What changed in this filing

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Item 7. Management’s Discussion and Analysis

2024-02-26 compared with 2023-02-17 · 183 added, 248 removed, 288 unchanged (60% of the section changed)

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• 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;

• Domain knowledge and technological innovation that benefits a diverse customer base;

• Geographic expansion with a localization strategy;

• Optimized go-to-market strategies to best access our markets;

• Strategic acquisitions and venture fund investments;

• Strategic and targeted acquisitions, joint ventures, and investments;

• Sustainability.

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”) of $1,603.7 million, which represents growth of 14% year-over-year at the end of 2022.

ARR organic growth was 16%.

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.

We continue to experience a shift toward a more significant mix of recurring revenue as demonstrated by our success in driving annualized recurring revenue (“ARR”) of $1,982.3 million, which represents growth of 24% year-over-year at the end of 2023 .

Excluding the impact of foreign currency, acquisitions, and divestitures, ARR organic growth was 13% .

This shift toward recurring revenue h as positively impacted our revenue mix and growth over time and is leading to improved visibility in our businesses.

Our software, services, and recurring revenue represented 67% and 59% of total revenue for 2023 and 2022.

Additionally, we continue to maintain focus on new product introductions and transitions to recurring revenue as evidenced by the Transporeon business and the pending Trimble Ag JV Transaction (as described below).

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 enterprise-level customer relationships.

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.

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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.

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.

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.

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.

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.

This has impacted our working capital in the short term;

however, we expect supply dynamics and customer demand to normalize over time.

Foreign Currency Fluctuations

We generate over half of our revenue from sales to customers outside of the U .S.

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.

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.

In the first quarter of 2022, we stopped selling to Russia and Belarus customers and wrote off uncollected customer receivables and inventory located in these countries, which was not material to our consolidated financial statements.

Total revenue associated with Russia and Belarus customers, either sold directly or indirectly through resellers or OEMs, was less than 2% of our total Company revenue for 2021.

We are focused on providing products and support to non-sanctioned Ukrainian customers and contributing to relief efforts.

Acquisitions and Divestitures

We acquire businesses that align with our long-term growth strategies including our strategic product roadmap and, conversely, we divest certain business that no longer fit those strategies.

In December 2022, we signed a definitive agreement to acquire Transporeon in an all-cash transaction valued at approximately €1.88 billion or $2.0 billion.

Transporeon, a Germany-based company, is a leading cloud-based transportation management software platform that connects key stakeholders across the industry lifecycle to positively impact the optimization of global supply chains, in alignment with our Connect and Scale strategy.

We believe the acquisition will advance our sustainability strategy by reducing under-utilized carrier capacity and “empty miles” and increase our international footprint and long-term Transportation opportunities.

The acquisition will be funded through a combination of cash on hand and debt.

We expect this acquisition to close in the first half of 2023, subject to customary closing conditions including the receipt of merger control clearances in Austria, Germany, and Poland.

Transporeon will be reported in our Transportation segment.

In 2022, we acquired two businesses, with total purchase consideration of $379.5 million.

In the aggregate, the acquired businesses contributed less than 1% of our total revenue during 2022.

In 2022, we divested six businesses with total proceeds of $226.3 million.

For 2021 , the revenue and operating income for these divested businesses were approximately $201.7 million and $33.0 million.

For additional discussion of acquisitions and divestitures, refer to Note 3 “Acquisitions and Divestitures” of this report.

We acquire businesses that align with our long-term growth strategies including our strategic product roadmap and, conversely, we divest certain businesses that no longer fit those strategies.

On September 28, 2023, we executed a definitive agreement with AGCO that provides for the formation of a JV with AGCO in the mixed fleet precision agriculture market.

Under the terms of the agreement, we will contribute the Trimble Ag business, excluding certain GNSS and guidance technologies, and AGCO will contribute its JCA Technologies business to the JV.

We will sell an interest in the JV to AGCO for $2.0 billion in pre-tax cash proceeds, subject to working capital adjustments.

Immediately following the closing of this proposed transaction, we will own 15% of the JV and AGCO will own 85% of the JV.

Additionally, we plan to enter into the following agreements with AGCO as part of the overall proposed transaction:

• a seven-year, renewable Supply Agreement through which we will provide key GNSS and guidance technologies to the JV for use in professional agriculture machines sold by AGCO, on an exclusive basis with limited exceptions;

• a Technology Transfer and License Agreement to govern the licensing of certain non-divested intellectual property and technology for use by the JV in the agriculture field and, upon expiration of the Supply Agreement, to govern fixed and variable royalty payments made to us by the JV;

• a Trademark License Agreement to govern the licensing of certain Trimble trademarks for use by the JV in the agriculture field;

• a Positioning Services Agreement through which the JV will serve as our channel partner for the positioning services in the agriculture market;

• a Transition Services Agreement to provide contract manufacturing services for the divested products for two years following closing of the proposed transaction.

The formation of the JV is expected to better serve farmers with factory fit and aftermarket applications in the mixed fleet precision agriculture market to help farmers drive productivity, efficiency, and sustainability.

