Trimble Announces Fourth Quarter and Full Year 2020 Results

 

FOOTNOTES TO GAAP TO NON-GAAP RECONCILIATION
(Unaudited)

To help investors understand Trimble's past financial performance and future results, as well as its performance relative to competitors, Trimble supplements the financial results that the Company provides in accordance with generally accepted accounting principles, or GAAP, with non-GAAP financial measures. These non-GAAP measures can be used to evaluate Trimble's historical and prospective financial performance, as well as its performance relative to competitors. The Company's management regularly uses supplemental non-GAAP financial measures internally to understand, manage, and evaluate the business, and to make operating decisions. These non-GAAP measures are among the primary factors management uses in planning for and forecasting future periods. Trimble believes that these non-GAAP financial measures reflect an additional way of viewing aspects of the Company's operations that, when viewed with GAAP results, provide a more complete understanding of factors and trends affecting the business. Further, Trimble believes some of the Company's investors track "core operating performance" as a means of evaluating performance in the ordinary, ongoing, and customary course of the Company's operations. Core operating performance excludes items that are non-cash, not expected to recur, or not reflective of ongoing financial results. Management also believes that looking at Trimble's core operating performance provides a supplemental way to provide consistency in period to period comparisons.

The method the Company uses to produce non-GAAP results is not computed according to GAAP and may differ from the methods used by other companies including industry peer companies, limiting the usefulness of these measures for comparative purposes.

Our non-GAAP results are not meant to be considered in isolation or as a substitute for comparable GAAP measures and should be read only in conjunction with Trimble's consolidated financial statements prepared in accordance with GAAP. The non-GAAP financial measures included in the previous table as well as detailed explanations to the adjustments to comparable GAAP measures are set forth below: 

Non-GAAP revenue

We believe this measure helps investors understand the performance of our business, 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 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 gross margin excludes the effects of certain acquired deferred revenue, amortization of purchased intangible assets, acquisition/divestiture items, stock-based compensation, deferred compensation, restructuring charges, and COVID-19 expenses.  We believe that these adjustments offer investors additional information that may be useful to view trends in our gross margin performance.

Non-GAAP operating expenses

We believe this measure is important to investors evaluating our non-GAAP spending in relation to revenue.  Non-GAAP operating expenses exclude the effects of certain acquired capitalized commissions that were eliminated in purchase accounting, amortization of purchased intangible assets, acquisition/divestiture items, stock-based compensation, deferred compensation, restructuring charges, executive transition costs, and COVID-19 expenses.  We believe that these adjustments offer investors supplemental information to facilitate comparison of our operating expenses to our prior results and trends.

Non-GAAP operating income       

We believe our investors benefit by understanding our non-GAAP operating income trends, which are driven by revenue, gross margin, and spending.  Non-GAAP operating income excludes the effects of purchase accounting adjustments to certain acquired deferred revenue and acquired capitalized commissions, amortization of purchased intangible assets, acquisition/divestiture items, stock-based compensation, deferred compensation, restructuring charges, executive transition costs, and COVID-19 expenses.  We believe that these adjustments offer a supplemental means for our investors to evaluate current operating performance compared to prior results and trends.

Non-GAAP non-operating expense, net       

We believe this measure helps investors evaluate our non-operating income trends.  Non-GAAP non-operating expense, net, excludes acquisition/divestiture items, and deferred compensation.  We believe that these exclusions provide investors with a supplemental view of our ongoing financial results.

Non-GAAP income tax provision

We believe this measure helps investors because it provides for consistent treatment of excluded items in our non-GAAP presentation and a difference in the GAAP and non-GAAP tax rates.  The non-GAAP tax rate excludes charges and benefits such as net deferred tax impacts results from the non-U.S. intercompany transfer of intellectual property, tax law changes, and significant one-time reserve releases upon statute of limitations expirations.

Non-GAAP net income

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 net income excludes the effects of purchase accounting adjustments to certain acquired deferred revenue and acquired capitalized commissions, amortization of purchased intangible assets, acquisition/divestiture items, stock-based compensation, restructuring charges, executive transition costs, COVID-19 expenses, and non-GAAP tax adjustments.  We believe our investors benefit from understanding these adjustments and from an alternative view of our net income performance as compared to prior periods and trends.

Non-GAAP diluted net income per share

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.  Non-GAAP diluted net income per share excludes the effects of purchase accounting adjustments to certain acquired deferred revenue and acquired capitalized commissions, amortization of purchased intangible assets, acquisition/divestiture items, stock-based compensation, restructuring charges, executive transition costs, COVID-19 expenses, and non-GAAP tax adjustments.  We believe that these adjustments offer investors a useful view of our diluted net income per share as compared to our prior periods and trends.

Adjusted EBITDA

Adjusted EBITDA is a performance measure that we believe offers a useful view of the overall operations of our business. We believe it is useful because it facilitates company-to-company 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 expenses.  We define Adjusted EBITDA as non-GAAP operating income plus depreciation expense and income from equity method investments, net.  Other companies define Adjusted EBITDA differently and so our measure may not be directly comparable to similarly titled measures.  Our investors should consider the limitations of using Adjusted EBITDA, including the fact that this measure does not provide a complete measure of our operating performance.  Adjusted EBITDA is not intended to purport to be an alternative to net income or operating income as a measure of operating performance or to cash flow from operating activities as a measure of liquidity.  In particular, Adjusted EBITDA is not intended to be a measure of cash flow available for our discretionary expenditures, as this measure does not consider certain cash requirements, such as restructuring charges, executive transition costs, acquisition and divestiture items, interest payments, tax payments and other debt service requirements.

