Rob Painter: Chad, the way I think about the software side is it certainly has proven thus far to be more resilient. Hey, with the software that you are using in Trimble, but I would say the same thing on the hardware. But the software our customers use is its mission-critical software. It’s not sitting on a shelf. It’s a nice to have. So, I would say as long as they have got customers have the backlog and the work and the customers have a need to digitize, the customers has a need to become more productive and more efficient and that’s a good setup for the resilience of that business and I think we could trust we could create that as a mega trend happening within many industries is the digitization of the work. The other thing that drives resilience in our view is when we have been selling and when we are selling the bundled offerings, when we are working with customers in a broader and bigger way, we think that, that has us closer to the customers.
As the relationships become closer, we think that, that drives continued usage of the technology over time. So, perfectly resilient, there is certainly – that can certainly be challenged at what point does that – what would it take for that to inflect. But we haven’t seen it. And we look at from our gross retention, we look at the net retention ratios, we look at the cross-sell, up-sell opportunities we have. We think we are sitting on many hundreds of millions of dollars of opportunity just within the portfolio that we have. So, that makes me optimistic about the setup that we will have. Now, will the numbers grow in percentage terms as much over time while a lot of large numbers likely kicks in at some point. We are approaching – we are not just approaching $1 billion or almost at $1 billion of ARR just within the B&I segment alone.
So, posting 20% ARR growth and 30% bookings growth is pretty special, and the team deserves the recognition for that. The hardware businesses, hey, the fact, brutal facts are that it is less resilient. The hardware is a book and burn business. Very little of it today is sold on a subscription basis. And yes, we would like to do more of that over time. Now, we also are in control of some of our own resilience. That is the expansion to machine types. It’s geographic penetration. It’s the combining the hardware and the software that we have at Trimble to drive resilience into that. So, I don’t think we are just victim to the environment around us. I also think there is a lot we can control within that. And I will net that out by saying I don’t think that hardware is ultimately as resilient as the software.
However, I think it is as powerful as the software, because what we can uniquely do at Trimble is connect the physical and digital worlds, that ability to connect the work in the office and the field and the hardware and software is especially unique and different.
Charles Dillard: Great. Thank you.
Operator: [Operator Instructions] And your next question comes from the line of Kristen Owen from Oppenheimer. Your line is open.
Kristen Owen: Hey. Thank you. Good morning. I appreciate you taking the question. I wanted to follow-up on some of the B&I commentary and just given some of the success that you have noted in becoming easier to do business with. I am wondering if you can speak to market share versus wallet share gains. How much of the growth are you experiencing is coming through customers just using more Trimble products versus maybe any shift in the competitive landscape, or are you merely just tackling white space there?
Rob Painter: Hi. Good morning Kristen. It’s a good question and thanks for that. The – I would say the reality is that there is a lot of white space within the market, and we look at the peers in the construction technology space, and many of them are also continuing to grow. And so I look at the map of the collective growth of peers and the industry. And to me, the only way the math works on that is that there is a secular adoption of the technology as the industry digitizes. We know it’s a greater than $1 trillion industry in construction that has historically been underserved and underpenetrated with technology and the trends around that are a positive catalyst for the adoption of technology. So, let me start with acknowledging that.
Now within that, what we see is from the cross-selling that we are doing, that to me is a metric where I would call that the wallet share that says we are doing something that’s unique and different and we think that nobody else can do that quite like we can. We have technology that serves the – across the AECO landscape, architects, engineers, construction and the owners. That’s quite different, and that’s just the software, but now bring in the hardware components that happen there. And not just the hardware that’s in with B&I, but the hardware that’s within survey. Because the survey ultimately is creates the digital – starts the workflow that is creating the digital model and then turning very often into a set of construction workflows from there.
On the market share topic, we do believe that we are gaining share within certain market segments and certain market segments and certain customers. And I qualify that with the word certain. I would say if you could characterize customers simply put as some who buy on best of breed or some who buy best of suite. When customers are buying best of suite, I would say we are gaining share with those customers because we can offer increasingly a better native integration of that data and the workflow across the industry life cycle. And we see positive feedback and uptick for customer who are wanting to buy suites from companies. I would say for those who buy best of breed, I would say we hold our own overall. But even within that, I could say I could double-click within the construction ERP business, I would say we are clearly who gained share in the markets that we serve.
I look in the architecture space, with the SketchUp product, we are going on multiple years now very, very strong double digit ARR growth and that to me would suggest, we are gaining some share in the conceptual modeling.
Kristen Owen: That’s really helpful. Thank you, Rob. I am going to shift gears a little bit. You talked about the macro environment, some of the headwinds facing the transportation business. But at 18.2% operating margins, this is the highest segment operating margin that you printed since before the ELD Mandates. So, I am wondering if you can talk a little bit about maybe what’s working on the cost side of the equation for that business, how much of that is uplift from Transporeon versus some of the hard work that you guys have been doing over the last couple of years? Thank you.
Rob Painter: Good question. I would give you a two-fold answer. First, I would say within the, call it, the run rate [ph] business, we have within transportation and then second is the Transporeon dynamic. Within the run rate business that we have, we have been working steadily to clearly the increase the gross margins and that we have in the business and I think to me the path that I think about was growing operating margins I go straight to the structural topic around that at the gross margin level and so to have which implies both have the products with the right eye proposition that get the right price and we got the right set of COGS that are associated with that and it’s becoming more software-centric. In transportation, I want to be less dependent on the hardware.
In fact, in the more long-term basis, being more hardware agnostic on the telematics side of the business, whereas hardware differentiates, truly differentiates throughout the rest of Trimble. It’s less so the case with the onboard computer in that side of the business. So, that’s a structural shift, right, when we can – when we really manifest more software forward, that’s a structural increase in the gross margin that can flow down to the profitability of the business. And then the other way you do that as you are getting the gross margins where they need to be, and it’s also managing the operating expenses along with that, so which the team has done a, I would say, a pretty good and certainly steady job of incrementing that forward for many quarters now as you noted.
Now, you layer in Transporeon on top of that and that is accretive to the margins within the segment. And so if we do our job and if the market will do us some favors here and start to turn next year, then that would again be a positive catalyst for the margins in the business.
Kristen Owen: Thank you so much.