Additionally, the proposed transaction is expected to (i) simplify our Connect and Scale strategy, (ii) reduce risk of channel transition in the agriculture market, and (iii) enhance our financial profile and flexibility with a resulting higher mix of software, services, and recurring revenue, as well allowing us to repurchase stock and repay $1.1 billion of our debt through use of the net proceeds.

The proposed transaction is expected to close in the first half of 2024 and is subject to customary closing conditions, including regulatory approvals.

Trimble Ag is reported as a part of our Resources and Utilities segment.

The assets and liabilities of Trimble Ag that are subject to the proposed transaction were classified as held for sale at the end of 2023.

See Note 4 “ Divestitures ” of this report.

On April 3, 2023, we acquired all of the outstanding shares of Transporeon in an all-cash transaction valued at €1.9 billion or $2.1 billion.

Transporeon is a Germany-based company and leading cloud-based transportation management software platform that connects key stakeholders across the industry lifecycle to positively impact the optimization of global supply chains, which aligns with our Connect and Scale strategy.

By combining Transporeon’s operations with ours, we expect economies of scale, growth, such as acceleration of recurring revenue, expansion of the addressable market, cross-sell opportunities, and enhanced productivity and sustainability solutions for our customers.

Transporeon is reported in our Transportation segment.

We have included the financial results of Transporeon in our Consolidated Financial Statements starting in the second quarter of 2023.

Macroeconomic Conditions

Macroeconomic conditions, including geopolitical tensions, such as the ongoing military conflicts in the Middle East and between Russia and Ukraine and related sanctions, exchange rate and interest rate volatility, and inflationary pressures, will continue to evolve globally.

Global inflation rates rose in 2022 and continued into early 2023.

As a result, interest rates increased over 2022 and 2023 in an effort to curb inflation.

These macroeconomic conditions have had and are expected to have a negative impact on our results of operations.

We may experience higher borrowing costs on our variable-rate debt.

At the end of 2023, our outstanding balance of variable-rate debt was $1.3 billion.

See Note 8 “Debt” of this report for additional information regarding our debt.

In 2023, as compared to the prior year, our organic hardware sales declined and bookings moderated as dealers moved toward lower levels of inventories due to improved product lead times and reduced end user demand.

Buildings and Infrastructure, Geospatial, and Resources and Utilities all had stronger hardware sales in the prior year.

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.

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.

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We enter into contracts that can include various combinations of products and services, which are generally capable of being distinct and accounted for as separate performance obligations;

however, determining whether products or services are considered distinct performance obligations that should be accounted for separately versus together may sometimes require significant judgment.

determining whether products or services are considered distinct performance obligations that should be accounted for separately versus together may sometimes require significant judgment.

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.

In instances where SSP is not directly observable, we determine SSP using information that may include market conditions and other observable inputs.

In instances where SSP is not directly observable, we estimate SSP considering multiple factors including but not limited to, our internal cost, pricing practices, sales channel, competitive positioning, and overall market and business environments.

As our offerings and markets change, we may be required to reassess our estimated SSP and, as a result, the timing and classification of our revenue could be affected.

We are a U.S.

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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.

Critical estimates when valuing intangible assets include expected future cash flows based on consideration of revenue and revenue growth rates and margins, customer attrition rates, future changes in technology and brand awareness, loyalty and position, and discount rates.

Any purchase consideration in excess of the fair values of the net assets acquired is recorded as goodwill.

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2023 2022 Dollar Change % Change

(In millions)

(In millions, except per share amounts)

Product $ 1,771.7 $ 1,986.1 $ (214.4) (11)%

Service 641.3 649.4 (8.1) (1) %

Subscription 883.0 762.2 120.8 16 %

Subscription and services 2,027.0 1,690.2 336.8 20%

Total revenue $ 3,798.7 $ 3,676.3 $ 122.4 3%

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Diluted earnings per share $ 1.25 $ 1.80 $ (0.55) (31)%

Non-GAAP revenue (1)

$ 3,676.3 $ 3,659.4 $ 16.9 — %

Non-GAAP operating income (1)

$ 934.7 $ 841.5 $ 93.2 11%

Non-GAAP operating income as a % of Non-GAAP revenue (1)

Non-GAAP operating income as a % of revenue (1)

24.6 % 22.9 %

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Both 2023 and 2022 were 52–week years.

2024 will be a 53-week year.

Year 2023 Compared with Year 2022

Change versus 2021 % Change

Change in total revenue — %

Acquisitions 1 %

Divestitures (4) %

Foreign currency exchange (4) %

Organic revenue growth - total revenue 7 %

Although organic revenue increased for fiscal 2022, it decelerated in the second half of the year due to slowing demand in some of our end markets and reductions in dealer inventory levels as a result of improved product lead times and macroeconomic concerns.

Additionally, Geospatial had unusually strong hardware sales in the previous year.

Throughout the year, software and subscription sales were strong in buildings businesses in Buildings and Infrastructure, and to a lesser extent, positioning services in Resources and Utilities and Transportation enterprise business, as evidenced by organic ARR growth of 16%.

