble’s stock than either index individually.
Added
Stock Repurchase Program In August 2021, our Board of Directors approved a new share repurchase program (“2021 Stock Repurchase Program”) authorizing up to $750.0 million in repurchases of our common stock.
Removed
Stock Repurchase Program The following table provides information relating to our purchase of equity securities for the fourth quarter of 2021 : Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Program Maximum Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program October 2, 2021 – November 5, 2021 — $ — — $ 649,995,416 November 6, 2021 – December 3, 2021 459,372 $ 87.08 459,372 $ 610,000,115 December 4, 2021 – December 31, 2021 — $ — — $ 610,000,115 Total 459,372 459,372 30 Table of Contents In August 2021, our Board of Directors approved a new share repurchase program (“2021 Stock Repurchase Program”) authorizing up to $750.0 million in repurchases of our common stock.
Added
At the end of 2022, the 2021 Stock Repurchase Program had remaining authorized funds of $215.3 million. Our pending acquisition of Transporeon, for a cash purchase price of €1.88 billion or $2.0 billion, will be funded through a combination of cash on hand and debt and is expected to occur in the first half of 2023.
Added
Because of the additional outstanding indebtedness we have and expect to incur in connection with the pending acquisition, we have temporarily discontinued share repurchases. As of February 14, 2023, there were approximately 506 holders of record of our common stock.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThe non-GAAP financial measures, definitions, and explanations to the adjustments to comparable GAAP measures are included below: Years 2021 2020 2019 (In millions, except per share data) Dollar Amount % of Revenue Dollar Amount % of Revenue Dollar Amount % of Revenue REVENUE: GAAP revenue: $ 3,659.1 $ 3,147.7 $ 3,264.3 Purchase accounting adjustments (A) 0.3 4.3 7.0 Non-GAAP revenue: $ 3,659.4 $ 3,152.0 $ 3,271.3 GROSS MARGIN: GAAP gross margin: $ 2,034.7 55.6 % $ 1,754.9 55.8 % $ 1,780.9 54.6 % Purchase accounting adjustments (A) 88.0 96.6 101.1 Acquisition / divestiture items (B) — 1.7 — Stock-based compensation / deferred compensation (C) 9.8 7.2 5.9 Restructuring and other costs (D) 0.2 1.2 1.1 Non-GAAP gross margin: $ 2,132.7 58.3 % $ 1,861.6 59.1 % $ 1,889.0 57.7 % OPERATING EXPENSES: GAAP operating expenses: $ 1,473.7 40.3 % $ 1,335.1 42.4 % $ 1,405.0 43.0 % Purchase accounting adjustments (A) (46.5) (60.0) (67.4) Acquisition / divestiture items (B) (21.8) (19.7) (20.5) Stock-based compensation / deferred compensation (C) (118.8) (83.2) (75.3) Restructuring and other costs (D) (10.9) (30.2) (26.8) Non-GAAP operating expenses: $ 1,275.7 34.9 % $ 1,142.0 36.2 % $ 1,215.0 37.1 % OPERATING INCOME: GAAP operating income: $ 561.0 15.3 % $ 419.8 13.3 % $ 375.9 11.5 % Purchase accounting adjustments (A) 134.5 156.6 168.5 Acquisition / divestiture items (B) 21.8 21.4 20.5 Stock-based compensation / deferred compensation (C) 128.6 90.4 81.2 Restructuring and other costs (D) 11.1 31.4 27.9 Non-GAAP operating income: $ 857.0 23.4 % $ 719.6 22.8 % $ 674.0 20.6 % NON-OPERATING INCOME (EXPENSE), NET: GAAP non-operating income (expense), net: $ 13.6 $ (24.8) $ (31.1) Acquisition / divestiture items (B) (42.1) (12.2) (12.1) Deferred compensation (C) (6.1) (7.5) (6.3) Non-GAAP non-operating expense, net: $ (34.6) $ (44.5) $ (49.5) 40 Table of Contents GAAP and Non-GAAP Tax Rate % (H) GAAP and Non-GAAP Tax Rate % (H) GAAP and Non-GAAP Tax Rate % (H) INCOME TAX PROVISION (BENEFIT): GAAP income tax (benefit) provision: $ 81.8 14.2 % $ 4.4 1.1 % $ (169.7) (49.2) % Non-GAAP items tax effected (E) 41.4 48.5 29.6 Difference in GAAP and Non-GAAP tax rate (F) 7.5 (4.9) 55.6 IP restructuring and tax law change impacts (G) 14.4 64.0 206.3 Non-GAAP income tax provision: $ 145.1 17.6 % $ 112.0 16.6 % $ 121.8 19.5 % NET INCOME: GAAP net income attributable to Trimble Inc.: $ 492.7 $ 389.9 $ 514.3 Purchase accounting adjustments (A) 134.5 156.6 168.5 Acquisition / divestiture items (B) (20.3) 9.2 8.4 Stock-based compensation / deferred compensation (C) 122.5 82.9 74.9 Restructuring and other costs (D) 11.1 31.4 27.9 Non-GAAP tax adjustments (E) - (G) (63.3) (107.6) (291.5) Non-GAAP net income attributable to Trimble Inc.: $ 677.2 $ 562.4 $ 502.5 DILUTED NET INCOME PER SHARE: GAAP diluted net income per share attributable to Trimble Inc.: $ 1.94 $ 1.55 $ 2.03 Purchase accounting adjustments (A) 0.53 0.62 0.67 Acquisition / divestiture items (B) (0.08) 0.04 0.03 Stock-based compensation / deferred compensation (C) 0.48 0.33 0.30 Restructuring and other costs (D) 0.04 0.12 0.11 Non-GAAP tax adjustments (E) - (G) (0.25) (0.43) (1.15) Non-GAAP diluted net income per share attributable to Trimble Inc.: $ 2.66 $ 2.23 $ 1.99 ADJUSTED EBITDA: OPERATING INCOME: GAAP net income attributable to Trimble Inc.: $ 492.7 $ 389.9 $ 514.3 Non-operating income (expense), net, income tax provision (benefit), and net gain attributable to noncontrolling interests 68.3 29.9 (138.4) GAAP operating income: 561.0 419.8 375.9 Purchase accounting adjustments (A) 134.5 156.6 168.5 Acquisition / divestiture items (B) 21.8 21.4 20.5 Stock-based compensation / deferred compensation (C) 128.6 90.4 81.2 Restructuring and other costs (D) 11.1 31.4 27.9 Non-GAAP operating income: $ 857.0 $ 719.6 $ 674.0 Depreciation expense 42.2 39.7 39.4 Income from equity method investments, net 37.7 39.4 35.8 Adjusted EBITDA: $ 936.9 25.6 % $ 798.7 25.3 % $ 749.2 22.9 % 41 Table of Contents Non-GAAP Definitions Non-GAAP revenue We define Non-GAAP revenue as GAAP revenue, excluding the effects of purchase accounting adjustments.