These non-GAAP measures can be used to evaluate our historical and prospective financial performance, as well as our performance relative to competitors. We believe some of our investors track our "core operating performance" as a means of evaluating our performance in the ordinary, ongoing, and customary course of our operations. Core operating performance excludes items that are non-cash, not expected to recur, or not reflective of ongoing financial results. Management also believes that looking at our core operating performance provides a supplemental way to provide consistency in period to period comparisons. Accordingly, management excludes from non-GAAP the effects of purchase accounting adjustments to certain acquired deferred revenue and acquired capitalized commissions, amortization of purchased intangible assets, acquisition/divestiture items, stock-based compensation, deferred compensation, restructuring charges, executive transition costs, COVID-19 expenses, and non-GAAP tax adjustments.

 

(A)

Acquired deferred revenue adjustment.  Purchase accounting generally requires us to write-down acquired deferred
revenue to fair value. Our GAAP revenue includes the fair value impact from purchase accounting for post-contract
support and subscriptions contracts assumed in connection with our acquisitions.  The non-GAAP adjustment to our
revenue is intended to reflect the full amount of such revenue.  We believe this adjustment is useful to investors as a
measure of the ongoing performance of our business and facilitates analysis of revenue growth and business trends.



(B) 

Amortization of acquired capitalized commissions .  Purchase accounting generally requires us to eliminate capitalized
sales commissions balances as of the acquisition date.  Our GAAP sales and marketing expenses generally do not reflect
the amortization of these capitalized sales commissions balances. The non-GAAP adjustment to increase our sales and
marketing expenses is intended to reflect the full amount of amortization related to such balances as though the acquired
companies operated independently in the periods presented.  We believe this adjustment to sales and marketing expenses
is useful to investors as a measure of the ongoing performance of our business.  



(C) 

Amortization of purchased intangible assets .  Included in our GAAP presentation of cost of sales and operating expenses
is amortization of purchased intangible assets. We believe that by excluding the amortization of purchased intangible
assets, which primarily represents technology and/or customer relationships already developed, this provides an
alternative way for investors to compare our operations pre-acquisition to those post-acquisition and to those of our
competitors that have pursued internal growth strategies.  However, we note that companies that grow internally will
incur costs to develop intangible assets that will be expensed in the period incurred, which may make a direct
comparison more difficult. 



(D) 

Acquisition / divestiture items .  Included in our GAAP presentation of cost of sales and operating expenses, acquisition
costs consist 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.  Included in our GAAP presentation of non-operating
expense, net, acquisition/divestiture items includes unusual acquisition, investment, and/or divestiture gains/losses.
Although we do numerous acquisitions, the costs that have been excluded from the non-GAAP measures are costs
specific to particular acquisitions.  These are one-time costs that vary significantly in amount and timing and are not
indicative of our core operating performance. 



(E) 

Stock-based compensation / deferred compensation .  Included in our GAAP presentation of cost of sales and operating
expenses are stock-based compensation consists of expenses for employee stock options and awards and purchase rights
under our employee stock purchase plan.  Additionally included in our GAAP presentation of cost of sales and operating
expenses are 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.  We exclude them from our non-GAAP measures because some investors may view it as
not reflective of our core operating performance as they are a non-cash item.



(F) 

Restructuring charges   / executive transition costs.   Included in our GAAP presentation of cost of sales and operating
expenses, restructuring charges recorded are primarily for employee compensation resulting from reductions in employee
headcount in connection with our company restructurings, and lease and building costs.  Additionally, included in our
GAAP presentation of operating expenses are amounts paid to former Company executives under the terms of the
executive severance agreements.  We exclude restructuring charges and executive transition costs from our non-GAAP
measures because we believe they do not reflect expected future operating expenses, they are not indicative of our core
operating performance, and they are not meaningful in comparisons to our past operating performance.  We have
incurred restructuring expenses in each of the periods presented. However, the amount incurred can vary significantly
based on whether a restructuring has occurred in the period and the timing of headcount reductions. Further, we believe
that excluding executive transition costs from our non-GAAP results is useful to investors because it allows for period-
over-period comparability. 



(G) 

COVID-19 expenses.   Included in our GAAP presentation of cost of sales and operating expenses, COVID-19 expenses
consist of costs incurred as a direct impact from the COVID-19 virus pandemic, such as cancellation fees of trade shows
due to public safety issues, additional costs for disinfecting facilities, and personal protective equipment.  We exclude
COVID-19 expenses from our non-GAAP measures because we believe they are one-time costs that vary significantly in
amount and timing and are not indicative of our core operating performance.



(H) 

Non-GAAP items tax effected .  This amount adjusts the provision for income taxes to reflect the effect of the non-GAAP
items (A) - (G) 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 (J).  We believe this information is
useful to investors because it provides for consistent treatment of the excluded items in this non-GAAP presentation. 



(I) 

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 (J).  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.  We believe that investors benefit from excluding this
amount from our non-GAAP income tax provision because it facilitates a comparison of the non-GAAP tax provision in
the current and prior periods. 



(J) 

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.  We excluded this because it is not indicative of our core operating performance. 



(K) 

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.  We believe that investors benefit from a presentation of non-GAAP tax rate percentage as a way of
facilitating a comparison to non-GAAP tax rates in prior periods.


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