Change versus 2022

Change in product revenue (4) %

Acquisitions — %

Divestitures (5) %

Foreign currency exchange (3) %

Organic revenue growth - product revenue 4 %

Change in service revenue (1) %

Acquisitions 4 %

Divestitures (1) %

Foreign currency exchange (4) %

Organic revenue growth - service revenue — %

Change in subscription revenue 16 %

Product Subscription and Services Total Revenue

Change in Revenue (11) % 20 % 3 %

Acquisitions — % 9 % 4 %

Divestitures (3) % (2) % (2) %

Foreign currency exchange (2) %

Organic revenue growth - subscription revenue 19 %

Organic product revenue increased due to term license software growth throughout the year, as well as stronger hardware and related software sales in the first half of the year.

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.

During 2022, sales to customers in North America represente d 53%;

Europe represented 28%;

Asia Pacific represented 11%;

and the rest of world represented 8% of our total revenue.

No single customer accounted for 10% or more of our total revenue or accounts receivable in 2022 and 2021.

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.

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.

Organic growth (8) % 13 % 1 %

Organic total revenue was up 1%.

Organic subscription and services revenue was up primarily due to strong growth in subscription and software term licenses in Buildings and Infrastructure, and to a lesser extent, positioning services in Resources and Utilities, and enterprise and MAPS in Transportation.

Organic product revenue decreased due to reductions in dealer inventory levels as a result of improved product lead times and reduced end user demand.

These decreases impacted sales in Buildings and Infrastructure, Geospatial, and Resources and Utilities.

Gross margin and gross margin as a percentage of revenue increased due to an increased mix of higher margin software and subscription sales including organic growth and the Transporeon acquisition, and declines in hardware sales, as well as lower supply chain costs.

Operating Income

Operating income decreased primarily due to divestitures and unfavorable foreign currency, partially offset by organic revenue and gross margin expansion.

Additionally, operating expense increased due to investments related to our Connect and Scale strategy and increased sales and marketing costs primarily related to trade shows and increased travel.

Other contributors to increased operating expense included restructuring costs, charitable donations, and higher acquisition and divestiture transaction costs partially offset by a reduction in incentive compensation.

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.

Research and Development, Sales and Marketing, and General and Administrative Expenses

Operating income decreased slightly primarily due to increased operating expense, partially offset by revenue and gross margin expansion.

Operating expense increased due to the Transporeon acquisition, higher research and development, and general and administrative costs, including investments related to our Connect and Scale strategy and increased amortization of purchased intangibles.

In addition, we incurred higher acquisition and divestiture transaction costs.

Operating income as a percentage of revenue decreased primarily due to increased operating expense, partially offset by gross margin expansion as a percentage of revenue.

We had cost reductions in 2023 and will continue to focus on further reductions.

Research and Development, Sales and Marketing, and General and Administrative Expense

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:

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Total $ 1,734.8 $ 1,517.9 $ 216.9 14%

R&D expense increased primarily due to slightly higher compensation expense and the impact of acquisitions, partially offset by favorable foreign currency and divestitures.

R&D expense increased primarily due to higher compensation expense, including incentive compensation, and to a lesser extent, the Transporeon acquisition.

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.

These increases were partially offset by favorable foreign currency and divestitures.

G&A expense increased primarily due to investments related to our Connect and Scale strategy, charitable donations to the Trimble Foundation, and acquisition and divestiture transaction costs.

These increases were partially offset by a reduction in incentive compensation, favorable foreign currency, and divestitures.

S&M expense increased slightly primarily due to the Transporeon acquisition.

G&A expense increased primarily due to higher acquisition and divestiture transaction costs, the Transporeon acquisition, and to a lesser extent, increased compensation expense, including incentive compensation.

Amortization of Purchased Intangible Assets

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Total amortization expense of purchased intangibles as a percentage of revenue 6 % 4 %

In 2022, total amortization of purchased intangibles decreased primarily due to the expiration of prior years’ acquisition amortization.

Non-Operating Income, Net

The following table shows non-operating income, net for the periods indicated:

In 2023, total amortization expense of purchased intangibles increased primarily due to amortization of intangibles acquired from the Transporeon acquisition, which were not applicable in the prior year .

Non-Operating Income (Expense), Net

The following table shows non-operating income (expense), net for the periods indicated:

2023 2022 Dollar Change % Change

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Income from equity method investments, net 28.1 31.1 (3.0) (10)%

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.

Other income (expense), net 31.9 (0.8) 32.7 (4088)%

Total non-operating income (expense), net $ (91.8) $ 58.2 $ (150.0) (258)%

Non-operatin g expense, net in creased primarily due to lower net gains from divestitures and higher interest expense from the new debt associated with the Transporeon acquisition, partially offset by foreign currency hedging gains associated with the Transporeon acquisition and fluctuations in the deferred compensation plan assets, both included in Other income (expense), net.

Income Tax Provision

Our effective income tax rates for 2022 and 2021 were 21.0% and 14.2%.

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.

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.

On August 16, 2022, the U.S.

federal government enacted the Inflation Reduction Act (“IRA”) of 2022.

The IRA includes a 15% corporate alternative minimum tax effective in 2024 for certain large corporations, a 1% excise tax on net share repurchases after December 31, 2022, and several tax incentives to promote clean energy.

We do not expect the provisions of the IRA to have a material impact on our financial results.

Our effective income tax rate for 2023 and 2022 were 12.8% and 21.0%.