Biggest changeThe non-GAAP financial measures, definitions, and explanations to the adjustments to comparable GAAP measures are included below: Years 2022 2021 2020 (In millions, except per share data) Dollar Amount % of Revenue Dollar Amount % of Revenue Dollar Amount % of Revenue REVENUE: GAAP revenue: $ 3,676.3 $ 3,659.1 $ 3,147.7 Purchase accounting adjustments (A) — 0.3 4.3 Non-GAAP revenue: $ 3,676.3 $ 3,659.4 $ 3,152.0 GROSS MARGIN: GAAP gross margin: $ 2,105.6 57.3 % $ 2,034.7 55.6 % $ 1,754.9 55.8 % Purchase accounting adjustments (A) 85.0 88.0 96.6 Acquisition / divestiture items (B) 0.2 — 1.7 Stock-based compensation / deferred compensation (C) 12.1 9.8 7.2 Restructuring and other costs (D) 1.7 0.2 1.2 Non-GAAP gross margin: $ 2,204.6 60.0 % $ 2,132.7 58.3 % $ 1,861.6 59.1 % OPERATING EXPENSES: GAAP operating expenses: $ 1,594.7 43.4 % $ 1,473.7 40.3 % $ 1,335.1 42.4 % Purchase accounting adjustments (A) (46.6) (46.5) (60.0) Acquisition / divestiture items (B) (32.6) (21.8) (19.7) Stock-based compensation / deferred compensation (C) (99.9) (118.8) (83.2) Restructuring and other costs (D) (52.5) (10.9) (30.2) Non-GAAP operating expenses: $ 1,363.1 37.1 % $ 1,275.7 34.9 % $ 1,142.0 36.2 % OPERATING INCOME: GAAP operating income: $ 510.9 13.9 % $ 561.0 15.3 % $ 419.8 13.3 % Purchase accounting adjustments (A) 131.6 134.5 156.6 Acquisition / divestiture items (B) 32.8 21.8 21.4 Stock-based compensation / deferred compensation (C) 112.0 128.6 90.4 Restructuring and other costs (D) 54.2 11.1 31.4 Non-GAAP operating income: $ 841.5 22.9 % $ 857.0 23.4 % $ 719.6 22.8 % 45 Table of Contents NON-OPERATING INCOME (EXPENSE), NET: GAAP non-operating income (expense), net: $ 58.2 $ 13.6 $ (24.8) Acquisition / divestiture items (B) (107.5) (42.1) (12.2) Deferred compensation (C) 8.5 (6.1) (7.5) Restructuring and other costs (D) 6.0 — — Non-GAAP non-operating expense, net: $ (34.8) $ (34.6) $ (44.5) GAAP and Non-GAAP Tax Rate % (H) GAAP and Non-GAAP Tax Rate % (H) GAAP and Non-GAAP Tax Rate % (H) INCOME TAX PROVISION (BENEFIT): GAAP income tax provision: $ 119.4 21.0 % $ 81.8 14.2 % $ 4.4 1.1 % Non-GAAP items tax effected (E) 49.9 41.4 48.5 Difference in GAAP and Non-GAAP tax rate (F) (22.9) 7.5 (4.9) IP restructuring and tax law change impacts (G) — 14.4 64.0 Non-GAAP income tax provision: $ 146.4 18.2 % $ 145.1 17.6 % $ 112.0 16.6 % NET INCOME: GAAP net income attributable to Trimble Inc.: $ 449.7 $ 492.7 $ 389.9 Purchase accounting adjustments (A) 131.6 134.5 156.6 Acquisition / divestiture items (B) (74.7) (20.3) 9.2 Stock-based compensation / deferred compensation (C) 120.5 122.5 82.9 Restructuring and other costs (D) 60.2 11.1 31.4 Non-GAAP tax adjustments (E) - (G) (27.0) (63.3) (107.6) Non-GAAP net income attributable to Trimble Inc.: $ 660.3 $ 677.2 $ 562.4 DILUTED NET INCOME PER SHARE: GAAP diluted net income per share attributable to Trimble Inc.: $ 1.80 $ 1.94 $ 1.55 Purchase accounting adjustments (A) 0.53 0.53 0.62 Acquisition / divestiture items (B) (0.30) (0.08) 0.04 Stock-based compensation / deferred compensation (C) 0.48 0.48 0.33 Restructuring and other costs (D) 0.24 0.04 0.12 Non-GAAP tax adjustments (E) - (G) (0.11) (0.25) (0.43) Non-GAAP diluted net income per share attributable to Trimble Inc.: $ 2.64 $ 2.66 $ 2.23 ADJUSTED EBITDA: OPERATING INCOME: GAAP net income attributable to Trimble Inc.: $ 449.7 $ 492.7 $ 389.9 Non-operating income (expense), net, income tax provision, and net gain attributable to noncontrolling interests 61.2 68.3 29.9 GAAP operating income: 510.9 561.0 419.8 Purchase accounting adjustments (A) 131.6 134.5 156.6 Acquisition / divestiture items (B) 32.8 21.8 21.4 Stock-based compensation / deferred compensation (C) 112.0 128.6 90.4 Restructuring and other costs (D) 54.2 11.1 31.4 Non-GAAP operating income: $ 841.5 $ 857.0 $ 719.6 Depreciation expense and cloud computing amortization 44.7 42.2 39.7 Income from equity method investments, net 31.1 37.7 39.4 Adjusted EBITDA: $ 917.3 25.0 % $ 936.9 25.6 % $ 798.7 25.3 % 46 Table of Contents Non-GAAP Definitions Non-GAAP revenue We define Non-GAAP revenue as GAAP revenue, excluding the effects of purchase accounting adjustments for acquisitions occurring prior to 2021.
Our growth strategy is centered on multiple elements: • Executing on our Connect and Scale strategy; • Increasing focus on software and services; • Focus on attractive markets with significant growth and profitability potential; • Domain knowledge and technological innovation that benefit a diverse customer base; • Geographic expansion with localization strategy; • Optimized go-to-market strategies to best access our markets; • Strategic acquisitions; • Venture fund investments; and • Sustainability.
Our growth strategy is centered on multiple elements: • Executing on our Connect and Scale strategy; • Increasing focus on software and services; • Focus on attractive markets with significant growth and profitability potential; • Domain knowledge and technological innovation that benefit a diverse customer base; • Geographic expansion with localization strategy; • Optimized go-to-market strategies to best access our markets; • Strategic acquisitions and venture fund investments; and • Sustainability.
Judgment is required to determine stand-alone selling price (“SSP”) for each distinct performance obligation. We use a range of amounts to estimate SSP when products and services are sold separately and determine whether there is a discount to be allocated based on the relative SSP of the various products and services.
Judgment is required to determine stand-alone selling price (“SSP”) for each performance obligation. We use a range of amounts to estimate SSP when products and services are sold separately and determine whether there is a discount to be allocated based on the relative SSP of the various products and services.
ARR is calculated by adding the portion of the contract value of all of our term licenses attributable to the current quarter to our non-GAAP recurring revenue for the current quarter and dividing that sum by the number of days in the quarter and then multiplying that quotient by 365.
ARR is calculated by taking our non-GAAP recurring revenue for the current quarter and adding the portion of the contract value of all of our term licenses attributable to the current quarter, and dividing that sum by the number of days in the quarter and then multiplying that quotient by 365.
We adopted ASU 2021-08 in the fourth quarter of 2021 for all acquisitions occurring in 2021, which requires the application of ASC 606, Revenue from Contracts with Customers, to recognize and measure contract assets and contract liabilities on the acquisition date.
We adopted ASU 2021-08 in the fourth quarter of 2021 for all acquisitions occurring in 2021 and going forward, which requires the application of ASC 606, Revenue from Contracts with Customers, to recognize and measure contract assets and contract liabilities on the acquisition date.
Non-GAAP diluted net income per share We defined Non-GAAP diluted net income per share as GAAP diluted net income per share, excluding the effects of purchase accounting adjustments, acquisition/divestiture items, stock-based compensation, restructuring and other costs, and non-GAAP tax adjustments.
Non-GAAP diluted net income per share We define Non-GAAP diluted net income per share as GAAP diluted net income per share, excluding the effects of purchase accounting adjustments, acquisition/divestiture items, stock-based compensation, restructuring and other costs, and non-GAAP tax adjustments.
Income Tax Provision In December 2021, due to a change in the Netherlands tax law, the statutory tax rate was further increased from 25.0% to 25.8% effective January 1, 2022. As a result, we recorded a one-time tax benefit of $14.4 million in 2021 due to the revaluation of the Netherlands deferred tax assets.
In December 2021, due to a change in the Netherlands tax law, the statutory tax rate was increased from 25.0% to 25.8% effective January 1, 2022. As a result, we recorded a one-time tax benefit of $14.4 million in 2021 due to the revaluation of the Netherlands deferred tax assets.
Our representative customers include construction owners, contractors, engineering and construction firms, surveying companies, farmers and agricultural companies, energy and utility companies, trucking companies, and state, federal, and municipal governments. Further information on our business is presented in Part I, Item 1, “Business”.
Our representative customers include construction owners, contractors, engineering and construction firms, surveying companies, farmers and agricultural companies, energy and utility companies, trucking companies, and state, federal, and municipal governments. Further information on our business is presented in Part I, Item 1, “Business” of this report.
In instances where SSP is not directly observable, we determine SSP using information that may include market conditions and other observable inputs. Income Taxes We are a U.S. based multinational company operating in multiple U.S. and foreign jurisdictions. Judgment is required in evaluating our uncertain tax positions and determining our provision for income taxes.
