Bentley Systems, Incorporated

Good morning, everyone, and thank you for joining us for Bentley Systems Q1 2022 Operating Results 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. Before we begin, allow me to provide a disclaimer regarding forward-looking statements. This webcast, including the question and answer portion of the webcast, may include forward-looking statements related to the expected future results for our company and are therefore forward-looking statements. Our actual results may differ materially from our projections due to a number of risks and uncertainties. The risks and uncertainties that forward-looking statements are subject to are described in our operating release and other SEC filings. Today's remarks will also include references to non-GAAP financial measures. Additional information, including reconciliation between non-GAAP financial information to the GAAP financial information, is provided in the press release and supplemental slide presentation. This webcast will be available for replay on Bentley Systems Investor Relations website at investors.bentley.com. After the presentation, we will then conclude with Q&A. And with that, let me introduce the CEO of Bentley Systems, Greg Bentley.

Good morning, as the case may be, and thanks to each of you for your interest. Our operating results presentation will follow our now standard sequence. I will now briefly cover tone of business and will be back after Nicholas for commentary about corporate developments. When we last met, it was already March, but much has happened in the world since then. Our 22Q1 operating results signify BSY's overall resilience, but with significant developments to remark upon, which we will do briskly today. This includes not only the war between Russia and Ukraine, but also related effects that I term counter-globalism impacting our business as a US company in China. These developments and our responses to date will be covered today as to Russia by our Chief Operating Officer Nicholas Cummins, based in Europe, and as to China by our Chief Investment Officer David Hollister and colleague Chris Liu. Chris was, until this year, our territory executive for North Asia, within which he helped grow Greater China to reach 5% of our business, and he's now heading Glocalization Initiatives for BSY Investments. Net of these 22Q1 ARR impacts in Russia and China, and incremental to year-over-year constant currency ARR growth of 15% from platform acquisitions Sequent and Powerline Systems, and you will also hear shortly from head of PLS, Otto Lynch, our business performance year-over-year constant currency ARR growth was 12%. and net recurring revenue retention, also in constant currency, for the trailing year was 108%. I consider these operating results to thus reflect some degree of overperformance globally with respect to post-pandemic seasonal expectations when excluding China and Russia. In light of this resilience, which will be the subject of my review of corporate developments in a few minutes, We haven't changed our general expectations since, in March, we provided our financial outlook for the full year 2022. This slide, which has become a fixture since the second half of 2020, is a reminder of the recurrent drag on our business from the industrial portion of the industrial resources infrastructure sector. So it's great to report now that industrial usage has finally turned around in the right direction, although still far from the pre-pandemic levels against which our directional colors are benchmarked. You will likely have heard plausible arguments that industrial capex is now being kick-started, even in Western countries, by new imperatives for energy security. We are now positioned, resiliently, for immediate accretion in ARR and revenue from these upticks in usage and application mix. And in 2022 Q1, we continued our measured pace of account upgrades to E365, and especially to foster ARR growth through E365's embedded success services. After so long during which EPCs, bogged down with industrial capex stagnation, have significantly stifled overall E365 ARR growth, during 22Q1 they finally resumed some new business, although still at a slower rate than the mainstream of E365 accounts. Such continued EPC invigoration throughout 2022 would contribute an upward inflection from 2021's growth, serving to offset the detrimental aspects of this year's geopolitical upheavals, which are actually creating opportunities for EPCs. Turning from enterprise to SMB, which as we showed last quarter was more significant than ever in 2021's new business, Virtuosity continued its rapid growth, seasonally adjusted. During 2022 Q1, about 60% of Virtuosity's new business was in 600 plus new names for BSY. In 2022 Q1, new names, that is not by acquisition, represented three percentage points within our 12% core ARR growth, a high watermark for us. Our internal term, new business, measures primarily ARR growth, subject to some mildly ranging weightings across different commercial offerings as I have reviewed in the past. All of our quota carriers and their territorial executives share new business incentives, and new business is now the basis for our management team's annual and long-term equity incentives. So each quarter, Nicolas will focus his operational perspectives on new business developments by region and product brands. Over to Nicolas.

Thank you, Greg. From a regional standpoint, our new business continued to accelerate in the Middle East, as well as in Australia and New Zealand as indicated in Q4. Our new business also accelerated in India, benefiting from renewed investment infrastructure, including industrial, and bounced back in Southeast Asia, in particular with engineering firms. Our new business slowed down notably in Europe from a year earlier, mainly due to lower consumption growth in our E365 accounts, reflecting the general economic conditions in the region impacting infrastructure investments, with a shortage of labor, raw construction material, and increased energy costs. We mentioned in March that Russia represented about 1% of our global ARR. We decided to pause marketing and sales in Russia in light of the war in Ukraine, effectively halting our new business. We also continue to strictly apply export controls and restrictions impacting our existing ARR. For instance, our oil and gas accounts are already under sanction, representing 10% of our ARR in Russia. We are expecting more sanctions and other restrictions to impact the remainder of our ARR, and have therefore decided to reduce our deemed recurring ARR substantially to reflect this, as Werner will quantify. David will cover China in his section. From a product standpoint, our new business accelerated in electric utilities, especially with our recent acquisition of PLS and SPIDA for transmission and distribution, as well as in water utilities with open flows, our product line for water infrastructure. Our new business also accelerated with open roads, our design and modeling application for roads, as well as STAAD, our main simulation application for structural analysis. A key pillar of our product strategy is to drive engineering excellence. The acquisition of ADINA exemplifies this. ADINA was founded in 1986 by Dr. Klaus Jürgen Barthe, a world renowned professor at MIT, who literally wrote the book on finite element analysis. We are delighted to welcome to Bentley, Dr. Bate and his dream team of PhDs with deep scientific and technical expertise. Historically, ADINA has been primarily commercialized in a process and industrial analysis context. However, it is highly regarded by infrastructure engineers as the industry standard to study the response of infrastructure in detail. We see opportunity to leverage ADINA in the analysis workflows of infrastructure engineers by offering the possibility to extend almost every application in our engineering simulation portfolio with nonlinear analysis and advanced simulation capabilities. ADINA will help engineers analyze with greater precision the impact of events that induce nonlinear, otherwise extreme response in built infrastructure, such as hurricane force winds, storm surge, earthquakes, blasts, and extreme temperatures. Back to you, Greg.