The decrease was primarily due to an increases in tax benefit from U.S.

federal R&D credit and foreign-derived intangible income (“FDII”) in 2023, and change in geographic mix of earnings, partially offset by lower stock-based compensation deductions in the current year.

Results by Segment

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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.

Our Chief Executive Officer, who is our Chief Operating Decision Maker (“CODM”) views and evaluates operations based on the results of our reportable operating segments under our management reporting system.

These results are not necessarily in conformance with U.S.

For additional discussion of our segments, refer to Note 6 “Reporting Segment and Geographic Information” of this report.

The following table shows a breakdown of revenue and operating income by segment for the periods indicated:

For additional discussion of our segments, refer to Note 7 “Segment Information” of this report.

The following table is a summary of revenue and operating income by segment compared for the periods indicated:

2023 2022 Dollar Change % Change

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Segment revenue $ 1,593.1 $ 1,494.0 $ 99.1 7%

Segment revenue as a percent of total revenue 40.6 % 38.9 %

Segment revenue as a % of total revenue 42 % 41 %

Segment operating income $ 440.8 $ 406.3 $ 34.5 8%

Segment operating income as a percent of segment revenue 27.2 % 28.9 %

Segment operating income as a % of segment revenue 27.7 % 27.2 %

Segment revenue $ 695.5 $ 756.5 $ (61.0) (8)%

Segment revenue as a percent of total revenue 20.6 % 22.6 %

Segment revenue as a % of total revenue 18 % 21 %

Segment operating income $ 209.1 $ 221.4 $ (12.3) (6)%

Segment operating income as a percent of segment revenue 29.3 % 29.4 %

Segment operating income as a % of segment revenue 30.1 % 29.3 %

Resources and Utilities

Segment revenue $ 769.1 $ 821.6 $ (52.5) (6)%

Segment revenue as a percent of total revenue 22.4 % 21.1 %

Segment revenue as a % of total revenue 20 % 22 %

Segment operating income $ 270.6 $ 278.3 $ (7.7) (3)%

Segment operating income as a percent of segment revenue 33.9 % 34.2 %

Segment operating income as a % of segment revenue 35.2 % 33.9 %

Transportation

Segment revenue $ 741.0 $ 604.2 $ 136.8 23%

Segment revenue as a percent of total revenue 16.4 % 17.4 %

Segment revenue as a % of total revenue 20 % 16 %

Segment operating income $ 130.2 $ 58.8 $ 71.4 121%

Segment operating income as a percent of segment revenue 9.7 % 6.8 %

The following table shows a reconciliation of our consolidated segment operating income to our consolidated income before income taxes for the periods indicated:

Segment operating income as a % of segment revenue 17.6 % 9.7 %

The following table is a reconciliation of our consolidated segment operating income to consolidated income before taxes:

(In millions)

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Consolidated operating income 448.8 510.9

Total non-operating income, net 58.2 13.6

Total non-operating income (expense), net (91.8) 58.2

Consolidated income before taxes $ 357.0 $ 569.1

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Foreign currency exchange — %

Organic revenue growth

Organic revenue increased due to demand for our subscription and term license software recurring offerings.

The increases resulted from higher sales to new and existing customers, as well as conversions from perpetual software to recurring offerings.

Civil construction hardware and related software license revenue increased due to relative strength in the North American construction market in the first half of 2022, partially offset by weaker hardware sales, particularly in Europe, in the second half of the year.

Despite revenue and gross margin expansion, operating income decreased primarily due to higher operating expense, unfavorable foreign currency , and divestitures.

Operating expense increased due to investments in our Connect and Scale strategy as well as higher marketing and travel costs.

Operating income as a percentage of revenue decreased primarily due to higher operating expense, partially offset by gross margin expansion due to product mix.

Organic growth

Organic revenue increased due to strong demand for our subscription and term license software.

The increases resulted from higher sales to new and existing customers as well as cumulative conversions from perpetual software to recurring offerings.

The increase was offset by lower civil construction hardware sales due to reductions in dealer inventory levels as a result of improved lead times and reduced end user demand.

Operating income and operating income as a percentage of revenue increased primarily from gross margin expansion due to increased sales and a higher mix of software and subscription revenue, partially offset by increased operating expense.

Operating expense increased due to increased compensation expense and investments, including our Connect and Scale strategy.

Change versus 2022 2023

Change in Revenue - Geospatial (8) %

Acquisitions — %

Divestitures (4) %

Foreign currency exchange (3) %

Organic revenue growth

Organic revenue decreased slightly due to unusually strong hardware sales in the prior year and the softening of hardware sales in the second half of 2022, partially offset by higher software and subscription sales.

Operating income decreased primarily due to divestitures and reduced revenue, partially offset by better gross margin due to product mix.

Operating income as a percentage of revenue was relatively flat.

Organic growth (4) %

Organic revenue decreased due to lower surveying hardware sales due to reductions in dealer inventory levels as a result of improved lead times and reduced end user demand.

The declines were partially offset by higher U.S.

Federal government sales in the current year;

the timing of government sales can fluctuate from period to period.

Operating income decreased due to reduced revenue, partially offset by gross margin expansion driven by product mix and lower hardware supply chain costs.