In instances where SSP is not directly observable, we determine SSP using information that may include market conditions and other observable inputs. 35 Table of Contents Income Taxes We are a U.S. based multinational company operating in multiple U.S. and foreign jurisdictions. Judgment is required in evaluating our uncertain tax positions and determining our provision for income taxes.
Basis of Presentation We use a 52–53 week fiscal year ending on the Friday nearest to December 31, which for 2021 was December 31, 2021. Both 2021 and 2020 were 52–week years.
Basis of Presentation We use a 52–53 week fiscal year ending on the Friday nearest to December 31, which for 2022 was December 30, 2022. Both 2022 and 2021 were 52–week years.
These percentages are defined as GAAP income tax provision as a percentage of GAAP income before taxes and non-GAAP income tax provision as a percentage of non-GAAP income before taxes. 43 Table of Contents
These percentages are defined as GAAP income tax provision as a percentage of GAAP income before taxes and non-GAAP income tax provision as a percentage of non-GAAP income before taxes. 48 Table of Contents
Discussions of 2019 items and year-to-year comparisons between 2020 and 2019 that are not included in this Annual Report on Form 10-K can be found in “Management's Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K, for the year ended January 1, 2021.
Discussions of 2020 items and year-to-year comparisons between 2021 and 2020 that are not included in this report can be found in “Management's Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K, for the year ended December 31, 2021.
Non-GAAP non-operating expense, net We define Non-GAAP non-operating expenses, net as GAAP non-operating expenses, net, excluding acquisition/divestiture items and deferred compensation. We believe this measure helps investors evaluate our non-operating expense trends.
Non-GAAP non-operating expense, net We define Non-GAAP non-operating expenses, net as GAAP non-operating expenses, net, excluding acquisition/divestiture items, deferred compensation, and restructuring and other costs. We believe this measure helps investors evaluate our non-operating expense trends.
This amount adjusts the provision for income taxes to reflect the effect of the non-GAAP items (A) - (D) on non-GAAP net income. This amount excludes the GAAP tax rate impact resulting from the non-U.S. intercompany transfer of intellectual property, which is separately disclosed in item (G). (F) Difference in GAAP and Non-GAAP tax rate .
(E) Non-GAAP items tax effected . This amount adjusts the provision for income taxes to reflect the effect of the non-GAAP items (A) - (D) on non-GAAP net income. This amount excludes the GAAP tax rate impact resulting from the non-U.S. intercompany transfer of intellectual property, which is separately disclosed in item (G).
For a full definition of ARR as used in this discussion and analysis, refer to the “Supplemental Disclosure of Non-GAAP Financial Measures and Annualized Recurring Revenue” later in this item 7.
For a full definition of ARR, organic ARR, and organic revenue growth as used in this discussion and analysis, refer to the “Supplemental Disclosure of Non-GAAP Financial Measures and Annualized Recurring Revenue” found later in this Item 7.
Adjusted EBITDA is a performance measure that we believe offers a useful view of the overall operations of our business because it facilitates operating performance comparisons by removing potential differences 42 Table of Contents caused by variations unrelated to operating performance, such as capital structures (interest expense), income taxes, depreciation and amortization expenses.
Adjusted EBITDA is a performance measure that we believe offers a useful view of the overall operations of our business because it facilitates operating performance comparisons by removing 47 Table of Contents potential differences caused by variations unrelated to operating performance, such as capital structures (interest expense), income taxes, depreciation, and amortization of purchased intangibles and cloud computing costs.
We believe our investors benefit by understanding our non-GAAP operating performance as reflected in a per share calculation as a way of measuring non-GAAP operating performance by ownership in the company. Adjusted EBITDA We define Adjusted EBITDA as non-GAAP operating income plus depreciation expense and income from equity method investments, net. Other companies may define Adjusted EBITDA differently.
We believe our investors benefit by understanding our non-GAAP operating performance as reflected in a per share calculation as a way of measuring non-GAAP operating performance by ownership in the company. Adjusted EBITDA We define Adjusted EBITDA as non-GAAP operating income plus depreciation expense, cloud computing amortization, and income from equity method investments, net.
Adjusted EBITDA is not intended to purport to be an alternative to net income or operating income as a measure of operating performance or cash flow from operating activities as a measure of liquidity.
Other companies may define Adjusted EBITDA differently. Adjusted EBITDA is not intended to purport to be an alternative to net income or operating income as a measure of operating performance or cash flow from operating activities as a measure of liquidity.
Factors that could cause or contribute to these differences include, but are not limited to, those discussed below and those listed under “Risks Factors.” This section of this Annual Report on Form 10-K generally discusses 2021 and 2020 items and year-to-year comparisons between 2021 and 2020.
Factors that could cause or contribute to these differences include, but are not limited to, those discussed below and those listed under “Risks Factors.” This section of this report generally discusses 2022 and 2021 items and year-to-year comparisons between 2022 and 2021.
When performing the quantitative approach, we compare the reporting unit’s carrying amount, including goodwill, to the reporting unit's fair value. The estimation of a reporting unit's fair value involves using estimates and assumptions, including expected future operating performance using risk-adjusted discount rates.
Alternatively, we may bypass the qualitative assessment and perform a quantitative impairment test. When performing a quantitative approach, we compare the reporting unit’s carrying amount, including goodwill, to the reporting unit's fair value. The estimation of a reporting unit's fair value involves using estimates and assumptions, including expected future operating performance using risk-adjusted discount rates.
Tax Payable At the end of 2021, we had income taxes payable of $101.6 million, with $47.1 million payable within the next 12 months. The amount payable within the next 12 months includes $6.7 million representing a one-time transition tax liability as a result of the 2017 Tax Cuts and Jobs Act (the “Tax Act”).
Tax Payable At the end of 2022, we had income taxes payab le of $64.6 million, with $23.7 million payable within the next 12 months. The amount payable within the next 12 months includes $13.6 million representing a one-time transition tax liability as a result of the 2017 Tax Cuts and Jobs Act (the “Tax Act”).
R&D expense increased primarily due to higher compensation expense, including incentive compensation . We believe that the development and introduction of new products are critical to our future success, and we expect to continue active development of new products. S&M expense increased primarily due to higher compensation expense, including incentive compensation and commissions.
We believe that the development and introduction of new solutions are critical to our future success, and we expect to continue the active development of new products. S&M expense increased primarily due to higher compensation expense, including commissions, higher marketing costs including trade shows, higher travel expenses, and the impact of acquisitions.
This amount represents the difference between the GAAP and non-GAAP tax rates applied to the non-GAAP operating income plus the non-GAAP non-operating expense, net. The GAAP tax rate used for this calculation excludes the net deferred tax impacts resulting from the non-U.S. intercompany transfer of intellectual property, which is separately disclosed in item (G).
The GAAP tax rate used for this calculation excludes the net deferred tax impacts resulting from the non-U.S. intercompany transfer of intellectual property, which is separately disclosed in item (G).
Amortization of Purchased Intangible Assets The following table shows amortization of purchased intangible assets for the periods indicated: 2021 2020 Dollar Change % Change (In millions) Cost of sales $ 87.7 $ 92.3 $ (4.6) (5) % Operating expenses 50.9 65.5 (14.6) (22) % Total amortization expense of purchased intangibles $ 138.6 $ 157.8 $ (19.2) (12) % Total amortization expense of purchased intangibles as a percentage of revenue 4 % 5 % 35 Table of Contents In 2021, total amortization of purchased intangibles decreased primarily due to the expiration of prior year acquisitions' amortization.
Amortization of Purchased Intangible Assets The following table shows amortization of purchased intangible assets for the periods indicated: 2022 2021 Dollar Change % Change (In millions) Cost of sales $ 85.0 $ 87.7 $ (2.7) (3) % Operating expenses 46.6 50.9 (4.3) (8) % Total amortization expense of purchased intangibles $ 131.6 $ 138.6 $ (7.0) (5) % Total amortization expense of purchased intangibles as a percentage of revenue 4 % 4 % In 2022, total amortization of purchased intangibles decreased primarily due to the expiration of prior years’ acquisition amortization.
