Bentley Systems, Incorporated

Bentley Systems Q2 2025 results. I'm Eric Boyer, Bentley's Investor Relations Officer. On the webcast today, we have Bentley Systems Executive Chair, Greg Bentley, Chief Executive Officer, Nicholas Cummins, and Chief Financial Officer, Werner Andre. This webcast includes forward-looking statements made as of August 6th, 2025, regarding the future results of operations 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 or forward-looking statements. This webcast will be available for replay on Bentley Systems Investor Relations website at investors.bentley.com on August 6th, 2025. After our presentation, we will conclude with Q&A. And with that, let me introduce the Executive Chair of Bentley Systems, Greg Bentley.

Good morning, and thanks to each of you for your interest in BSY. Please pardon my voice, which is suffering from a summer cold. CEO Nicholas and CFO Werner will, as always, report in detail Bentley Systems' continued excellent operating and financial results for 25Q2, and thus for the first half of 2025, as we track consistently towards our outlook range for this full year. Earlier this year, in reviewing 24Q4, I looked back over the years since BSY's IPO in 2020 to quantify that our outlook range for 2025 would complete the process of at least doubling over these five years each of our key financial metrics of ARR, revenues, adjusted operating income, less stock-based compensation, and free cash flows while minimizing equity dilution. Then, most recently in reviewing 25Q1, I likewise looked back five years to quantify the respects in which we've purposefully gained further business resilience over this span. It is even more clear this quarter that we're currently benefiting from those improvements. Our excellent operating performance to date in 2025 is in keeping with a primary sustaining long-term growth driver over this period and which will prevail foreseeably. Going digital has become the enduring priority for infrastructure engineering, in particular because of pervasive resource constraints. To keep up with the world's imperatives for infrastructure performance, resilience, and adaptation, each BSY user and account needs each year to achieve step functions in productivity and value generation through enhanced utilization of software, cloud services, and AI. To help quantify such progress in software consumption per engineer, I would like now to again, but for the last time, I think, look back over five years, but this time with reference to external market data. This slide, which we still use in our intro deck today, shows global counts of engineers and related technicians and their software expenditures as tabulated by UK global research firm Cambasci. Conveniently, for our purpose of monitoring the long-term trend, this last data that we had on engineering employment and spending is for 2019, immediately preceding BSY's IPO. We originally compared spending per engineer slash technician for infrastructure engineering to that of product engineering to glean a data point for the market potential headroom. But now, for the purpose of this look back, let's examine the changes in just infrastructure engineering spending over time, as Kanbashi has just provided an update which slightly refines 2019 and which, most importantly, introduces the most recent year for which this data, including engineering employment, is available, 2023. I do not find it surprising that over these four years, the total number of infrastructure engineers and supporting technicians has only increased by about 1% per year on average. While there isn't sufficient granularity in both datasets to establish this, I believe that even this nominal increase is concentrated in less developed countries, while I believe that in countries like the US, infrastructure engineering retirements have exceeded new graduates. Most significantly, Kambashi finds that software spending by infrastructure engineers slash technicians has grown at a compounded annual growth rate of about 10% over this period. And this is in nominal rather than constant currencies. Kambashi's estimate is that the constant currency growth rate was a full percent higher. By virtue of BSY's constant currency revenue growth rate during the period, we somewhat outgained this broader market. Hence, software spending per infrastructure engineer slash technician has grown about 9% in nominal currencies or indeed approximately 10% in constant currencies over this period. Even so, the $514 annually per engineer or technician tends to appear low compared to averages for VSY users. Usefully, for this newly available 2023 data, Kanbashi has provided refinements for better understanding. To start with, we can now focus on employment and spending just for engineers rather than also including the technician categories, which are rather miscellaneous and less representative of BSY's primary user profile. See here Kambashi's observation that in 2023, 17.6 million infrastructure engineers globally spent $10.2 billion on engineering and GIS software, averaging a relatively higher annual spending of $579 per engineer. For this new 2023 data, Kanbashi