Operating income as a percentage of revenue was relative flat.

Resources and Utilities

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Divestitures (1) %

Foreign currency exchange (4) %

Organic revenue growth

Organic revenue increased due to relative strength in agriculture, particularly in the OEM channel, as well as price increases, partially offset by weaker agriculture sales in the reseller channel, particularly Europe, in the second half of the year.

To a lesser extent, revenue was favorably impacted by higher subscription revenue in positioning services.

Operating income increased primarily due to organic revenue expansion, partially offset by unfavorable foreign currency, and higher operating expenses due to investments in our Connect and Scale strategy.

Operating income as a percentage of revenue was relatively flat.

Organic growth (6) %

Organic revenue decreased due to reductions in channel inventory levels as a result of improved lead times and slowing demand in agriculture markets, as well as impacts related to changes in our distribution network.

The decrease was partially offset by higher subscription revenue in positioning services.

Operating income decreased slightly due to reduced revenue and higher operating expense, largely offset by gross margin expansion.

Operating income as a percentage of revenue was up primarily due to gross margin expansion driven by a higher mix of software and subscription revenue and lower hardware supply chain costs.

Transportation

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Divestitures (2) %

Foreign currency exchange (1) %

Organic revenue growth

Organic revenue decreased primarily driven by lower mobility hardware sales to North American customers.

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.

Organic growth 4 %

Organic revenue increased primarily driven by enterprise and MAPS subscription revenue growth.

Additionally, North American mobility hardware sales increased in 2023.

Operating income and operating income as a percentage of revenue increased primarily due to gross margin expansion, driven by a higher mix of subscription revenue, including the impact of the Transporeon acquisition.

We continue to maintain focus on new product introductions and transitions to recurring revenue.

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At the End of Year 2023 2022 Dollar Change % Change

(In millions)

(In millions, except percentages)

Cash and cash equivalents (1)

$ 238.9 $ 271.0 $ (32.1) (12) %

As a percentage of total assets 2.5 % 3.7 %

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(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) %

Net cash provided by operating activities $ 597.1 $ 391.2 $ 205.9 53 %

Net cash used in investing activities (2,068.1) (226.3) (1,841.8) 814 %

Net cash provided by (used in) financing activities 1,431.5 (199.0) 1,630.5 (819) %

Effect of exchange rate changes on cash and cash equivalents 7.4 (20.6) 28.0 (136) %

Net increase in cash and cash equivalents $ (54.7) $ 88.0

Net (decrease) increase in cash and cash equivalents $ (32.1) $ (54.7)

(1) Includes $9.1 million of cash and cash equivalents classified as held for sale as of December 29, 2023.

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.

The decreases were partially offset by an increase in deferred revenue.

The increase in cash provided by operating activities was primarily driven by lower inventory purchases and reduced bonus payouts.

The increase was partially offset by a decrease in deferred revenue due to the timing of billings and higher interest payments.

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.

The increase in cash used in investing activities was primarily due to acquisition activities in the current year, including the Transporeon acquisition, and higher proceeds from divestitures in the prior year.

Financing Activities

The decrease in cash used in financing activities was primarily driven by higher proceeds of revolving credit facilities, which was used in part to fund the B2W acquisition, partially offset by an increase in common stock repurchases.

The increase in cash provided by financing activities was primarily driven by proceeds from our $800.0 million issuance of 2033 Senior Notes and $1.0 billion term loans in the current year, and higher common stock repurchases in the prior year.

The increase was partially offset by the repayment of the 2023 Senior Notes that matured in the current year.

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.

I n March 2022, we entered into a five-year, unsecured revolving loan facility for borrowings up to $1.25 billion, which replaced the 2018 Credit Facility.

The 2022 Credit Facility contains an option to increase the borrowings up to $1.75 billion with lender approval.

At the end of 2022, $225.0 million was outstanding under the 2022 Credit Facility.

In December 2022, in connection with our pending acquisition of Transporeon, we arranged to incur substantial new debt obligations, which will be drawn prior to the acquisition closing date.

These arrangements include:

• a term loan credit agreement providing for an unsecured delayed draw term loan facility in the aggregate principal amount of $1.0 billion, comprised of commitments for a 3-year tranche in the amount of $500.0 million and a 5-year tranche in the amount of $500.0 million, and

• an amendment to our 2022 Credit Facility that made $600.0 million of the existing commitments under the Credit Facility available for the pending acquisition of Transporeon and increased our maximum permitted leverage ratio following the closing of the acquisition.

Prior to arranging the above two transactions, we had entered into a 364-day bridge facility commitment letter (the “Bridge Facility”) that provided for up to €1.88 billion of commitments for term loans to fund our acquisition of Transporeon.

The Bridge Facility was reduced to €500 million by the term loan credit agreement and the amended 2022 Credit Facility.

We anticipate refinancing some or all of our outstanding indebtedness and debt commitments at or prior to their maturities, which could involve us accessing the capital markets.

A provision enacted in the Tax Cuts and Jobs Act of 2017 related to the capitalization of research and development costs for tax purposes bec ame effective on January 1, 2022.

In 2022, we paid $88.0 million with respect to this tax provision.