We consider the accounting polices described below to be our critical accounting policies. These critical accounting policies are impacted significantly by judgments, assumptions, and estimates used in the preparation of the consolidated financial statements, and actual results could differ materially from the amounts reported based on these policies.
These critical accounting policies are impacted significantly by judgments, assumptions, and estimates used in the preparation of the consolidated financial statements, and actual results could differ materially from the amounts reported based on these policies. Our accounting policies are more fully described in Note 1 “ Description of Business and Accounting Policies ” of this report.
Other than the items discussed above, we do not have any off-balance sheet financing arrangements or liabilities. Debt At the end of 2021, we had outstanding floating and fixed-rate senior notes with varying maturities for an aggregate principal amount of approximately $1.3 billion. Future interest payments total $264.2 million, with $60.8 million payable within the next 12 months.
Other than the items discussed above, we do not have any off-balance sheet financing arrangements or liabilities. 43 Table of Contents Debt At the end of 2022, we had outstanding floating and fixed-rate senior notes with varying maturities for an aggregate principal amount of approximately $1.5 billion.
Risk Factors” for further discussion of the possible impact of the COVID-19 pandemic and its resulting effects on our business. 32 Table of Contents CRITICAL ACCOUNTING POLICIES AND ESTIMATES The preparation of financial statements and related disclosures in conformity with U.S. generally accepted accounting principles (“GAAP”) requires us to make judgments, assumptions, and estimates that affect the reported amounts of assets, liabilities, revenue, costs of sales, operating expenses, and related disclosures.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES The preparation of financial statements and related disclosures in conformity with U.S. generally accepted accounting principles (“GAAP”) requires us to make judgments, assumptions, and estimates that affect the reported amounts of assets, liabilities, revenue, costs of sales, operating expenses, and related disclosures. We consider the accounting polices described below to be our critical accounting policies.
Lastly, we believe that our core operating performance offers a supplemental measure for period-to-period comparisons and can be used to evaluate our historical and prospective financial performance, as well as our performance relative to competitors.
Lastly, we believe that our core operating performance offers a supplemental measure for period-to-period comparisons and can be used to evaluate our historical and prospective financial performance, as well as our performance relative to competitors. Organic revenue growth is a non-GAAP measure that refers to revenue excluding the impacts of (i) foreign currency translation, and (ii) acquisitions and divestitures.
We review intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of those assets may not be recoverable based on their future cash flows. The estimated future cash flows are primarily based on assumptions about expected future operating performance.
If the reporting unit's carrying amount exceeds its fair value, an impairment loss is recognized. We review intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of those assets may not be recoverable based on their future cash flows.
For debt refinancing, we anticipate we will have readily accessible capital markets in order to secure appropriate funding. Our material cash requirements include the following contractual and other obligations and cash needs: Leases We have operating leases primarily for certain of our major facilities including corporate offices, research and development facilities, and manufacturing facilities.
Our material cash requirements include the following contractual and other obligations and cash needs: Leases We have operating leases primarily for certain of our major facilities including corporate offices, research and development facilities, and manufacturing facilities. Operating leases represent undiscounted lease payments and include short-term leases.
In addition, we have unrecognized tax benefits of $63.3 million included in Other non-current liabilities, including interest and penalties. At this time, we cannot make a reasonably reliable estimate of the period of cash settlement with tax authorities regarding this liability, and therefore, such amounts are not included in the contractual obligations table above.
In addition, we have unrecognized tax benefits of $75.5 million included in Other non-current liabilities, including interest and penalties. At this time, we cannot make a reasonably reliable estimate of the period of cash settlement with tax authorities regarding this liability. Refer to Note 12 “Income Taxes” of this report for additional information regarding our taxes.
Non- GAAP non-operating expense, net, exclude unusual one-time acquisition/divestiture charges and/or divestiture gains/losses. The costs that have been excluded from the non-GAAP measures are costs specific to particular acquisitions. As a result, these are one-time costs that vary significantly in amount and timing and are not indicative of our core operating performance. (C) Stock-based compensation / deferred compensation .
Non-GAAP non-operating expense, net, excludes unusual one-time acquisition/divestiture charges, including foreign currency exchange rate gains/losses related to an acquisition, divestiture gains/losses, and strategic investment impairments. These are one-time costs that vary significantly in amount and timing and are not indicative of our core operating performance. (C) Stock-based compensation / deferred compensation .
RESULTS OF OPERATIONS Overview The following table shows revenue by category, gross margin and gross margin as a percentage of revenue, operating income and operating income as a percentage of revenue, diluted earnings per share, and annualized recurring revenue compared for the periods indicated: 2021 2020 Dollar Change % Change (In millions) Revenue: Product $ 2,247.5 $ 1,828.0 $ 419.5 23 % Service 649.4 644.8 4.6 1 % Subscription 762.2 674.9 87.3 13 % Total revenue $ 3,659.1 $ 3,147.7 $ 511.4 16 % Gross margin 2,034.7 1,754.9 279.8 16 % Gross margin as a % of revenue 55.6 % 55.8 % Operating income 561.0 419.8 141.2 34 % Operating income as a % of revenue 15.3 % 13.3 % Diluted earnings per share $ 1.94 $ 1.55 $ 0.39 25 % Non-GAAP revenue (1) $ 3,659.4 $ 3,152.0 $ 507.4 16 % Non-GAAP operating income (1) 857.0 719.6 137.4 19 % Non-GAAP operating income as a % of Non-GAAP revenue (1) 23.4 % 22.8 % Non-GAAP diluted earnings per share (1) $ 2.66 $ 2.23 $ 0.43 19 % Annualized Recurring Revenue (“ARR”) (1) $ 1,409.1 $ 1,295.8 $ 113.3 9 % (1) Refer to “Supplemental Disclosure of Non-GAAP Financial Measures and Annualized Recurring Revenue” of this Annual Report on Form 10-K for definitions.
The estimated future cash flows are primarily based on assumptions about expected future operating performance. 36 Table of Contents RESULTS OF OPERATIONS Overview The following table shows revenue by category, gross margin and gross margin as a percentage of revenue, operating income and operating income as a percentage of revenue, diluted earnings per share, and annualized recurring revenue compared for the periods indicated: 2022 2021 Dollar Change % Change (In millions) Revenue: Product $ 2,152.0 $ 2,247.5 $ (95.5) (4) % Service 641.3 649.4 (8.1) (1) % Subscription 883.0 762.2 120.8 16 % Total revenue $ 3,676.3 $ 3,659.1 $ 17.2 — % Gross margin 2,105.6 2,034.7 70.9 3 % Gross margin as a % of revenue 57.3 % 55.6 % Operating income 510.9 561.0 (50.1) (9) % Operating income as a % of revenue 13.9 % 15.3 % Diluted earnings per share $ 1.80 $ 1.94 $ (0.14) (7) % Non-GAAP revenue (1) $ 3,676.3 $ 3,659.4 $ 16.9 — % Non-GAAP operating income (1) 841.5 857.0 (15.5) (2) % Non-GAAP operating income as a % of Non-GAAP revenue (1) 22.9 % 23.4 % Non-GAAP diluted earnings per share (1) $ 2.64 $ 2.66 $ (0.02) (1) % Annualized Recurring Revenue (“ARR”) (1) $ 1,603.7 $ 1,409.1 $ 194.6 14 % (1) Refer to “Supplemental Disclosure of Non-GAAP Financial Measures and Annualized Recurring Revenue” of this report for definitions.
Critical estimates when valuing intangible assets include expected future cash flows based on consideration of future growth rates and margins, customer attrition rates, future changes in technology and brand awareness, loyalty and position, and discount rates. We evaluate goodwill on an annual basis or more frequently if indicators of potential impairment exist.
When determining the fair values, we make significant estimates and assumptions, especially concerning intangible assets. Critical estimates when valuing intangible assets include expected future cash flows based on consideration of future growth rates and margins, customer attrition rates, future changes in technology and brand awareness, loyalty and position, and discount rates.