also provides analysis of employment and spending down to the level of countries classified together within the five quintile tiers of per capita GDP. The wide variation in average spending is striking to me. The engineers in the most developed countries, while nearly the least numerous, spend the significant plurality of the global total averaging over $1,900 per year per engineer. This is generally consistent with BSY's average and globally uniform pricing and utilization for E365. So the numerical bulk of infrastructure engineers in less developed country levels represent a multiple of long-term upside opportunity, as they inevitably will tend to catch up in going digital and in expenditures to do so. Now, coming back to Bentley Systems and our standing as the market leader in so many infrastructure engineering market segments, as we show in our own assessment of the competitive landscape in this slide from our intro deck, let's examine Cambasci data to understand how so much of this $10 billion in software spending by infrastructure engineers obviously goes elsewhere than to BSY. To do this, let's parse the full $14 billion of now 2024 software revenue, which Kambashi ascribes to BIM. This term originally referred to building information modeling decades ago, but has come to connote as here a catch-all for what could otherwise be described as AEC, for architecture, engineering, and construction, as opposed to product engineering or manufacturing. Within this total, BIM design is not only the largest submarket, but we believe it is the prerequisite to success throughout the others. The greatest ultimate opportunity is for digital twins to support infrastructure operations and maintenance. Although this submarket is only nascent so far, we think our asset analytics initiative portends its comparatively unlimited potential, monetized per asset rather than per engineer. But the potential compounding value of a digital twin depends significantly upon its assimilation of the digital context, digital components, and digital chronology from BIM design. So here, per Cambasci, are the market shares within the $6.5 billion of BIM design revenues. The largest by far is for Autodesk, followed significantly by Bentley, Schneider, Hexagon, Nemetschek, Trimble, and in all China, I have grouped together all the Chinese companies identified by Kanbashi, listed here in the fine print. To help understand the widely varied mix across infrastructure segments per competitor within BIM design, Kanbashi analyzes each company's such revenues by product category within Plant, architectural, which includes mechanical, electrical, and plumbing, or MEP, civil, and structural. Looking here at the relative proportions for each company, one sees that every one of these putative competitors has a considerably different primary focus than Bentley Systems. At Bentley Systems, we don't break out product revenues in these same categories, and I suspect that Kanbashi's estimates here seem to discount Sequent's major share of geotechnical and environmental software used in civil engineering. While we have a comprehensive portfolio across all disciplines required for major infrastructure projects, including their plant and building engineering aspects, our focus is characterized by civil and supporting structural products, primarily for horizontal infrastructure networks. By contrast, Hexagon and Schneider's design products are clearly focused primarily on plant engineering. Nemetschek's design products are concentrated in architectural slash MEP. Trimble's design products are primarily divided between architectural MEP and structural to support such buildings. China has more or less official state-owned software for its country-specific structural analysis codes and many competitors for buildings software. Finally, the primary design product focus for our principal competitor Autodesk is architectural slash MEP for vertical infrastructure buildings. Within Autodesk's Sybil product share, its offerings for Sybil site design, likewise associated with buildings, loom large. And as you may recall, we at BSY see this as a substantial competitive upside opportunity. Our BIM design software peers and competitors are worthy and resourceful. While our space is desirable and envied, each of these others have a principal focus that is clearly different. I believe that we are favorably differentiated by virtue of our established franchise as the outright market leader in comprehensive infrastructure engineering software, particularly for the horizontal networks of public works slash utilities, grids, roads and bridges, rail and transit, water and wastewater, and resources, and the geo-professional disciplines, structural disciplines, and project delivery collaboration across all of this. Given the world's prevailing imperatives for infrastructure performance, resilience, and adaptation, I wouldn't trade positions with any design software peer or competitor. Notwithstanding this favorable competitive backdrop, Our consistent execution should not be taken for granted, and I commend our management and colleagues for 25Q2. Over now to Nicolas. Thank you.