Additionally, if this provision is not deferred or repealed in 2023, we expect that cash tax payments in 2023 will be slightly lower than 2022.

We believe that our cash and cash equivalents and available borrowing capacity under our existing lines of credit, along with cash provided by operations will be sufficient in the foreseeable future to meet our anticipated operating cash needs, including expenditures related to our Connect and Scale strategy, debt service, acquisitions, and any stock repurchases under the stock repurchase program.

Our 2022 Credit Facility allows us to borrow up to $1.25 billion, with an option to increase the borrowings up to $1.75 billion with lender approval.

As of December 29, 2023, $150.0 million was outstanding under the 2022 Credit Facility.

Our 2023 Senior Notes totaling $300.0 million matured and were paid in June 2023.

Our 2024 Senior Notes totaling $400.0 million are maturing in December 2024.

We anticipate using a combination of cash on hand, borrowing from our existing revolvers, or new debt to repay the 2024 Senior Notes.

In the second quarter of 2023, we acquired Transporeon, which was funded through a combination of $1.0 billion of term loans, $225.0 million drawn on the 2022 credit facility, as amended, and the 2033 senior notes, see Note 3 “Acquisition s ” of this report.

In the third quarter of 2023, we executed a definitive agreement to contribute our Trimble Ag business to a newly formed JV with AGCO and sell 85% of the stake in the JV to AGCO for $2.0 billion in pre-tax cash proceeds, subject to certain adjustments.

See Note 4 “ Divestitures ” of this report.

Although we will continue to evaluate the optimal capital structure for our business following the completion of the pending sale, we expect to use the $1.5 billion of estimated proceeds after tax to repurchase stock and repay approximately $1.1 billion in debt.

Our material cash requirements include the following contractual and other obligations and cash needs:

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Refer to Note 9 “Leases” of this report for additional information regarding our leases.

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.

At the end of 2023, we had income taxes payable of $62.4 million, with $39.7 million payable within the next 12 months.

The amount payable within the next 12 months includes $18.2 million representing a one-time transition tax liability as a result of the 2017 Tax Cuts and Jobs Act (the “Tax Act”).

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Other than the items discussed above, we do not have any off-balance sheet financing arrangements or liabilities.

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.

At the end of 2023, we had outstanding fixed-rate senior notes and floating credit facilities with varying maturities for an aggregate principal amount of approximately $3.1 billion.

Future interest payments total $898.4 million, with $190.7 million payable within the next 12 months.

During 2022, we had $224.6 million of proceeds from debt, net of the payments.

We anticipate repaying $1.1 billion of our debt through the use of the net proceeds from the proposed AGCO JV transaction.

Refer to Note 4 “ Divestitures ” of this report for additional information.

During 2023, we had $1.6 billion of proceeds from debt, net of the payments.

Refer to Note 8 “Debt” of this report for additional information regarding our debt.

Stock Repurchase Program

We have a 2021 Stock Repurchase Program authorized by our Board of Directors, that allows us to repurchase shares from time to time, subject to business and market conditions and other investment opportunities, through open market transactions, privately-negotiated transactions, accelerated stock repurchase plans, or by other means for up to $750 million.

At the end of 2023, we had a 2021 Stock Repurchase Program authorized by our Board of Directors that allowed us to repurchase stocks from time to time, subject to business and market conditions and other investment opportunities, through open market transactions, privately-negotiated transactions, accelerated stock repurchase plans, or by other means for up to $750.0 million.

On January 28, 2024, our Board of Directors approved a 2024 Stock Repurchase Program that allows us to repurchase stock from time to time, through accelerated stock repurchase plans, open market transactions, privately negotiated transactions, block purchases, tender offers, or by other means for up to $800.0 million.

The 2024 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.

The 2024 Stock Repurchase Program replaced the 2021 Stock Repurchase Program, which was cancelled.

Refer to Note 1 5 “Common Stock Repurchase” of this report for additional information regarding our 2021 Stock Repurchase Program and 2024 Stock Repurchase Program.

EFFECT OF NEW ACCOUNTING PRONOUNCEMENTS

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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.

We believe non-GAAP financial measures provide useful information to investors and others in understanding our “core operating performance”, which excludes the (i) effect of non-cash items and certain variable charges not expected to recur;

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.

We believe non-GAAP financial measures provide useful information to investors and others in understanding our “core operating performance”, which excludes (i) the effect of non-cash items and certain variable charges not expected to recur;

and (ii) transactions that are not meaningful in comparison to our past operating performance or not reflective of ongoing financial results.

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We believe organic revenue growth provides useful information in evaluating the results of our business because it excludes items that are not indicative of ongoing performance or impact comparability with the prior year.

We provide a reconciliation tables showing the change in revenue growth to organic revenue growth in the “ Results of Operations ” section found earlier in this Item 7.

We provide reconciliation tables showing the change in revenue growth to organic revenue growth in the “ Results of Operations ” section found earlier in this Item 7.

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 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.

ARR represents the estimated annualized value of recurring revenue.

ARR is calculated by taking our subscription, maintenance and support, and recurring transaction revenue for the current quarter and adding the portion of the contract value of all our term licenses attributable to the current quarter, then dividing that sum by the number of days in the quarter and then multiplying that quotient by 365.

