TRMB — A recurring revenue slowdown
Recurring revenue can be a useful sign of stability. Its growth rate can still slow.
On November 4, $TRMB reported third-quarter revenue of $966.8 million, up 7% from a year earlier. Trimble's annualized recurring revenue reached $2.56 billion, up 11%. That figure estimates the annual value of current recurring contracts; it is not the same as revenue already collected over a year.
There is a catch in the outlook. Management reduced its expected full-year organic recurring revenue growth to approximately 10% from 12% to 14%. Organic growth excludes some effects such as currency movements, so it is not directly comparable to the reported growth above. Softer European freight conditions and slower demand for positioning services were part of the picture.
The company sells technology used in construction, mapping and transportation. In transportation, freight activity can affect demand for some services, so a steady contract base does not make the business immune to a weaker market.
Investors can separate a temporary slowdown from a deeper problem by tracking recurring revenue growth and the transportation segment in the next few reports. Watch whether growth improves as freight conditions change, and whether customers continue to renew as Trimble works through the weaker demand.