LIQUIDITY AND CAPITAL RESOURCES At the End of Year 2021 2020 Dollar Change % Change (In millions) Cash and cash equivalents $ 325.7 $ 237.7 $ 88.0 37 % As a percentage of total assets 4.6 % 3.5 % Principal balance of outstanding debt $ 1,300.0 $ 1,555.9 $ (255.9) (16) % Years 2021 2020 Dollar Change % Change (In millions) Cash provided by operating activities $ 750.5 $ 672.0 $ 78.5 12 % Cash used in investing activities (203.5) (231.8) 28.3 (12) % Cash used in financing activities (447.7) (400.3) (47.4) 12 % Effect of exchange rate changes on cash and cash equivalents (11.3) 8.6 (19.9) (231) % Net increase in cash and cash equivalents $ 88.0 $ 48.5 Operating Activities The increase in cash provided by operating activities was primarily driven by higher net income adjusted for non-cash items, and higher account payables, partially offset by higher inventory purchases.
LIQUIDITY AND CAPITAL RESOURCES At the End of Year 2022 2021 Dollar Change % Change (In millions) Cash and cash equivalents $ 271.0 $ 325.7 $ (54.7) (17) % As a percentage of total assets 3.7 % 4.6 % Principal balance of outstanding debt $ 1,525.0 $ 1,300.0 $ 225.0 17 % Years 2022 2021 Dollar Change % Change (In millions) Cash provided by operating activities $ 391.2 $ 750.5 $ (359.3) (48) % Cash used in investing activities (226.3) (203.5) (22.8) 11 % Cash used in financing activities (199.0) (447.7) 248.7 (56) % Effect of exchange rate changes on cash and cash equivalents (20.6) (11.3) (9.3) 82 % Net increase in cash and cash equivalents $ (54.7) $ 88.0 Operating Activities The decrease in cash provided by operating activities was primarily driven by lower net income after adjusting for non-cash items and divestiture gains, higher bonus and cash tax payments, higher accounts receivable, higher inventory purchases, and lower accounts payable associated with the timing of inventory payments.
As our solutions have expanded, our go-to-market model has also evolved with a balanced mix between direct, distribution, and OEM customers as well as an increasing number of enterprise level customer relationships. Additionally, in August 2021, we announced a newly formed strategic venture fund.
This shift towards recurring revenue has positively impacted our revenue mix and growth over time and is leading to improved visibility in our businesses. As our solutions have expanded, our go-to-market model has also evolved with a balanced mix between direct, distribution, and OEM customers as well as an increasing number of enterprise level customer relationships.
Operating leases represent undiscounted lease payments and include short-term leases. At the end of 2021, we had fixed lease payment obligations of $190.7 million, with $50.5 million payable within the next 12 months. Refer to Note 7 of this Annual Report on Form 10-K for additional information regarding our leases.
At the end of 2022, we had fixed lease payment obligations of $171.6 million, with $48.7 million payable within the next 12 months. Refer to Note 8 “ Leases ” of this report for additional information regarding our leases.
Financing Activities The increase in cash used in financing activities was primarily driven by an increase in repurchases of common stock, partially offset by a decrease in debt repayments, net of debt proceeds. 38 Table of Contents Cash and Cash Equivalents We believe that our cash and cash equivalents and borrowings, along with cash provided by operations will be sufficient in the foreseeable future to meet our anticipated operating cash needs, expenditures related to our Connect and Scale strategy, debt service, and any stock repurchases under the stock repurchase program.
Cash and Cash Equivalents We believe that our cash and cash equivalents and borrowings, along with cash provided by operations will be sufficient in the foreseeable future to meet our anticipated operating cash needs, expenditures related to our Connect and Scale strategy, and debt service.
Results by Segment We report our financial performance, including revenue and operating income, based on four reportable segments: Buildings and Infrastructure, Geospatial, Resources and Utilities, and Transportation. Our Chief Executive Officer and Chief Operating Decision Maker views and evaluates operations based on the results of our reportable operating segments under our management reporting system.
We do not expect the provisions of the IRA to have a material impact on our financial results. Results by Segment We report our financial performance, including revenue and operating income, based on four reportable segments: Buildings and Infrastructure, Geospatial, Resources and Utilities, and Transportation.
For additional discussion of our segments, refer to Note 5 of this Annual Report on Form 10-K. 36 Table of Contents The following table shows a breakdown of revenue and operating income by segment for the periods indicated: 2021 2020 Dollar Change % Change (In millions) Buildings and Infrastructure Segment revenue $ 1,422.7 $ 1,231.0 $ 191.7 16 % Segment revenue as a percent of total revenue 39 % 39 % Segment operating income $ 411.7 $ 338.1 $ 73.6 22 % Segment operating income as a percent of segment revenue 28.9 % 27.5 % Geospatial Segment revenue $ 828.9 $ 650.5 $ 178.4 27 % Segment revenue as a percent of total revenue 23 % 21 % Segment operating income $ 244.1 $ 184.4 $ 59.7 32 % Segment operating income as a percent of segment revenue 29.4 % 28.3 % Resources and Utilities Segment revenue $ 771.3 $ 630.0 $ 141.3 22 % Segment revenue as a percent of total revenue 21 % 20 % Segment operating income $ 264.0 $ 221.0 $ 43.0 19 % Segment operating income as a percent of segment revenue 34.2 % 35.1 % Transportation Segment revenue $ 636.5 $ 640.5 $ (4.0) (1) % Segment revenue as a percent of total revenue 17 % 20 % Segment operating income $ 43.4 $ 50.1 $ (6.7) (13) % Segment operating income as a percent of segment revenue 6.8 % 7.8 % The following table shows a reconciliation of our consolidated segment operating income to our consolidated income before income taxes for the periods indicated: 2021 2020 (In millions) Consolidated segment operating income $ 963.2 $ 793.6 Unallocated general corporate expenses (106.2) (74.0) Purchase accounting adjustments (134.5) (156.6) Acquisition / divestiture items (21.8) (21.4) Stock-based compensation / deferred compensation (128.6) (90.4) Restructuring and other costs (11.1) (31.4) Consolidated operating income 561.0 419.8 Total non-operating income (expense), net 13.6 (24.8) Consolidated income before taxes $ 574.6 $ 395.0 Buildings and Infrastructure Revenue increased primarily due to strong demand for our civil construction hardware and related software and from strong recovery in markets across major regions, including strong residential construction and infrastructure spend.
The following table shows a breakdown of revenue and operating income by segment for the periods indicated: 2022 2021 Dollar Change % Change (In millions) Buildings and Infrastructure Segment revenue $ 1,494.0 $ 1,422.7 $ 71.3 5 % Segment revenue as a percent of total revenue 40.6 % 38.9 % Segment operating income $ 406.3 $ 411.7 $ (5.4) (1) % Segment operating income as a percent of segment revenue 27.2 % 28.9 % Geospatial Segment revenue $ 756.5 $ 828.9 $ (72.4) (9) % Segment revenue as a percent of total revenue 20.6 % 22.6 % Segment operating income $ 221.4 $ 244.1 $ (22.7) (9) % Segment operating income as a percent of segment revenue 29.3 % 29.4 % Resources and Utilities Segment revenue $ 821.6 $ 771.3 $ 50.3 7 % Segment revenue as a percent of total revenue 22.4 % 21.1 % Segment operating income $ 278.3 $ 264.0 $ 14.3 5 % Segment operating income as a percent of segment revenue 33.9 % 34.2 % Transportation Segment revenue $ 604.2 $ 636.5 $ (32.3) (5) % Segment revenue as a percent of total revenue 16.4 % 17.4 % Segment operating income $ 58.8 $ 43.4 $ 15.4 35 % Segment operating income as a percent of segment revenue 9.7 % 6.8 % 40 Table of Contents The following table shows a reconciliation of our consolidated segment operating income to our consolidated income before income taxes for the periods indicated: 2022 2021 (In millions) Consolidated segment operating income $ 964.8 $ 963.2 Unallocated general corporate expenses (123.3) (106.2) Purchase accounting adjustments (131.6) (134.5) Acquisition / divestiture items (32.8) (21.8) Stock-based compensation / deferred compensation (112.0) (128.6) Restructuring and other costs (54.2) (11.1) Consolidated operating income 510.9 561.0 Total non-operating income, net 58.2 13.6 Consolidated income before taxes $ 569.1 $ 574.6 Buildings and Infrastructure 2022 Change versus 2021 % Change Change in revenue - Buildings and Infrastructure 5 % Acquisitions 2 % Divestitures (5) % Foreign currency exchange (3) % Organic revenue growth 11 % Organic revenue increased due to demand for our subscription and term license software recurring offerings.
Our accounting policies are more fully described in Note 1 of this Annual Report on Form 10-K. Revenue Recognition Revenue is recognized upon transfer of control of promised products or services to customers in an amount that reflects the consideration that we expect to receive in exchange for those products or services.
Revenue Recognition Revenue is recognized upon transfer of control of promised products or services to customers in an amount that reflects the consideration that we expect to receive in exchange for those products or services. Revenue is recognized net of allowance for returns and any taxes collected from customers.
EFFECT OF NEW ACCOUNTING PRONOUNCEMENTS The impact of recent accounting pronouncements is disclosed in Note 1 of this Annual Report on Form 10-K. 39 Table of Contents S UPPLEMENTAL DISCLOSURE OF NON-GAAP FINANCIAL MEASURES AND ANNUALIZED RECURRING REVENUE To supplement our consolidated financial information, we included non-GAAP financial measures, which are not meant to be considered in isolation or as a substitute for comparable GAAP because we believe non-GAAP financial measures provide useful information to investors and others in understanding our “core operating performance”, which excludes the effect of non-cash items and certain variable charges not expected to recur, not meaningful in comparison to our past operating performance or not reflective of ongoing financial results.
EFFECT OF NEW ACCOUNTING PRONOUNCEMENTS The impact of recent accounting pronouncements is disclosed in Note 1 “Description of Business and Accounting Policies” of this report. 44 Table of Contents SUPPLEMENTAL DISCLOSURE OF NON-GAAP FINANCIAL MEASURES AND ANNUALIZED RECURRING REVENUE To supplement our consolidated financial information, we include non-GAAP financial measures, which are not meant to be considered in isolation or as a substitute for comparable GAAP.
In addition to providing non-GAAP financial measures, we disclose Annualized Recurring Revenue (“ARR”) to give the investors supplementary indicators of the value of our current recurring revenue contracts. ARR represents the estimated annualized value of recurring revenue, including subscription, maintenance and support revenue, and term license contracts for the quarter.
ARR represents the estimated annualized value of recurring revenue, including subscription, maintenance and support revenue, and term license contracts for the quarter.
Non- GAAP gross margin and operating expenses exclude restructuring and other exit costs comprised of termination benefits related to reductions in employee headcount, including executive severance agreements, the closure or exit of facilities, and cancellation of certain contracts.
Non- GAAP gross margin and operating expenses exclude restructuring and other costs comprised of termination benefits related to reductions in employee headcount and closure or exit of facilities, executive severance agreements, costs incurred in exiting business activities in Russia and Belarus, other business exit costs, Bridge Facility fees, as well as a $20 million commitment to donate to the Trimble Foundation to be paid over four quarters.
Our effective income tax rates for 2021 and 2020 were 14.2% and 1.1%, respectively. The effective income tax rate in 2021 increased compared to 2020 primarily due to the smaller one-time tax benefit recorded in 2021 relating to the revaluation of the Netherlands deferred tax assets mentioned above.
The effective income tax rate in 2022 increased compared to 2021 primarily due to a one-time tax benefit recorded in 2021 related to the revaluation of the Netherlands deferred tax assets mentioned below and lower stock-based compensation deductions during 2022.
Our focus on these growth drivers has led over time to growth in revenue and profitability and an increasingly diversified business model. We continue to experience a shift toward a more significant mix of recurring revenue contracts, as demonstrated by our success in driving annualized recurring revenue (“ARR”) growth of 9% year-over-year at the end of 2021.
We continue to experience a shift toward a more significant mix of recurring revenue contracts, as demonstrated by our success in driving annualized recurring revenue (“ARR”) of $1,603.7 million, which represents growth of 14% year-over-year at the end of 2022. ARR organic growth was 16%.
ARR should be viewed independently of revenue and deferred revenue as it is a performance measure and is not intended to be combined with or to replace either of those items.
Organic ARR refers to annualized recurring revenue excluding the impacts of (i) foreign currency translation, and (ii) acquisitions and divestitures. ARR and organic ARR should be viewed independently of revenue and deferred revenue as they are performance measures and are not intended to be combined with or to replace either of those items.
The 2021 Stock Repurchase Program does not obligate us to acquire any specific number of shares. Refer to Note 13 of this Annual Report on Form 10-K for additional information regarding our 2021 Stock Repurchase Program.
The 2021 Stock Repurchase Program does not obligate us to acquire any specific number of shares. Because of the additional outstanding indebtedness we have and expect to incur in connection with the pending Transporeon acquisition, we have temporarily discontinued share repurchases. Refer to Note 14 “Common Stock Repurchase” of this report for additional information regarding our 2021 Stock Repurchase Program.
Research and Development, Sales and Marketing, and General and Administrative Expenses The following table shows research and development (“R&D”), sales and marketing (“S&M”), and general and administrative (“G&A”) expense along with these expenses as a percentage of revenue for the periods indicated: 2021 2020 Dollar Change % Change (In millions) Research and development $ 536.6 $ 475.9 $ 60.7 13 % Percentage of revenue 14.7 % 15.1 % Sales and marketing 506.8 467.0 39.8 9 % Percentage of revenue 13.9 % 14.8 % General and administrative 369.1 300.9 68.2 23 % Percentage of revenue 10.1 % 9.6 % Total $ 1,412.5 $ 1,243.8 $ 168.7 14 % As a result of COVID-19 impacts, the year-to-year comparison of 2020 to 2021 reflects distortions in expense growth rates as our expenses normalized in 2021, with the biggest impact due to higher incentive compensation, including bonuses and stock-based compensation, particularly in G&A.
Operating income as a percentage of revenue decreased primarily due to increased operating expense, partially offset by increased gross margin as a percentage of revenue. 38 Table of Contents Research and Development, Sales and Marketing, and General and Administrative Expenses The following table shows research and development (“R&D”), sales and marketing (“S&M”), and general and administrative (“G&A”) expense along with these expenses as a percentage of revenue for the periods indicated: 2022 2021 Dollar Change % Change (In millions) Research and development $ 542.1 $ 536.6 $ 5.5 1 % Percentage of revenue 14.7 % 14.7 % Sales and marketing 553.6 506.8 46.8 9 % Percentage of revenue 15.1 % 13.9 % General and administrative 422.2 369.1 53.1 14 % Percentage of revenue 11.5 % 10.1 % Total $ 1,517.9 $ 1,412.5 $ 105.4 7 % R&D expense increased primarily due to slightly higher compensation expense and the impact of acquisitions, partially offset by favorable foreign currency and divestitures.
Growth in subscription sales in many of our software businesses continued to remain strong. Price increases, which went into effect in the second half of the year, and reduced discounting had a slighter impact on revenue growth for the year. Product revenue increased due to strong hardware and related software sales in Geospatial, Resources and Utilities, and Buildings and Infrastructure.
In the second half of the year, slowing demand for our hardware and related software products impacted sales in Buildings and Infrastructure, Geospatial, and Resources and Utilities. Organic service revenue was relatively flat. Organic subscription revenue increased primarily due to strong growth in Buildings and Infrastructure and, to a lesser extent, in Resources and Utilities, Transportation, and Geospatial.
Segment operating income and operating income as a percentage of revenue increased primarily due to higher revenue and operating cost containment, partially offset by lower gross margin. Gross margin was down primarily due to product mix and increased supply chain costs for hardware products, partially offset by reduced discounting and customer price increases.
Operating income as a percentage of revenue decreased primarily due to higher operating expense, partially offset by gross margin expansion due to product mix.
Enterprise revenue continued to experience subscription revenue growth as the business transitions from a perpetual software license model. Mobility sales were down due to reduced subscriber counts, partially offset by higher hardware shipments for the year.
Enterprise subscription revenue continued to experience growth as the business transitions from a perpetual software license model. Operating income and operating income as a percentage of revenue increased primarily due to targeted cost reductions and gross margin expansion due to product mix, partially offset by divestitures and reduced revenue.
Non-Operating Income (Expense), Net The following table shows non-operating expense, net for the periods indicated: 2021 2020 Dollar Change % Change (In millions) Interest expense, net $ (65.4) $ (77.6) $ 12.2 (16) % Income from equity method investments, net 37.7 39.4 (1.7) (4) % Other income, net 41.3 13.4 27.9 208 % Total non-operating income (expense), net $ 13.6 $ (24.8) $ 38.4 (155) % In 2021, non-operating income increased primarily due to recognition of gains from the sale of businesses included in Other income, net, and to a lesser extent, lower interest costs associated with a decrease in our outstanding debt.
Non-Operating Income, Net The following table shows non-operating income, net for the periods indicated: 2022 2021 Dollar Change % Change (In millions) Divestitures gain, net $ 99.0 $ 41.4 $ 57.6 139 % Interest expense, net (71.1) (65.4) (5.7) 9 % Income from equity method investments, net 31.1 37.7 (6.6) (18) % Other expense, net (0.8) (0.1) (0.7) 700 % Total non-operating income, net $ 58.2 $ 13.6 $ 44.6 328 % In 2022, non-operating income increased primarily due to higher gains from divestitures, partially offset by lower joint-venture profitability, higher interest expense due to Bridge Facility fees, and fluctuations in deferred compensation plan assets included in Other expense, net. 39 Table of Contents Income Tax Provision Our effective income tax rates for 2022 and 2021 were 21.0% and 14.2%.
We regularly assess the likelihood of adverse outcomes from these examinations in determining the adequacy of our provision for income taxes.
We regularly assess the likelihood of adverse outcomes from these examinations in determining the adequacy of our provision for income taxes. Business Combinations and Valuation of Goodwill and Purchased Intangible Assets For business combinations, we allocate the purchase consideration to the assets acquired, liabilities assumed, and any noncontrolling interest based on their fair values at the acquisition date.
Gross margin increased primarily due to strong revenue growth. Gross margin as a percentage of total revenue shows a slight decrease mainly due to increased mix of hardware sales and increased supply chain costs, offset by price increases and reduced discounting as well as lower intangibles amortization.
Gross margin as a percentage of total revenue increased due to an increased mix of software and subscription sales, price increases, and to a lesser extent, divestitures of lower margin hardware centric businesses. Operating Income Operating income decreased primarily due to divestitures and unfavorable foreign currency, partially offset by organic revenue and gross margin expansion.
At the end of 2021, we had operating purchase obligations and commitments of $710.8 million, with $446.6 million payable within the next 12 months. Refer to Note 8 of this Annual Report on Form 10-K for additional information regarding our purchase obligations and commitments.
Future interest payments total $260.5 million, with $67.3 million payable within the next 12 months. During 2022, we had $224.6 million of proceeds from debt, net of the payments. Refer to Note 7 “Debt” of this report for additional information regarding our debt.
No single customer accounted for 10% or more of our total revenue in 2021 and 2020. No single customer accounted for 10% or more of our accounts receivable at the end of 2021 and 2020. Gross Margin Gross margins varied due to several factors including product mix, customer pricing, distribution channel, and product costs.
Gross Margin Gross margins varied due to several factors including product mix, customer pricing, distribution channel, and product costs. Gross margin increased primarily due to organic revenue growth in Buildings and Infrastructure and Resources and Utilities, partially offset by divestitures and unfavorable foreign currency.
Refer to Note 11 of this Annual Report on Form 10-K for additional information regarding our taxes. Other Purchase Obligations and Commitments Purchase obligations and commitments primarily relate to investments in our platform associated with our Connect and Scale strategy and non-cancellable inventory commitments, which increased due to the extension of lead times and the growth of our hardware business.
Other Purchase Obligations and Commitments Purchase obligations and commitments primarily relate to investments in our platform associated with our Connect and Scale strategy and non-cancellable inventory commitments. At the end of 2022, we had operating purchase obligations and commitments of $858.8 million, with $326.2 million payable within the next 12 months.
We utilize either a qualitative or quantitative approach to assess the likelihood of impairment on the first day of the fourth quarter. When performing the qualitative approach, we consider macroeconomic conditions, industry and market considerations, overall financial performance, and other relevant events and factors that may impact the reporting units.
Qualitative factors include but are not limited to macroeconomic conditions, industry and market considerations, cost factors, overall financial performance, or other relevant company-specific events. If it is determined more likely than not that the fair value of a goodwill reporting unit is less than its carrying amount, we perform a quantitative analysis.
Investing Activities The decrease in cash used in investing activities was primarily due to higher net proceeds from the sale of businesses and sale of property and equipment during 2021 , partially offset by slightly higher acquisition spending in 2021. The current year included the AgileAssets acquisition compared to the prior year, which included the Kuebix acquisition.
The decreases were partially offset by an increase in deferred revenue. 42 Table of Contents Investing Activities The increase in cash used in investing activities was primarily due to higher payments related to businesses acquired in 2022, partially offset by higher proceeds from divestitures.
Removed
Excluding the impact of foreign currency and acquisitions and divestitures, ARR organic growth was 12% . This shift has positively impacted our revenue mix and growth over time and is leading to improved visibility in our businesses. Our software, recurring revenue, and services represented 55% of total revenue for 2021.
Added
Our focus on these growth drivers has led over time to growth in revenue and profitability and an increasingly diversified business model.
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Through this fund, we expect to invest up to $200 million in early- to growth-stage companies that can accelerate innovation and effectively bring new solutions to our customers and industry.
Added
Throughout this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” , we refer to organic revenue growth, which is a non-GAAP measure.
Removed
Impact of COVID-19 and supply chain constraints on our business COVID-19 and variant impacts, especially related to global supply chain disruptions and parts and labor shortages, and increased worldwide demand for certain components, continued to impact our business and operations. We are experiencing extended delivery times for certain components of our hardware products and increased freight costs.
Added
Impact of Recent Events on Our Business Macroeconomic conditions, including geopolitical tensions, such as the ongoing military conflict between Russia and Ukraine and related sanctions, exchange rate and interest rate volatility, and inflationary pressures, will continue to evolve globally.
Removed
As a result, we are making binding commitments with longer lead times and procuring components at higher prices, which may impact our flexibility to adapt to changing market conditions and product demand. Currently, we expect these challenging supply chain conditions to persist in the near term.
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In the second half of 2022, our organic hardware sales growth and bookings moderated from slowing demand in some of our end markets served by our dealer channels and also from dealer inventories moving towards lower levels due to improved product lead times and macroeconomic concerns.
Removed
Therefore, we will continue to experience delays in shipping our products and increased costs, which may reduce our revenue and gross margin and continue to increase our backlog. Our 2021 results of operations reflect significant revenue improvement as the overall impact of COVID-19 was less pronounced.
Added
The greatest impact was a decline in Europe where the impacts of foreign currency exchange rates, the ongoing military conflict in Ukraine, and energy inflation were the greatest.
Removed
As a result of COVID-19, the year-to-year comparison of 2020 to 2021 reflects significant distortions in growth rates as our business rebounded in 2021. See “1A.
Added
Supply Chain Over the past year, we experienced inflationary cost increases for certain components of our hardware products due to supply chain disruptions resulting from parts and labor shortages and an increase in worldwide demand for components. In response, we increased customer pricing to offset inflationary pressures.
Removed
Revenue is recognized net of allowance for returns and any taxes collected from customers.
Added
In the second half of 2022, these cost pressures lessened as component supply became more readily available. We expect these cost pressures will continue to diminish over time as suppl y chain conditions continue to normalize. Additionally, over the past year, due to extended component lead times, we made binding commitments over a longer horizon for certain components.
Removed
Business Combinations and Valuation of Goodwill and Purchased Intangible Assets We account for business combinations using the acquisition method of accounting whereby certain identifiable assets and liabilities of the acquired business and any noncontrolling interest in the acquiree are recorded at their estimated fair values as of the acquisition date.
Added
This has impacted our working capital in the short term; however, we expect supply dynamics and customer demand to normalize over time. 34 Table of Contents Foreign Currency Fluctuations We generate over half of our revenue from sales to customers outside of the U .S.
Removed
Any purchase consideration in excess of the estimated fair values of the net assets acquired is recorded as goodwill. Acquisition-related expenses and related restructuring costs are expensed as incurred. When determining the fair values of certain assets acquired, liabilities assumed, and noncontrolling interests in the acquiree, we make significant estimates and assumptions, especially concerning intangible assets.