Organic ARR refers to annualized recurring revenue excluding the impacts of (i) foreign currency translation, and (ii) acquisitions and divestitures.

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The non-GAAP financial measures, definitions, and explanations to the adjustments to comparable GAAP measures are included below:

2022 2021 2020

(In millions, except per share data) Dollar

Revenue Dollar

Dollar % of Dollar % of

(In millions, except per share amounts) Amount Revenue Amount Revenue

GAAP revenue:

$ 3,798.7 $ 3,676.3

Purchase accounting adjustments (A) — 0.3 4.3

Non-GAAP revenue:

$ 3,676.3 $ 3,659.4 $ 3,152.0

GROSS MARGIN:

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$ 2,332.8 61.4 % $ 2,105.6 57.3 %

Purchase accounting adjustments (A) 85.0 88.0 96.6

Amortization of purchased intangible assets (A) 108.7 85.0

Acquisition / divestiture items (B) 0.5 0.2

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$ 1,884.0 49.6 % $ 1,594.7 43.4 %

Purchase accounting adjustments (A) (46.6) (46.5) (60.0)

Amortization of purchased intangible assets (A) (103.6) (46.6)

Acquisition / divestiture items (B) (71.9) (32.6)

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$ 448.8 11.8 % $ 510.9 13.9 %

Purchase accounting adjustments (A) 131.6 134.5 156.6

Amortization of purchased intangible assets (A) 212.3 131.6

Acquisition / divestiture items (B) 72.4 32.8

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$ (132.8) $ (34.8)

Tax Rate % (H) GAAP and

Tax Rate % (H)

INCOME TAX PROVISION (BENEFIT):

GAAP and Non-GAAP Tax Rate % GAAP and Non-GAAP Tax Rate %

INCOME TAX PROVISION:

GAAP income tax provision:

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Difference in GAAP and Non-GAAP tax rate (F) 35.6 (22.9)

IP restructuring and tax law change impacts (G) — 14.4 64.0

Non-GAAP income tax provision:

$ 138.2 17.2 % $ 146.4 18.2 %

GAAP net income attributable to Trimble Inc.:

GAAP net income:

$ 311.3 $ 449.7

Purchase accounting adjustments (A) 131.6 134.5 156.6

Amortization of purchased intangible assets (A) 212.3 131.6

Acquisition / divestiture items (B) 35.9 (74.7)

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Restructuring and other costs (D) 51.4 60.2

Non-GAAP tax adjustments (E) - (G) (27.0) (63.3) (107.6)

Non-GAAP net income attributable to Trimble Inc.:

Non-GAAP tax adjustments (E) - (F)

(92.5) (27.0)

Non-GAAP net income:

$ 663.7 $ 660.3

DILUTED NET INCOME PER SHARE:

GAAP diluted net income per share attributable to Trimble Inc.:

GAAP diluted net income per share:

$ 1.25 $ 1.80

Purchase accounting adjustments (A) 0.53 0.53 0.62

Amortization of purchased intangible assets (A) 0.85 0.53

Acquisition / divestiture items (B) 0.14 (0.30)

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Restructuring and other costs (D) 0.21 0.24

Non-GAAP tax adjustments (E) - (G) (0.11) (0.25) (0.43)

Non-GAAP diluted net income per share attributable to Trimble Inc.:

Non-GAAP tax adjustments (E) - (F)

(0.37) (0.11)

ADJUSTED EBITDA:

OPERATING INCOME:

GAAP net income attributable to Trimble Inc.:

Non-GAAP diluted net income per share:

$ 2.66 $ 2.64

Non-operating income (expense), net, income tax provision, and net gain attributable to noncontrolling interests 61.2 68.3 29.9

ADJUSTED EBITDA:

GAAP operating income:

$ 448.8 11.8 % $ 510.9 13.9 %

Purchase accounting adjustments (A) 131.6 134.5 156.6

Amortization of purchased intangible assets (A) 212.3 131.6

Acquisition / divestiture items (B) 72.4 32.8

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Adjusted EBITDA $ 1,009.7 26.6 % $ 917.3 25.0 %

$ 917.3 25.0 % $ 936.9 25.6 % $ 798.7 25.3 %

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.

We believe this measure helps investors understand the performance of our business including acquisitions, as non-GAAP revenue excludes the effects of certain acquired deferred revenue that was written down to fair value in purchase accounting.

Management believes that excluding fair value purchase accounting adjustments more closely correlates with the ordinary and ongoing course of the acquired company’s operations and facilitates analysis of revenue growth and trends.

Non-GAAP gross margin

We define Non-GAAP gross margin as GAAP gross margin, excluding the effects of purchase accounting adjustments, acquisition/divestiture items, stock-based compensation, deferred compensation, and restructuring and other costs.

We define Non-GAAP gross margin as GAAP gross margin, excluding the effects of amortization of purchased intangible assets, acquisition/divestiture items, stock-based compensation, deferred compensation, and restructuring and other costs.

We believe our investors benefit by understanding our non-GAAP gross margin as a way of understanding how product mix, pricing decisions, and manufacturing costs influence our business.