Thank you, Greg. We delivered another strong quarter despite ongoing global uncertainties. This performance underscores the resilience of our business model and the strengths of our end markets driven by secular infrastructure investment. As demand for better and more resilient infrastructure continues to outpace the available engineering resource capacity, our software plays a crucial role in helping infrastructure engineers achieve more with less. Our strong first half performance reinforces our confidence in meeting our full year outlook based on low double-digit AR growth, continued margin expansion of approximately 100 basis points, and robust free cash flow generation, consistent with our long-term financial framework. Turning to Q2 highlights, AR grew 11.5% year-over-year and 12% when excluding the impact of China. Growth in the quarter was underpinned by a net revenue retention rate of 109%. E365 continues to be a growth driver, with renewals consistently reflecting stronger commitment levels. The willingness of accounts to commit to higher contractual floors in return for corresponding ceilings signals their confidence in the strength and sustainability of their own demand environment. In Q2, we once again added 300 basis points of AR growth from new logos, primarily within the SMB segment. And for the 14th consecutive quarter, we added more than 600 new SMB logos through online store. Retention within the segment remained high, further signaling confidence in the demand environment, this time from smaller accounts that are arguably more sensitive to economic uncertainty. Turning to our tone of business by infrastructure sector, Resources was our fastest growing sector this quarter, with Sequin delivering a particularly strong performance. Notably, growth for Sequin was led by mining, outpacing civil for the first time in six quarters. While we are seeing early signs of improvement in mining exploration, it is still too soon to call it a market recovery. Public Works Utilities delivered another solid quarter, performing in line with the company overall, supported by sustained global infrastructure investment. The needed focus on grid resilience is particularly benefiting power line systems. Growth in industrial sector remained modest, while commercial facilities was flat. Performance across regions in Q2 remained largely consistent with prior quarters. Growth in Americas was once again solid, with Latin America continuing to stand out. In the US, our accounts remain confident in their outlooks for the year, despite ongoing uncertainty related to tariffs, policy shifts, and regulatory changes. There's also increased optimism that Congress will now prioritize meaningful permitting legislation. The combination of executive orders, updated agency guidelines, recent court rulings, and bipartisan state level initiatives all signal momentum towards comprehensive permitting reform, particularly in areas such as transmission, critical minerals, and other strategic verticals. Our powerline systems and sequent businesses, both standout growth drivers since their acquisition 3.5 and four years ago, respectively, are especially well positioned to benefit from these developments. Also noteworthy, Congress has already begun working on the surface transportation reauthorization of the IJA a year and a half before its scheduled expiration, a clear indication that civil infrastructure investment remains a national priority. In EMEA, we delivered another quarter of solid growth, with the Middle East continuing to lead the region, followed by the UK. Investment remains strong across transportation, energy, and water infrastructure, while momentum continues to build in defense-related projects, data centers, and nuclear. Together, these trends reflect a broadening base of demand. Recent announcements in the UK and Europe point to a continued supportive funding environment into the foreseeable future. In June, the UK government published its 10-year infrastructure strategy, which earmarks £725 billion in long-term funding and aims to attract private investment into its national infrastructure. And in July, the European Commission put forward its 1.8 trillion euros proposal for the next long-term EU budget for 2028 to 2034. The proposal clearly prioritized investment infrastructure and should be a continued tailwind for funding in years to come. In Asia-Pacific, the overall performance remains steady. India continued to stand out, with positive sentiment across strategic national programs in water and power. ANZ was softer, primarily due to a slowdown in transportation spending in Australia. However, we are well positioned to support major infrastructure projects tied to the 2032 Brisbane Olympics, some of which, like Cross River Rail, are already in progress, with broader activity expected to ramp up near term. China performed in line with our expectations, given ongoing economic and geopolitical headwinds, and now represents only about 2% of total ARR. Finally, I want to highlight the success of our first ever Cesium Deliverable Conference, which brought more than 400 attendees from around the world to Philadelphia. We acquired Cesium for its market-leading 3D geospatial platform, its talent, and its vibrant developer community. All three were on display at the conference. Band-Aid users, representatives from technology leaders like Google and Nvidia, and developers spanning verticals from AEC to government to aerospace, learned how we are bringing iTwin capabilities to Cesium, including reality modeling and AI-based feature detection services. Attendees also share the many ways they're using Cesium to deliver powerful 3D geospatial experiences in applications for the built and natural environment. One example is HNTB, an engineering firm that leverages Cesium and Google's 3D photo-ray signals to provide precise geospatial context, enabling better informed decisions for infrastructure design. With this capability, stakeholders can assess projects ranging from single highway interchanges to 30 mile road and rail corridors with greater clarity. By using Cesium, HNTB has reduced the effort required to model existing buildings for contextual detail on long linear projects by up to 80%. We are excited about the opportunities ahead to expand the Cesium developer community and empower it with additional iTwin platform capabilities. And we look forward to sharing the progress we've made integrating Cesium across our broader product portfolio at our upcoming year infrastructure conference this October in Amsterdam, alongside advancements in AI and Bentley Infrastructure Cloud. And with that, I will turn it over to Werner.