For sure, we see interest rates having an impact in the residential markets. In Europe, I would say you have the same factors, but you have residential is worse than what we see in the U.S. And Asia Pacific, we see – well, not surprisingly, we see India being better. We see China being worse. You connect the China economy to a decent amount of the Australian economy, and we see some of the residential construction being slower in that market. So add those up and you have our view on the present state of construction. And let me be clear, within that is we have software businesses and we have hardware businesses. I mentioned it during the first question that we had 30% bookings increase in our construction software business in the third quarter.
We had ARR growing over 20% in B&I. So there is a different behavior happening within the software business and within the hardware business. The feedback that we get from the market on that is that customers, they continue to have trouble finding qualified labor, managing that labor. They have strong overall backlog, particularly in the Americas. And so that backlog and that complexity and managing the workout in the field is a catalyst for the software adoption and that plays through into the numbers we have. So now we take the present and we map to the future, which was the other part of your question. We’re essentially saying we don’t see it getting better, fundamentally better, fundamentally inflecting, particularly on the residential, and that’s the one probably I should comment on most discretely as our planning assumption at this point is assumed into 2024 that it doesn’t get better.
Of course, when interest rates come down, that will be a positive thing next year. And we know in places like here in the U.S. that we do need additional housing. So there is a dislocation, fundamental dislocation. So as the interest rates moderate, I think it’s reasonable to think that, that will get better. But for now, our planning assumption, I think the smart thing to do is just assume it doesn’t.
Rob Wertheimer: Thank you.
Operator: Your next question comes from the line of Rob Mason from Baird. Your line is open.
Rob Mason: Hi. Yes, good morning. Just to go back to the expectations around overall ARR. Like you said, it did not sound like there is much movement in your outlook around the B&I related to ARR. What about transportation? Should we expect that, that still tracks up mid-single digits, the track that it’s been on?
David Barnes: Hey, Rob, it’s David Barnes. I’ll take that. I mentioned in my prepared remarks that bookings are coming in soft in our North American mobility business in transportation and we received notification turn that will occur going forward. So our – while our ARR has been looking better recently, we do think that will – the churn we have in our North American mobility business will adversely affect transportation ARR growth in Q4 and going into next year by somewhere around 200 basis points. Now I’ll emphasize that the rest of the transportation ARR base is doing really well. Our Maps business is growing ARR at double-digit rate, even Transporeon were growing ARR. Our enterprise business is growing ARR. Actually, our mobility business in Europe and in Brazil is good.
So the North American mobility business represents about quarter of transportation ARR, and that – the trends there are going to be more adverse. So the sort of core base outlook is for transportation, ARR growth to be adversely impacted by a couple of hundred basis points going forward because of the churn dynamic in North American mobility.
Rob Mason: Understood. Okay. Maybe just as a follow-up then. I understand you don’t want to speak too broadly about 2024, and this may just be somewhat of a transitory dynamic with the AGCO transaction coming up. But just how should we think about the ending of the CNH aftermarket agreement and the impact relative to your efforts to try to backfill that. Obviously, AGCO is a solution. But until that transaction closes, I’m just curious how to think about modeling that impact next year.
Rob Painter: Hey, Rob, that’s a good question. I’ll take that one. CNH continues to be an important customer and partner for Trimble and for the JV on an ongoing basis. So the nature of the agreement when we changed our approach to ag distribution and made the announcement the change in the relationship with that CNH aftermarket distribution, which we did earlier in the year. That’s not a change from CNH as a customer and a partner, it really was saying we’re going to – as we work with the dealers in the future, we need as part of our – through our strategy to be able to work with the dealers directly to have more of that signal of what’s happening in the market and being closer to the end customer. So they have been an important customer.
They are an important customer. They will be an important customer going forward, as well AGCO, obviously, through the nature of the joint venture and say, remember, we serve the mixed fleet. And that means all colors of iron, including over 100 OEMs that we work with today. So that’s our view on the shape of the market. Now clearly, CNH will have an ambition set to have more of their own technology. And we know that – and you know that through the acquisitions that they have done. So in time, that will be, I’d say, a topic but let’s remember that we have hundreds of thousands of units out in the machine. We have many, many farms who operate on Trimble technology, and we believe we will continue to do so in the future. So there will be some disruption as we go through the change for sure.
And we expected that. That’s been largely in the numbers we’ve had and certainly part of the conversation we had with AGCO when we establish a joint venture.
Rob Mason: Is there a way, Rob, to isolate how much – there was some reference to the distribution transition in the third quarter, how much impact that’s causing the R&D segment today?
Rob Painter: I would measure it in, I’d say, some millions of dollars, like so call it in the low single-digit percentage of the disruption. But I also think that, that could very well be a timing topic. In fairness to CNH dealers, in this case, there were two announcements this year, one when at the beginning of the year, when we talked about changing the arc of the relationship; and the second was the JV announcement. So I think it is reasonable to assume that some of these dealers have taken a step back and paused and sort of hear, hey, what does this mean and where do we go. There is demand out there in the market and customers use our technology. So we believe through our new distribution strategy, the Vantage distribution strategy, that we can capture and meet that need out in the marketplace. It just may shift from, I’d say, this year into next year.
Rob Mason: Makes sense. Thank you.
Operator: Your next question comes from the line of Jonathan Ho from William Blair. Your line is open.
