Bentley Systems, Incorporated

Good morning, everyone, and thank you for joining Bentley Systems Q4 2021 Operating Results in 2022 Outlook Webcast. I'm Kerry Mann, Bentley's VP of Investor Relations. On the webcast today, we have Bentley Systems Chief Executive Officer Greg Bentley, Chief Financial Officer Werner Andre, Chief Operating Officer Nicholas Cummins, and Chief Investment Officer David Hollister. This webcast includes forward-looking statements made as of March 1, 2022. regarding the future results of operation and financial position, business strategy and plans, and objectives for future operations of Bentley Systems Incorporated. All such statements made in or contained during this webcast, other than statements of historical fact, are forward-looking statements. This webcast will be available for replay on Bentley Systems' investor relations website at investors.bentley.com. After our presentation, we will conclude with Q&A. And with that, Let me introduce the CEO of Bentley Systems, Greg Bentley.

Hello. Stepping back to reflect on our first full year as a public company feels to me that our Bentley is now running on more cylinders than ever. Back from intermittent pandemic disruptions to where not only BSY, but also our users and accounts have reinstated, if also redefined, business as usual. In fact, with confidence that after the pandemic, its impetus to going digital in infrastructure engineering will remain permanent, as the needed and now actual commitments to infrastructure renewal and resilience require increasing our accounts workloads at the same time that they face limits in increasing their workforce capacity. With the emerging opportunity for infrastructure digital twins having been kick-started by the pandemic imperative for going digital to substitute for work on site, while at BSY we have, since going public, significantly improved our go-to-market execution both within existing enterprise accounts and to reach new SMB prospects, and finally, as we have completed platform extension scale acquisitions to fully address the world's unprecedented consensus ESDG priorities for mobility, environment, and grids. Our tone of business discussions to date have centered around the contrasting color tones between the still cyclically curtailed capital projects in the industrial resources infrastructure sector on the one hand, and the relatively impervious momentum in our mainstay public works utilities infrastructure sector on the other hand. Particularly as we have so much to cover today, it fortunately simply suffices this quarter to report that nothing has changed appreciably by sector. The EPC firm's application usage has not yet turned upward, but has ceased to get any worse as they're essentially all on our E365 daily consumption program, they and we will benefit as soon as higher energy prices spark net new capex starts, including for renewables and storage. Starting with operating results reporting for the quarters of 2022, we will break out from the traditional industrial infrastructure sector, our revenue apportionment for a separated resources sector, where in addition to this renewable energy upside, Sequent is gaining vigorously at a pace unprecedented for us in the robust market for going digital and mining to meet the same energy transition demand. I think the most informative view of our overall business tone comes through tracking our book of subscription growth and net retention. Here is a view from before and through the pandemic of our reported ARR growth and of our reported NRR, which as a comparison to a full year earlier, naturally lags ARR growth and is lower by about the 2% of ARR growth, which comes from new names each year. ARR growth suffered starting with the first quarter of 2020 as project stops and work capacity disruptions immediately affected our daily and monthly reset subscribers, including the EPCs, and that dip in ARR growth which lasted several quarters in 2020, is inversely echoed in the subsequent sequence of consequently higher ARR growth rates as all users went back to full-time work. It seems a natural surmise that lagging NRR will likely continue to increase. To look inside these numbers, here again is the 21Q3 breakdown of ARR by consumption model. In 21Q4, our E365 ARR grew steadily in the proportion shown here, including as we upgraded further accounts to E365 to reach this breakdown of ARR at the end of 2021, and highlighting our SMB accounts, by our definition, spending less than 100K with us annually. All others are at least eventual prospects for E365 for years to come at our measured pace of such upgrades. We offer E365 upgrades by invitation to selected accounts upon their annual renewals so that we can assure that we continue to have sufficient and appropriate enterprise success resources to deliver the included success services. In substantiating why these services make E365 so important to BSY and to our accounts, I will cite our annual measurement within ARR Growth and NRR of application mix accretion. We have tended to assess the pandemic-affected tone of business in terms of days of usage of any and all of our applications, but we grow ARR as we add more value when a user upgrades their BSY application usage to a more specialized BSY application in order to improve the quality and productivity of their work. We annually calculate this application mix accretion as the average daily usage value abstracting from any price changes across all application usage during the year. As we continuously develop and acquire more specialized applications for our comprehensive platform, I believe this advancement opportunity will be an endless progression. For instance, a civil engineering user of MicroStation who's working on roadway projects will be much more productive upon upgrading to open roads. which more than doubles our ARR per such application usage day. The same civil engineer may remain a prospect to subsequently upgrade to our yet more specialized forthcoming open tunnel application. A wind farm designer who had been using MicroStation in the absence of a specialized modeling product should advantageously upgrade to our new open wind power application increasing our ARR per such day of application usage by a factor of about 30. A structural engineer at an EPC firm now working on an offshore wind platform should upgrade from our general-purpose structural analysis application instead to our specialized SACS offshore structural application to incorporate the analysis of wave motions, increasing our ARR per such application usage day by a factor of over 1.5. During 2020, our application mix accretion was about 2.5%. Now, I'm pleased to say that for 2021, our application mix accretion increased to over 3.5%, a significant component of our increased ARR growth. I credit this to our user success organization's expansion throughout 2021. Our user success colleagues can apply analytics to our cloud-based functional logging of all application usage to identify these individual upgrade opportunities, to bring them to the attention of the appropriate existing users of our less specialized applications, and to help them to take full advantage. Most of the early growth in our user success force was as a result of transferring and consolidating from various other supporting functions our colleagues with substantive infrastructure engineering experience and credentials. Continued further expansion is afforded by the so-purposed upgraded ARR implicit in E365 daily application pricing, and therefore E365 accounts are most intensively served by our enterprise success teams. Validating our prioritization of E365 and this associated enterprise success resourcing, our 2021 application mix accretion was almost twice as high within E365 accounts as within non-E365 accounts. And in terms of underlying overall application usage trends from 2019, so as not to dwell on pandemic-induced volatility, E365 accounts excluding the uniquely impacted EPCs performed significantly directionally better. Lastly, In working to establish a broad baseline for our enterprise accounts general sentiment, among those surveyed in both 2020 and 2021, the E365 accounts skewed toward much stronger recommendations in our favor. This slide, originally from our IPO deck, highlighted that such accretion within our existing enterprise accounts could reach two-thirds of this SAM to the extent that we could grow each account to the BSY run rate intensity we had already achieved for the most BSY run rate intensity accounts in each size tier within each of the project delivery and owner-operator categories. So, given these new initiatives at E365 and enterprise success since IPO, how far have we progressed in this run rate intensity in enterprise accounts, starting with the top owners? The BSY run rate intensity for each is calculated in relation to the net asset value of their fixed infrastructure assets. Reflecting our efforts to strengthen our offerings lifecycle comprehensiveness across infrastructure operations, from 2019 to 2021, the BSY run rate intensity within the BI500 increased in constant currencies by 19%. Next, as to the project delivery accounts that are engineering news record global top design firms, the BSY run rate intensity for each is calculated in relation to their design billings as reported to ENR, excluding Chinese firms where the history isn't consistent. From 2019 to 2021, their BSY run rate intensity increased in constant currencies, reflecting their rate of going digital in BSY spending per dollar of their own design billings by 12%. To conclude as to enterprise accounts, what I've covered are factors behind my belief that continued expansion of our E365 program and the enterprise success activities that support it will relatively improve our ARR growth rates. But what about our potential growth within small and medium-sized businesses where our products are just as suitable but we need to go to market in ways that are new to us. We commissioned market research firm Cambachi, who had recently updated our TAM study that starts by counting the world's infrastructure engineering professionals, to help us quantify the SMB prospects. We determined to consider only project delivery firms, since owner-operators of infrastructure, given its capital intensity, can hardly be SMBs. We then, we next apply the typical BSY run rate intensity for project delivery firms to translate our cutoff of 100K per year to correspond approximately to firms with at most 50 infrastructure engineering professionals. What proportion of our potential market do such firms represent? Given limitations on available data, Kim, that she could answer this only for engineering and architecture firms and only for certain countries. So here are, by bubble size, the proportions of these infrastructure professionals in SMB compared to larger firms in Germany, in Japan, in South Korea, in the UK, and in the US. As you see, market structures evidently vary so much that one can't safely generalize across the world. But for instance, in our two largest markets, the US and the UK, and in total for these five countries, certainly representing much of the world, there are even more infrastructure professionals in SMB prospects than in enterprises. These results encourage us to continue the priority we have placed on the SMB opportunity since the IPO increased our profile and led us to focus more on marketing. During this time, we have reallocated much of our pandemic-caused cost savings and travel and events into SMB go-to-market initiatives. In particular, see here our 2021 quarterly progression of staffing levels for sales and fulfillment of our Virtuosity subscriptions, which combine annual term licenses with expert availability and are targeted at SMB new business. The results were reflected in this promising trend of Virtuosity's new business growth by quarter, during 2021. Most encouraging is the improving ratio of new business growth to headcount resources as we continue to climb the learning curve and reaching and converting SMB prospects. To summarize, here's our resulting progress in total annual NBG for SMB accounts, inflecting upward to represent now 41% of our overall NBG in 2021. This reinforces our belief that much more SMB upside is reachable. For more operational perspectives on our go-to-market activities, with those responsibilities having been added for 2022 to his product leadership roles, over to Nicolas.

Thank you, Greg. We updated our product portfolio overview in the 10K report to reflect the important product advancements we made in 2021. We continue to build on the foundation and extend the comprehensiveness of our product portfolio. In particular, engineering applications with our modeling and simulation products for engineering practitioners. Enterprise systems for engineering collaboration, construction, and asset performance, supporting digital workflows across the entire infrastructure lifecycle. Geo-professional applications with a combination of sequent, original Bentley geotechnical products, and subsequent acquisitions for the subsurface. Industry solutions with industry-specific capabilities to advance infrastructure for mobility, environment, and grids. And at the center of our portfolio, iTwin, our infrastructure digital twin platform, powering an increasing number of Bentley and third-party products. I would like to highlight the performance of Synchro in Q4 and through 2021. Synchro is our construction management solution, which we have extended to be uniquely suited for heavy civil projects. As you might recall from Greg's comments during the Q3 operating results, with Synchro, we're taking a distinct approach to construction. We have some of our peers are focusing on automating 2D workflows. Our focus with Synchro is on helping the industry advance to 4D by leveraging digital twins. The industry has validated our approach with accelerated growth in 2021 across the spectrum of construction organizations, including SMB. Synchro has been adopted so far by 58 of the ENR Global 100 top contractors and by 77 of the top 100 contractors outside of China. Now let me take a moment to explain what we mean by 4D. Synchro, powered by iTwin, allows construction teams to create a 4D construction model by leveraging 3D models from the design phase and adding time, the fourth dimension. It is used for construction planning and scheduling to communicate with key stakeholders and collaborate with trade partners. It is also used in project execution to track progress, as well as empower construction teams with information and the context they need to make informed decisions. Synchro featured prominently at the Year in Infrastructure in 2021, with many winners of the Going Digital Awards crediting Synchro. I would like to highlight one winner. Replacing the aging bridge on East 138th Street in New York City may seem uncomplicated at first glance, but located one mile south of Yankee Stadium, it is in a highly congested area and the management of traffic during construction is a significant quality of life issue to the local community. The New York State Department of Transportation, the owner of the bridge, opted for a digital twin solution to manage the complex sequence of traffic lane closures. They use Syncro to create a 4D construction sequencing model and engage with stakeholders to take important decisions without having to work manually through more than 200 plan sheets. This project sets a new standard for what can be accomplished by DOTs by going digital. You can read more about this project in the 2021 Infrastructure Yearbook. From a regional standpoint, our new business growth continues to accelerate in Latin America. primarily driven by additional usage in our E365 accounts, in particular of open flows or product line for the water infrastructure. The new business growth also accelerated in Middle East, benefiting from renewed investment infrastructure, including industrial and resources. And as expected, Australia and New Zealand bounced back in Q4, benefiting from renewed investment in both public works and in industrial. 2021 began as a difficult year in China, as mentioned by Greg in previous calls. We confirmed a strong rebound of new business growth in Q4, but not enough to close the gap for the full year. We take the long view in China. It remains an important growth opportunity for Bentley, given its massive investments in infrastructure. And the biggest projects in China continue to leverage our technology to innovate. Six of 19 winning projects of the Growing Digital Awards in Infrastructure were from China. A few words about Sequent now, which had a great Q4 and a great year 2021. Sequent had strong performance across all regions. The fastest growing region over this quarter was Asia-Pacific. South America was its second fastest growing region, followed by Europe, Middle East Africa, and North America. In all these regions, Sequent benefited from continued investments in mining required to support the world's energy transition. In addition to mining, Sequent's growth remains strong and civil. We expect that growth to accelerate over time as we continue to drive synergies with the rest of Bentley. With Sequent, we are offering the most comprehensive product portfolio for geo-professionals. We completed four additional acquisitions in 2021 to complement that portfolio. the most recent one being AR2Tech in December for geostatistics and spatial data analysis. LeapFrog, the original product of Sequent used to model the subsurface, led the growth in Q4. You can think of LeapFrog as a foundation product for geo-professionals, on top of which we offer additional products to provide a better understanding of the subsurface. Case in point, we doubled the revenue for two acquisitions made in 2021, Imago to capture and process digital images of drill cores and chips, and MXDeposit to manage drill hole and other field data. In order to illustrate how these products come together, I would like to highlight First Majestic. First Majestic is a Canadian company which owns and operates four mines in Mexico and the US. First Majestic uses sequence leapfrog geo to develop a realistic representation of the geology at each site. and leapfrog age to aid resource estimation. And when geological models are changed, resource estimates also change dynamically. Sequence Central allows the company to publish models and resource estimates so they're available to everyone in real time, on-site or remotely, including resource geologists based in Canada. First, Majestic recently implemented Imago integrated with Leapfrog Geo to make more confident, profitable exploration and mining decisions based on digital images of drill cores and chips. They are also using GeoStudio to evaluate the slope stability of tailing dams and filter tailings, as well as Plaxis for deep excavation and tunneling analysis. This is just one of many situations that underscore the potential for portfolio expansions and synergies subsurface. Now, I would like to hand back to Greg to talk about corporate developments.