Added
In 2022, due to the strengthening of the U.S. dollar, year-over-year unfavorable foreign currency impacts on revenue and operating income were $114.1 million or 4% and $26.0 million or 5%. Interest Rates Fluctuations The global inflation rate has risen sharply, and interest rates are rising in an effort to curb inflation.
Removed
If the reporting unit's carrying amount exceeds its fair value, an impairment loss is recognized. 33 Table of Contents Intangible assets acquired individually, with a group of other assets, or in a business combination are recorded at fair value.
Added
In addition to the negative impact macroeconomic conditions have had on our sales, we may experience higher borrowing costs on existing variable rate debt and future debt issuances, including financing related to the pending acquisition of Transporeon. Ongoing Military Conflict in Ukraine We are monitoring and responding to effects of the ongoing military conflict in Ukraine.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

11 edited+4 added−0 removed3 unchanged
Biggest changeForeign currency forward contracts outstanding at the end of 2021 and 2020 are summarized as follows: At the End of 2021 At the End of 2020 Nominal Amount Fair Value Nominal Amount Fair Value (In millions) Forward contracts: Purchased $ (107.5) $ 0.1 $ (99.4) $ 0.9 Sold $ 183.6 $ (0.2) $ 52.0 $ (0.5) 44 Table of Contents TRIMBLE INC.
Biggest changeForeign currency contracts outstanding at the end of 2022 and 2021 are summarized as follows: At the End of 2022 At the End of 2021 Nominal Amount Fair Value Nominal Amount Fair Value (In millions) Forward contracts: Purchased $ (77.9) $ — $ (107.5) $ 0.1 Sold $ 130.6 $ 0.2 $ 183.6 $ (0.2) Foreign currency exchange contract related to acquisition $ 1,999.4 $ 10.4 $ — $ — While not predictive, a hypothetical 5% decrease in the Euro as of December 30, 2022 would change the fair value of the foreign currency exchange contract related to the pending acquisition of Transporeon by $68 million. 50 Table of Contents TRIMBLE INC.
We enter into foreign currency forward contracts to minimize the short-term impact of foreign currency exchange rate fluctuations on cash, debt, and certain trade and intercompany receivables and payables, primarily denominated in Euro, New Zealand Dollars, Canadian Dollars, British Pound, and Brazilian Real.
We enter into foreign currency forward contracts to minimize the short-term impact of foreign currency exchange rate fluctuations on cash, debt, and certain trade and intercompany receivables and payables, primarily denominated in Euro, New Zealand Dollars, Brazilian Real, and Canadian Dollars.
Item 7A. Quantitative and Qualitative Disclosure about Market Risk We are exposed to market risk related to changes in interest rates and foreign currency exchange rates. We use certain derivative financial instruments to manage these risks. We do not use derivative financial instruments for speculative purposes.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk We are exposed to market risk related to changes in interest rates and foreign currency exchange rates. We use certain derivative financial instruments to manage these risks. We do not use derivative financial instruments for speculative purposes.
Due to the nature of our cash equivalents that they are readily convertible to cash, we do not anticipate any material effect on our portfolio due to fluctuations in interest rates. We are exposed to market risk due to the possibility of changing interest rates under our credit facilities.
Due to the nature of our cash equivalents that they are readily convertible to cash, we do not anticipate any material effect on our portfolio due to fluctuations in interest rates.
Revenue resulting from selling in local currencies and costs incurred in local currencies are exposed to foreign currency exchange rate fluctuations, which can affect our operating income. As exchange rates vary, operating income may differ from expectations. In 2021, revenue and operating income were favorably impacted by foreign currency exchange rates by $43.8 million and $4.3 million.
Revenue resulting from selling in local currencies and costs incurred in local currencies are exposed to foreign currency exchange rate fluctuations, which can affect our operating income. As exchange rates vary, operating income may differ from expectations. In 2022, revenue and operating income were unfavorably impacted by foreign currency exchange rates by $114.1 million and $26.0 million.
Dollars, Euros, or in certain other agreed currencies as described in Note 6 of this Annual Report on Form 10 ‑ K. At the end of 2021, we had one £55.0 million, two $75.0 million, and one €100.0 million revolving credit facilities, which are uncommitted.
We may borrow funds under the 2022 Credit Facility and uncommitted facilities in U.S. Dollars, Euros, or in certain other agreed currencies as described in Note 7 “Debt” of this report. At the end of 2022, we had two $75.0 million, one €100.0 million, and one £55.0 million revolving credit facilities, which are uncommitted.
INDEX TO FINANCIAL STATEMENTS Consolidated Balance Sheets 46 Consolidated Statements of Income 47 Consolidated Statements of Comprehensive Income 48 Consolidated Statements of Stockholders’ Equity 49 Consolidated Statements of Cash Flows 50 Notes to Consolidated Financial Statements 51 Reports of Independent Registered Public Accounting Firm (PCAOB ID: 42) 71 45 Table of Contents
INDEX TO FINANCIAL STATEMENTS Consolidated Balance Sheets 52 Consolidated Statements of Income 53 Consolidated Statements of Comprehensive Income 54 Consolidated Statements of Stockholders’ Equity 55 Consolidated Statements of Cash Flows 56 Notes to Consolidated Financial Statements 57 Reports of Independent Registered Public Accounting Firm (PCAOB ID: 42) 77 51 Table of Contents
These contracts reduce the exposure to fluctuations in foreign currency exchange rate movements, as the gains and losses associated with foreign currency balances are generally offset with the gains and losses on the forward contracts. These instruments are marked-to-market through earnings every period and generally range from one to two months in maturity.
These contracts reduce the exposure to fluctuations in foreign currency exchange rate movements, as the gains and losses associated with foreign currency balances are generally offset with the gains and losses on the forward contracts.
At the end of 2021, we do not have any outstanding balance on our revolving credit facilities. Foreign Currency Exchange Rate Risk We operate in international markets, which expose us to market risk associated with foreign currency exchange rate fluctuations between the U.S. Dollar and various foreign currencies, the most significant of which is the Euro.
Treasury rate as of December 30, 2022 would change the fair value of the Treasury Rate Lock by $16.5 million. Foreign Currency Exchange Rate Risk We operate in international markets, which expose us to market risk associated with foreign currency exchange rate fluctuations between the U.S. Dollar and various foreign currencies, the most significant of which is the Euro.
We do not enter into foreign currency forward contracts for trading purposes. We occasionally enter into foreign currency forward contracts to hedge the purchase price of some of our larger business acquisitions.
We do not enter into foreign currency contracts for trading purposes.
Our 2018 Credit Facility includes a five-year revolving loan facility with a maturity date of May 2023. We also have four unsecured, uncommitted, revolving credit facilities that are callable by the bank at any time. We may borrow funds under the 2018 Credit Facility in U.S.
We are exposed to market risk due to the possibility of changing interest rates under our credit facilities, including the 2022 Credit Facility, 2022 Term Loan Credit Agreement, and the Bridge Facility. We also have four unsecured, uncommitted, revolving credit facilities that are callable by the bank at any time.
Added
At the end of 2022, $225.0 million was outstanding under the 2022 Credit Facility. We expect to issue fixed-rate debt in the first half of 2023 as part of the pending acquisition of Transporeon and to refinance existing debt.
Added
To minimize interest rate fluctuations, in December 2022, we entered into a contract to offset the changes in the price of U.S. Treasury Notes with an original maturity of 10 years for the period commencing on the contract date and ending May 31, 2023 (“Treasury Rate Lock”).
Added
The Treasury Rate Lock is marked-to-market each period through other comprehensive income until the debt is issued, and the effective interest rate method is applied. The nominal amount is $400 million, and the fair value at the end of 2022 is $7.2 million. While not predictive, a hypothetical 50 basis point increase or decrease in the 10-year U.S.
Added
Additionally, in December 2022, we entered into a foreign currency exchange rate contract to minimize foreign currency fluctuations on the €1.88 billion or $2.0 billion pending acquisition of Transporeon. 49 Table of Contents Our foreign currency contracts are marked-to-market through earnings every period and generally range in maturity from one to two months, or from four to six months for acquisitions.

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