Non-GAAP operating expenses

We define Non-GAAP operating expenses as GAAP operating expenses, excluding the effects of purchase accounting adjustments, acquisition/divestiture items, stock-based compensation, deferred compensation, and restructuring and other costs.

We define Non-GAAP operating expenses as GAAP operating expenses, excluding the effects of amortization of purchased intangible assets, acquisition/divestiture items, stock-based compensation, deferred compensation, and restructuring and other costs.

We believe this measure is important to investors evaluating our non-GAAP spending in relation to revenue.

Non-GAAP operating income

We define Non-GAAP operating income as GAAP operating income, excluding the effects of purchase accounting adjustments, acquisition/divestiture items, stock-based compensation, deferred compensation, and restructuring, and other costs.

We define Non-GAAP operating income as GAAP operating income, excluding the effects of amortization of purchased intangible assets, acquisition/divestiture items, stock-based compensation, deferred compensation, and restructuring and other costs.

We believe our investors benefit by understanding our non-GAAP operating income trends, which are driven by revenue, gross margin, and spending.

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 define Non-GAAP non-operating expense, net as GAAP non-operating income (expense), net, excluding acquisition/divestiture items, deferred compensation, and restructuring and other costs.

We believe this measure helps investors evaluate our non-operating expense trends.

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Non-GAAP net income

We define Non-GAAP net income as GAAP net income, excluding the effects of purchase accounting adjustments, acquisition/divestiture items, stock-based compensation, restructuring and other costs, and non-GAAP tax adjustments.

We define Non-GAAP net income as GAAP net income, excluding the effects of amortization of purchased intangible assets, acquisition/divestiture items, stock-based compensation, restructuring and other costs, and non-GAAP tax adjustments.

This measure provides a supplemental view of net income trends, which are driven by non-GAAP income before taxes and our non-GAAP tax rate.

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.

We define Non-GAAP diluted net income per share as GAAP diluted net income per share, excluding the effects of amortization of purchased intangible assets, acquisition/divestiture items, stock-based compensation, restructuring and other costs, and non-GAAP tax adjustments.

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.

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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.

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 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.

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 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.

Explanations of Non-GAAP adjustments

(A) Purchase accounting adjustments .

Purchase accounting adjustments consist of the following:

(i) Acquired deferred revenue adjustment .

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.

For acquisitions occurring prior to 2021, non-GAAP revenue excludes the adjustment to our revenue as a result of measuring the contract liability at fair value on the acquisition date.

(ii) Amortization of acquired capitalized commissions .

Purchase accounting generally requires entities to eliminate capitalized sales commissions balances as of the acquisition date.

Non-GAAP operating expenses exclude the adjustments that eliminate the capitalized sales commissions.

F or acquisitions occurring prior to 2021, non-GAAP operating expenses exclude the adjustment of ac quired capitalized commissions amortization.

(iii) Amortization of purchased intangible assets .

Amortization of purchased intangible assets .

Non-GAAP gross margin and operating expenses exclude the amortization of purchased intangible assets, which primarily represents technology and/or customer relationships already developed.

(B) Acquisition / divestiture items .

Non-GAAP gross margin and operating expenses exclude acquisition costs consisting of external and incremental costs resulting directly from merger and acquisition and strategic investment activities such as legal, due diligence, integration, and other closing costs, including the acceleration of acquisition stock options and adjustments to the fair value of earn-out liabilities.

Acquisition / divestiture items .

Non-GAAP gross margin and operating expenses exclude costs consisting of external and incremental costs resulting directly from acquisitions, divestitures, and strategic investment activities such as legal, due diligence, integration, and other closing costs, including the acceleration of acquisition stock awards and adjustments to the fair value of earn-out liabilities.

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.

Stock-based compensation / deferred compensation .

Non-GAAP gross margin and operating expenses exclude stock-based compensation and income or expense associated with movement in our non-qualified deferred compensation plan liabilities.

Changes in non-qualified deferred compensation plan assets, included in non-operating expense, net, offset the income or expense in the plan liabilities.

(D) Restructuring and other costs.

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.

(E) Non-GAAP items tax effected .

Restructuring and other costs.

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, business exit costs, as well as a $20 million commitment to donate to the Trimble Foundation that was paid over four quarters ending in the first quarter of 2023.

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).

(F) Difference in GAAP and Non-GAAP tax rate .

Difference in GAAP and Non-GAAP tax rate .

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 non-GAAP tax rate excludes charges and benefits such as net deferred tax impacts resulting from a non-U.S.

intercompany transfer of intellectual property and significant one-time reserve releases upon statute of limitations expirations.

(G) IP restructuring and tax law change impacts.

These amounts represent net deferred tax impacts resulting from a non-U.S.

intercompany transfer of intellectual property, consistent with tax law changes, including tax rates changes, and our international business operations.

(H) GAAP and non-GAAP tax rate percentages .

The non-GAAP tax rate excludes charges and benefits such as (i) deferred tax impacts from tax amortization relating to a non-U.S.

intercompany transfer of intellectual property and R&D cost capitalization impact to global intangible low-taxed income ("GILTI"), and (ii) significant one-time reserve releases upon statute of limitations expirations.

GAAP and non-GAAP tax rate percentages .

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.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis