Earnings call transcript: Bentley Systems Q1 2025 earnings beat forecasts

Bentley Systems Inc. (BSY) reported better-than-expected earnings for Q1 2025, with earnings per share (EPS) of $0.35, surpassing the forecasted $0.30. The company’s revenue also exceeded expectations, reaching $371 million against a forecast of $366.41 million. Following the earnings announcement, Bentley’s stock rose by 3.55% in pre-market trading, reflecting investor optimism about the company’s strong performance and growth prospects. According to InvestingPro data, the company maintains impressive gross profit margins of 81.03% and has demonstrated consistent profitability over the last twelve months.

Key Takeaways

• Bentley Systems reported a 10% year-over-year increase in total revenues.
• Subscription revenues, making up 92% of total revenues, grew by 11%.
• The company’s stock price increased by 3.55% in pre-market trading.
• Bentley introduced new AI-driven solutions and expanded its digital twin technology.

Company Performance

Bentley Systems showcased robust growth in Q1 2025, driven by strong demand for its infrastructure engineering software and services. With a market capitalization of $14.17 billion, the company achieved a 10% increase in total revenues compared to the same period last year, maintaining its 5-year revenue CAGR of 13%. Subscription revenues, a key growth driver, accounted for 92% of total revenues and increased by 11% year-over-year. Bentley’s focus on digital twin technology and AI-driven solutions appears to be paying off, positioning the company well in the infrastructure sector. InvestingPro analysis reveals several additional growth metrics and insights available to subscribers, along with a comprehensive Pro Research Report covering what really matters about BSY’s performance.

Financial Highlights

• Revenue: $371 million, up 10% year-over-year
• Earnings per share: $0.35, exceeding the forecasted $0.30
• Adjusted Operating Income less Stock-Based Compensation: $126 million, up 12%
• Free Cash Flow: €216 million, a 7% increase year-over-year

Earnings vs. Forecast

Bentley Systems outperformed expectations in Q1 2025, with actual EPS of $0.35 compared to the forecast of $0.30, representing a 16.7% positive surprise. Revenue also exceeded forecasts, coming in at $371 million against the expected $366.41 million. This performance marks a continuation of the company’s trend of surpassing market expectations, driven by robust subscription growth and strategic investments in technology.

Market Reaction

Following the earnings release, Bentley’s stock price rose by 3.55% in pre-market trading, reflecting investor confidence in the company’s growth trajectory. The stock’s last close was $43.77, and the current trading price remains within its 52-week range of $36.51 to $57.19. Based on InvestingPro’s Fair Value analysis, the stock appears fairly valued at current levels. Analyst price targets range from $41 to $61, suggesting potential upside, while the company maintains a "GOOD" Financial Health Score of 2.83. This positive market reaction aligns with broader trends in the infrastructure sector, which is benefiting from increased global investment.

Outlook & Guidance

Bentley Systems maintains a positive outlook for the remainder of 2025, expecting low double-digit growth in Annual Recurring Revenue (ARR) and a 100 basis points expansion in margins. The company plans to continue focusing on asset analytics and AI-driven solutions, which are anticipated to drive future growth. Bentley’s strategic initiatives align with global infrastructure investment trends, providing a solid foundation for continued success.

Executive Commentary

Nicholas Cummins, CEO, emphasized the growing demand for resilient infrastructure, stating, "There’s never been so much demand for better and more resilient infrastructure." He also highlighted the role of AI in enhancing productivity, saying, "AI is gonna be part of the solution for sure, to allow infrastructure organizations to do more with less." Greg Bentley, Executive Chair, underscored the company’s global perspective, stating, "We are a global citizen."

Risks and Challenges

• Potential supply chain disruptions could impact software delivery.
• Market saturation in developed regions may limit growth.
• Macroeconomic pressures, such as inflation, could affect customer spending.
• Talent shortages in engineering fields could hinder project execution.
• Regulatory changes in key markets may pose compliance challenges.

Q&A

During the earnings call, analysts inquired about Bentley’s outlook on US infrastructure spending and permitting reform. The management expressed optimism about these areas, citing strong interest in asset analytics solutions. They also addressed the global economic environment, maintaining a cautiously optimistic stance. The potential of AI in boosting engineering productivity was another key topic, with executives highlighting significant opportunities in this area.

Full transcript - Bentley Systems Inc (BSY) Q1 2025:

Eric, Moderator/Investor Relations, Bentley Systems: Chair, Greg Bentley chief executive officer, Nicholas Cummins and chief financial officer, Werner Andre. This webcast includes forward looking statements made as of 05/07/2025 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, are forward looking statements. This webcast will be available for replay on Bentley Systems Investor Relations website at investors.bentley.com on 05/07/2025. After our presentation, we will conclude with q and a.

And with that, let me introduce the executive chair of Bentley Systems, Greg Bentley.

Greg Bentley, Executive Chair, Bentley Systems: Good morning. And as always, thanks for your interest in BSY. Of course, CEO Nicholas and CFO Werner will report in detail Bentley Systems’ excellent operating and financial results for the first quarter of twenty twenty five. But given the heightened uncertainties in global markets since we last spoke just two months ago, at which time I reviewed BSY’s financial compounding over our almost five years since going public, this time, I will highlight our corresponding and intentional progress in the attributes that make our model resilient against macro vulnerabilities and cyclicality. To this end, we have improved our business mix along the dimensions of infrastructure sectors, infrastructure life cycle, our commercial models, account scale, and geography.

We can track this by comparing over the period the charts within our introductory debt for investors which quantify the distribution of our business footprint. Now our allocation within infrastructure sectors is so distinctively significant that we start our description with this breakdown of our ARR by end market. Scaled an area within each of these pie charts, here’s how our ARR growth has developed from its comparable distribution at the beginning of twenty twenty. Among infrastructure sectors, commercial facilities and industrial are by far most subject to both demand and interest rate cyclicality. For us, these sectors combined proportion of total ARR is now less than one sixth, down by about half from pre IPO in favor of much more consistently robust sectors.

And our overall business resilience has been proactively enhanced by our 2021 and 2022 platform acquisitions, growing fastest for us and in the most promising infrastructure sectors. First, led by sequence leadership in subsurface environmental modeling, the resources sector and geoprofessional disciplines, which were only a single digit proportion pre IPO, now comprise almost a quarter of our ARR. New applications for civil infrastructure are serving to help offset capital market sensitivity delaying investment in new mines. Most auspiciously, long term fundamental shortages of self sufficient supply for metals and minerals are spurring government priorities to expedite permitting for such essential capital projects. Next, our PowerLine Systems platform acquisition has made BSY indispensable for physical investment in the world’s electrical transmission and distribution grid.

The infrastructure sector poised to benefit even more, and I think even sooner, from permitting reform. The new imperative for data center build out is just adding to the many years of backlog of new capacity required to maintain and improve the power grid’s reliability and security. The world has recently seen the catastrophic impact of failure in overstressed grids. Our own longest term opportunity relates to infrastructure life cycle phases. Deliberately advancing toward the digital twin future as our business mix gains an ever more resilient balance in sustaining asset performance.

Since IPO, our steadily growing life cycle information management offerings have coalesced within the Bentley infrastructure cloud, now powered at a platform level by iTwin and Cesium. AI will forever now be compounding within each of our accounts the reuse value of their own accumulated data across project wise, synchro, and asset wise. And a compelling use case for Digital Twins is to leverage our leading simulation software portfolio, now having grown to about a quarter of our ARR, for continuous reuse over an infrastructure assets operating life cycle, to quality assure as operated performance and resilience, and to maintain fitness for evolving purposes. Enhancing such opportunities for diversification on the part of BSY between project and asset life cycles and reflecting our years of prioritizing investments and capabilities for operations and maintenance since 02/2009. Our ARR directly from infrastructure owner operators has now reached parity with our ARR from their project supply chain of engineering and construction contractors.

With infrastructure operations always essential and thus evergreen compared to more discretionary project decisions, this has all succeeded in purposefully reducing our cyclical exposure. Our resilience has similarly been enhanced by commercial model driven improvements in the quality of our revenue mix. Since pre IPO, our recurring revenues have now reached a high watermark of 92% of total. We continue to sell perpetual licenses now primarily to SMB and China, but its proportion of total revenues is down to low single digits. Likewise contributing to the visibility of recurring revenue, the proportion of elective select maintenance coverage for perpetual licenses has decreased by more than half.

Professional services have always been the most volatile among our revenue captions, especially as we’ve now bundled the recurring success professional services instead within e three sixty five. And with revenues from our cohesive digital integrators implementation services for IBM’s Maximo having rather precipitously declined, as a proportion of revenues, professional services, which at best generate low margins, are back down below our pre IPO level. And in preference to such dependencies on the vagaries of third party enterprise asset management environments, our new AI driven asset analytics initiatives can provide instant on entry points for digital twins and operations and maintenance and by way of ARR. Enterprise subscriptions, our ever growing mainstay, are now almost exclusively through our e three sixty five program. There, we’re compensated for embedding our success experts and quarterly blueprints to consistently improve our rates of accretion in each account.

Looking now at this breakdown of our ARR as we do each quarter to show the e three sixty five plurality continuously growing, we can also quantify how we have steered the ARR makeup within e three sixty five to mitigate the intrinsic theoretical volatility of its daily consumption charging for our engineering applications. In fact, almost all of e three sixty five ARR is now subject to negotiated annual floors and, usually and symmetrically, ceilings on consumption charges, actually serving to increase the visibility and linearity of our overall ARR growth. And most significantly for resilience, increasingly, we and accounts covering now the majority of e three sixty five ARR have mutually agreed to extend these floors and ceilings over multiple years, graduating upwards at each annual renewal. These pre negotiated annual increments have tended to converge around our current high watermark NRR of a 10%, underscoring that these accounts are equally confident in the sustained resilience of their own businesses and in the priority they place on going digital to surmount chronic engineering resource capacity constraints. With our direct sales model at 94% this past quarter, the increasing scale leverage provided by thriving enterprise account growth supports much of the annual operating margin improvement that underlies our own confidence in resiliently compounding free cash flow.

I believe our distribution of revenues by account scale is the hallmark of our qualifications and aspirations as the infrastructure engineering software company. With growth since 02/2019, the number of accounts within each size tier has at least almost doubled, with now over 180 accounts at over $1,000,000 in ARR, over 500 accounts with ARR between 250 k and $1,000,000, and over 900 accounts with ARR between 100 k and 250 k dollars. Serving this enterprise account portfolio more deeply and efficiently is the foundation of our distinctive resilience. And a priority since going public has been our opportunity to also reach SMB prospects who need the same engineering applications primarily through our digital go to market investments. So it’s gratifying to also quantify our corresponding cumulative success in new logos as we’ve increased the number of accounts with ARR under 100 k to just over 39,500.

And finally, a significant contributor to our stability and predictability is geographic diversification. We have long been fully scaled across the world. And while regional growth rates and, for that matter, exchange rates are always in flux, our plurality proportion of revenues from The US has actually not changed since pre IPO amid better balance elsewhere throughout The Americas. During this period, our business in Russia has, of course, been zeroed out. And importantly, our exposure to China has been halved to only about two and a half percent of revenues with much more than compensating relative growth elsewhere in Asia Pacific.

Werner Andre, Chief Financial Officer, Bentley Systems: So with all of these structural improvements and resilience,

Greg Bentley, Executive Chair, Bentley Systems: I conclude that while we are presumably not impervious to disruptions, we have accomplished much to make significant disruptions less likely and then less impactful. I think we’re benefiting already. And for reporting on 2025, over to Nicolas and then Werner. Thank you.

Nicholas Cummins, Chief Executive Officer, Bentley Systems: Thank you, Greg. We started the year off strong, delivering AR growth, profitability and free cash flow in line with our Q1 expectations. Our results position us well in regard to our financial outlook for the year, consistent with our longer term framework of low double digit AR growth, 100 basis points of margin expansion and strong cash flow generation. We remain confident in our ability to continue to deliver solid results despite global macro uncertainties, given the continued solid demand environment, the backlogs of our accounts, and our resilient business model that Greg highlighted. The most recent ACAC survey released in March showed a very positive outlook from US Engineering firms over the next twelve months.

Our accounts remain cautiously optimistic following the tariff announcements as countries continue to prioritize infrastructure funding, some even more than before. The fundamentals of our demand environment remain the same: a critical need for better and more resilient infrastructure a continued shortage of engineers, with a number of unfilled positions consistently around 9%, and, as a consequence, backlogs extending further out, as reported in the same ACEC survey. All of these factors point to a strong demand backdrop for our software to help improve the productivity of existing engineers. Focusing now on Q1 highlights. AR growth was 12% year over year and 12.5% excluding the impact of China.

Solid growth in the quarter was supported by our net revenue retention remaining at 110%. Our E365 program continues to be a growth driver, in particular from renewals. And we again added 300 basis points of AR growth from new logos, mainly SMB. In fact, we added more than 600 new logos through our nine stores for the thirteenth straight quarter. Retention remains high within this segment.

We expect renewals to be further supported as we expand our auto renewal process to more countries and continue to automate meaningful touchpoints during the subscription. Our tone of business by infrastructure sector in Q1 remained consistent with previous quarters. Public Works Utilities was once again the main growth driver as governments around the world continued to fund infrastructure at robust levels, while commercial facilities remained flat. Growth in resources remained solid despite continued softness in new mine investments, while growth in industrial remained modest. Over the coming years, these sectors are likely to benefit from increased investment, in particular in The US, with the administration’s drive to increase manufacturing capacity, energy production and mining.

Speaking of mining, during the quarter, we introduced Sequen EVO, a powerful cloud based platform designed to unlock the full potential of geoscience data. The launch of EVO comes at an opportune time, as the mining industry needs to find new ways to work faster and more efficiently to meet the global demand for minerals. EVO provides a strong foundation for integrated workflows by bringing together geoscience data from both Sequence and third party applications into a single, accessible source. It allows teams to generate insights from past projects and collaborate more effectively by working with the most up to date data. Looking now at Q1 performance by region.

Trends remain largely consistent with previous quarters. Growth was solid across Americas, with Latin America standing out. The market outlook in The US remains bright, with IHA continuing for at least another eighteen months, while the administration has also announced priorities favorable to continued investment, including the overhaul of the permitting process. States also continue to amplify the federal funding with their own infrastructure budgets, in particular for transportation. With the value of state and local government contract awards in Q1 up 34% year over year.

Also in The US, the American Society of Civil Engineers recently released the 2025 edition of its infrastructure report card. Produced every four years, the report card grades the state of US infrastructure. This is therefore the first report since the inflection in infrastructure spending started with IIJA. The overall grade improved a half step from 2021, from a C- to a C. Though modest, the progress shows the positive impact of such investments and serves as encouragement for more.

ASC estimates that $9,000,000,000,000 more are required to reach a state of good repair across all 18 infrastructure categories noted in the report. Moving to EMEA, the region also had solid growth, with The Middle East standing out again and continued infrastructure investment in Europe, including The UK. There were a number of major announcements such as the EU’s Rearm Europe Plan, which aims to mobilize close to €800,000,000,000 for defense related spending, including the upgrade of dual use transport infrastructure. Germany also announced a special fund of €500,000,000,000 for investments in infrastructure, including to help the country achieve climate neutrality by 02/1945. In Asia Pacific, India was once again the main growth driver, with the strong performance of our structural engineering applications, including P and S.

China, which represents less than 2.5% of total ARR, performed as we expected, given the ongoing economic and geopolitical headwinds. Finally, I would like to highlight a recent announcement we made at the Google Cloud Next conference. The addition of Google Street View imagery and Vertex AI to our asset analytics offering for the road network. The combination of crowdsourced data, Street View imagery, and AI can greatly improve planning and operations, from standard roadway maintenance to disaster recovery, such as obtaining precise insights into the state of infrastructure before and after disasters to help plan and accelerate reconstruction efforts. As a concrete and meaningful use case, through the partnership with Google, we are working with the County Of Los Angeles to support their recovery efforts from the Eaton fires.

Before I turn it over to Werner, I would like to call your attention to two reports we just published. Our 2024 Impact Report highlights our leadership in sustainability and focus on ethical practices. As I noted in the forward to the impact report, while infrastructure is essential to our quality of life, it also has significant impacts on the natural environment. That is why we focus on empowering our users to design, build, and operate more sustainable and resilient infrastructure. It is also why we work to improve our own sustainability, foster current and future infrastructure professionals, engage in our local communities, and more.

Our 2024 infrastructure yearbook celebrates the outstanding accomplishments of our users. The yearbook highlights over two sixty remarkable projects nominated for the twenty twenty four Going Digital Awards and Infrastructure program. Each project reflects the vision and talent of infrastructure professionals who leverage our software to improve product delivery and asset performance. I encourage everyone to check out these documents. They are both available to download from our website.

If you want to order a physical copy of the yearbook, simply ask Eric, and we’ll be happy to ship one to you. And with that, I will hand off to Werner.

Werner Andre, Chief Financial Officer, Bentley Systems: Thank you, Nicolas. Indeed, we have started the year strong in every respect, which puts us in a good position in regards to our financial outlook range for the year. Total revenues for the first quarter were $371,000,000 up 10% year over year on a reported and 11% on a constant currency basis. Strong subscription and licenses revenues in the first quarter were partly offset by lower services revenues. Subscription revenues grew 11% year over year for the quarter in reported and 13% in constant currency.

Subscription revenues now represent 92% of total revenues, up one percentage point from the same period last year, improving the overall quality of our total revenues in terms of growth consistency, predictability and margin contribution. Our SMB and E365 initiatives continue to be solid contributors. Perpetual license revenues for the quarter grew 13% year over year in reported and 15% in constant currency. Our less controllable and less predictable professional services revenues declined 18% for the quarter in reported and 16% in constant currency and now represent 5% of total revenues, down one percentage point from the same period last year. As previously mentioned, the largest portion of our nonrecurring services relate to IDM Maximo implementation and upgrade work.

Our last twelve months recurring revenues, which include subscriptions and a small amount of recurring services, increased by 13% year over year in reported and 14% in constant currency and represent 92% of our total revenues, up two percentage points year over year. Our last twelve months constant currency account retention rate remained at 99% and our constant currency net retention rate remained at 110% led by accretion within our consumption based E365 commercial model. We ended Q1 with ARR of $1,319,000,000 at quarter end spot rates. On a constant currency basis, our trailing twelve months ARR growth rate was 12% year over year and consistent with our expectations. Excluding China, our ARR growth rate was 12.5% year over year.

On a quarterly sequential basis, our constant currency ARR growth rate was 2.1%, slightly below our twenty four Q1 sequential growth rate of 2.2%. With regards to seasonality, we continue to expect our quarterly sequential ARR growth to be back half loaded similar to 2024, in line with our contract renewal seasonality. Our GAAP operating income was $115,000,000 for the first quarter. I’ve previously explained the impact on our GAAP operating results from deferred compensation plan liability revaluations and acquisition expenses. Moving on to adjusted operating income less stock based compensation expense or AOI less SBC, our primary profitability and margin performance measure.

AOI less SBC was 126,000,000 for the quarter, up 12% year over year with a margin of 34.1%, up 80 basis points. Our margin performance for Q1 has been strong, particularly when considering that the comparative period is a high benchmark, benefiting then from run rate savings from the strategic realignment program, which we initiated in twenty three Q4. Our twenty five Q1 margin benefited from our strong total revenues performance, our mix shift towards higher margin subscription revenues and from certain discretionary OpEx spend being slightly more back half loaded in 2025 when compared to 2024. This will put us in a good position to deliver on our 100 basis points full year margin improvement target. As a reminder, we concentrate our annual raises for colleagues to occur as of April 1 of each year.

And since approximately eighty percent of our cost structure is headcount and related support cost, annual raises have a significant impact on our operating expenses in Q2, Q3 and Q4 relative to Q1. Our larger promotional and event related costs are also concentrated in the second half of the year. Our free cash flow was €216,000,000 for the quarter, up €15,000,000 or 7% and in line with our expectation for the first quarter. Based on the expected seasonality of collections and expenditures, we expect to generate in the range of 60% of our full year free cash flow during the first half of twenty twenty five. We have previously discussed the cash flow efficiency of our operating model.

In that regard, I want to highlight that we started to record our cloud services subscription deposits on the face of our balance sheet. Historically, we recorded our CSS deposits as part of our accruals and other current liabilities. Our CSS deposits primarily relate to our E365 commercial offering and are funded by our accounts predominantly at the annual contract renewal based on their estimated next twelve months consumption. These deposits are subsequently applied to quarterly consumption invoices. The working capital impact of CSS deposits is similar to deferred revenues and reflect collections in advance of expected future consumption revenues.

CSS deposits were $448,000,000 as of 03/31/2025 and increased by 78,000,000 from 03/31/2024. With regards to our Q1 capital allocation, along with providing sufficiently for organic growth, we deployed free cash flow as follows: €135,000,000 fully paying down our senior debt €10,000,000 convertible senior notes repurchases 39,000,000 on effective share repurchases to offset dilution from stock based compensation and $21,000,000 on dividends. With our senior debt being fully paid down, our net debt leverage, including our 2026 and 2027 convertible notes as debt, was 2.4x adjusted EBITDA, down from 2.9x at the end of twenty twenty four. Our strong balance sheet and projected free cash flow generation will sufficiently fund our dividend, share repurchases and growth initiatives, including programmatic acquisitions, as we continue our deleveraging trajectory. Our five year senior secured credit agreement, which we entered into in October 2024, provides a currently undrawn $1,300,000,000 revolving credit facility.

Combined with our strong balance sheet and anticipated future free cash flow generation, it offers ample flexibility to address the January 2026 maturity of $678,000,000 in outstanding convertible debt while keeping our cash interest thereafter at about the same magnitude as in recent past. Interest rates on our debt are protected for very low fixed coupons on our convertible notes and very favorable terms of our $200,000,000 interest rate swap expiring in 02/1930.

Speaker 4: And

Werner Andre, Chief Financial Officer, Bentley Systems: finally, we remain comfortable with our 2025 financial outlook range that we provided just over two months ago on our Q4 call. With regards to foreign exchange rates, for the first quarter, the U. S. Dollar has weakened slightly relative to the exchange rates assumed in our 2025 annual financial outlook, resulting in approximately $1,000,000 incremental revenue from currency. Based on the most recent rates where the U.

S. Dollar has further weakened relative to our outlook rates, if April exchange rates would prevail throughout the remainder of the year, our Q2 to Q4 GAAP revenues would be positively impacted by approximately $20,000,000 relative to the exchange rates assumed in our 2025 financial outlook. And with that, we are ready for Q and A. Over to Eric. Thank you.

Eric, Moderator/Investor Relations, Bentley Systems: Thanks, Bernard. Before we begin, I just wanted to remind everyone to please ask only one question so we can get to everybody today. Our first question comes from Joe Vruwink from Baird.

Joe Vruwink, Analyst, Baird: Hi. Great. Hi. Hi, everyone. Thanks for the time today.

There’s obviously been a lot of focus on what’s happening in The US, and your commentary sounds quite positive. May maybe a few topics that would be helpful to address. First, since, the states are responsible for much of the regular way infrastructure activity in the country? Would you say your business also skews that way as opposed to federal? And then when it comes to the federal exposure, obviously, the the IIJA is is a part of that.

Are you seeing priorities under the current administration, change? So maybe the headline numbers are unchanged, but underneath the surface, is it changing? And is it actually changing in ways that could be positive for Bentley? I’m I’m thinking about how you have such high exposure to roads and grid work that seems to be an area of interest that I think would be a net benefit for you.

Greg Bentley, Executive Chair, Bentley Systems: I’m I’m gonna jump in sitting here in The US. To the first question, I think there there is slightly more dependence on federal funding in our mix given the highway funds are federal funds matched by the states and as Nicholas described, amplified by the states, but the greater portion is a federal portion somewhat. The mix within IIJA has changed, will change, but it’s it’s it’s in in keeping with the headlines you read about, the slightly different priorities by the Trump administration in regard to high speed rail and renewable energy and so forth. But another change is this administration has less tolerance for discretionary grant programs and will end up making more of it by formula for the discretion to return to the states, you like. And over to you, Nicholas.

Nicholas Cummins, Chief Executive Officer, Bentley Systems: Yeah. Joe, I think you described the the right way. The headline number, is expected to remain the same. It’s the mix that is gonna change. And and as you said, the mix might be actually in our favor as it changes.

Maybe more investment towards roads versus rail, and we’re traditionally very strong with, with roads. You know, what’s ex what what is actually interesting here is, the focus on efficiency indeed on cutting the red tape, and this is very well received by our users, by our accounts. Yeah. They they they they appreciate that. And then all the push for permitting reform to make permits delivered much faster, which should contribute to then an increase in in infrastructure to work related to the expansion of the electric grid or even potential mining.

Thank

Werner Andre, Chief Financial Officer, Bentley Systems: you.

Eric, Moderator/Investor Relations, Bentley Systems: Thanks, Joe. The next question in front comes from Matt Hedberg from RBC.

Matt Hedberg, Analyst, RBC: Can you hear me okay?

Nicholas Cummins, Chief Executive Officer, Bentley Systems: Yep. Yep.

Greg Bentley, Executive Chair, Bentley Systems: We can. Now we can, Matt.

Matt Hedberg, Analyst, RBC: Okay. Thanks, guys. Thanks for the time. Congrats on the results. Greg, that was a it was a great overview to start the call.

I think a lot of us, you know, think about, you know, some of the macro sort of tides that we’re hearing about, and I think sort of that overview was helpful in thinking about the durability of the model. I guess on the macro question, you illustrated there are some more sensitive areas like commercial industrials and commercial and facilities. I’m curious, in some of these more macro sensitive areas, did you see any sort of deals extend or anything that would illustrate any sort of macro pressure there? And I guess, has April trended relatively similar to March? Obviously, it seemed like from your results and your reiteration of the full year guide, but just sort of wondering about some of those more macro sensitive areas, if there was any sort of indication of macro pressure.

Greg Bentley, Executive Chair, Bentley Systems: I’m gonna ask Nicholas to comment on closer to the market short term feedback.

Nicholas Cummins, Chief Executive Officer, Bentley Systems: Yeah. Hey, Matt. I mean, as as Greg noted, commercial facilities and industrial are traditionally very sensitive to variations of demand and interest rates. And and we we we think that this is what has happened, especially for commercial facilities in the remaining years. I think in industrial, there is a more positive sentiment, especially in The US, given the big push for the new administration to bring back manufacturing in The US, which should lead to more and more activities.

But that’s that’s the extent to which I can I can comment? Yeah.

Greg Bentley, Executive Chair, Bentley Systems: And all of the above energy strategies are going to help industrial as well, but projects need to get underway.

Matt Hedberg, Analyst, RBC: Thank

Eric, Moderator/Investor Relations, Bentley Systems: you. Next question comes from Jason Celino from KeyBanc.

Speaker 4: Great. Thank you for taking my question this morning. The constant currency ARR growth in the quarter was really impressive, third quarter row of 12% growth. I I I don’t wanna say you’re tracking toward the high end of your guide because it’s only been a quarter. But how should we think about linearity of that growth through the rest of the year?

Thank you.

Greg Bentley, Executive Chair, Bentley Systems: Would would you like to take that, Vern?

Werner Andre, Chief Financial Officer, Bentley Systems: Yeah. Happy to do so. So I think I I will focus on, first of all, like, the the quarter, which was, a 2.1% quarterly ARR growth, which aligns very much slightly lower than the 2.2 that we had, like, a year ago. And q with q one twenty four dropping off and being replaced with q one twenty five, our our year over year growth rate remained relatively the same at at 12 at 12%. This was, exactly as we did expected for q one.

And and as you mentioned, it’s early. Only 20% of our renewal opportunity is in is in q one, but it puts us in a good, position relative to our financial outlook range. But I think this is a good opportunity to just reiterate, like, the the expectation of seasonality for us. So we do we do expect that our quarterly sequential ARR growth allocation is will be more in line with our quarterly contract renewal seasonality, which is with q one and q three at the lower end, q two higher, and q four being the highest. And then with regards to year over year ARR growth, we expect q three to be our seasonal low this year due to the timing of potential acquisition and asset analytics deals, which were particularly strong in twenty four q two and twenty four q three.

And these deals, we expect to be closer to year end in 02/2025, and then the impact from the Cesium acquisition will be dropping off in twenty five q three. So so that’s that’s kind of the framework how we think about seasonality as we go through the through the year.

Speaker 4: Perfect. Thank you, Werner. Yep.

Eric, Moderator/Investor Relations, Bentley Systems: Thanks, Jason. The next question comes from Siddi Panigrahi from Mizuho.

Siddi Panigrahi, Analyst, Mizuho: Thank you. Thank you for taking my question. Switching bit to the product side, it’s been, like, three quarters of CCM, CCM acquisition. And, also, recently, you announced Google, partnership with Google. Wondering how is that progressing, and what kind of opportunity you see in the asset analytics side, and and what kind of traction you are getting from customer?

Nicholas Cummins, Chief Executive Officer, Bentley Systems: On, Cesium, first of all, so we are progressing very well in, adopting Cesium technology across our portfolio when relevant, whenever we need three d geospatial visualization. And and with respect to to Google, same thing. We’re making good progress in adopting Google data, so two d data, Google Maps, basically, as an alternative to Bing Maps or Google three d photorealistic tiles using CZM technology, again, when when relevant. And with Google, as we we just announced this quarter, we are going one step further in leveraging their technology and their data when it comes to asset analytics. And the first product to benefit from that is our is our product, for the road network called Blinksy, where we are leveraging Google Suite view data, for asset inventories and also to do comparison of before and after.

And we’re using also Vertex AI, for stronger asset analytics. Right? So the way we, expect this to contribute is a a larger reach. We can go after more geographies now where the Google Street View data is readily available that allows us to do asset inventories without relying on the provisioning of, data by dish dashcam providers, for example. We expect, more use wait.

Well, we know, actually, we’re gonna cover more use cases, but we also expect a higher win rate simply because we have a stronger solution, thanks to the integration with Google. And I’ll just say, we’re still just at the beginning of a relationship with Google. There’s much more we’re working on. There’s much more that is coming.

Siddi Panigrahi, Analyst, Mizuho: Great. Thank you, Thomas.

Greg Bentley, Executive Chair, Bentley Systems: And as to Roadways and Blinksy during the quarter, we announced two new deals with DOTs that are among many that are in the works, but most to come later in the year, we think.

Siddi Panigrahi, Analyst, Mizuho: Great. Thank you, Craig.

Eric, Moderator/Investor Relations, Bentley Systems: Thanks. The next question will come from Taylor McGinnis from UBS.

Taylor McGinnis, Analyst, UBS: Yes. Hi. Thanks so much for taking my question and congrats on

Werner Andre, Chief Financial Officer, Bentley Systems: the

Taylor McGinnis, Analyst, UBS: quarter. If we go back to mid April, I think the White House put out some guidelines for permitting reform. And it seems like in the next ninety days or so, there’s going to be more action taken. So could you just maybe comment on the time line or when you think that could start to serve as a tailwind to your business? And I know in the past, you’ve mentioned this being a tailwind specifically to Sequin and PowerLine systems.

So any way, you know, to quantify, like, those businesses today and, you know, what that could mean potentially in the back half or into next year? Thanks.

Greg Bentley, Executive Chair, Bentley Systems: Well, I might jump in because I did mention that I think the, you know, the permitting reform is necessary. But even when you have permitting reform, you still need to get a permit, and there’s a a latency there. It’s just recognized as being urgent and needing to be addressed. And and while new mining is important and will will benefit power line systems and especially the grid capacity expansions. And what I was referencing, of course, is what happened in Iberia that that it’s catastrophic to to have overstressed grids fail.

Some progress has been made toward that, but but you might remember that I have said about our PowerLine Systems acquisition that I believe, you know, when we we talk about our business in general, we’re a subscription business. It goes on a long time. Things can’t change very quickly, but I have said that the power line systems business could grow by an integer multiple. Well, it will have done so already by the end of this year in the three years by then that we’ve owned it, but it really is poised to to grow more quickly because it’s indispensable, as we say, for the physical transmission infrastructure capacity expansion that the world needs in order to connect the renewables capacity that’s coming online and to balance it in in ways that the existing grid wasn’t designed for. So we do actually have a portion of our business that that is spring loaded, I think, to benefit from the permitting reform.

It just can’t happen even in one year, let alone one quarter, but it’s already it’s it’s already made a big difference for us.

Taylor McGinnis, Analyst, UBS: Thanks. Great. Thank

Eric, Moderator/Investor Relations, Bentley Systems: you so much. Yeah. Thanks, Taylor. The next questions will come from Jay Bleishauer from Griffin Securities.

Jay Bleishauer, Analyst, Griffin Securities: Thank you. Good morning. Greg, the charts that you provided earlier, the before and after charts on the number and scope of accounts was quite interesting and very useful. With that in mind, what is your pipeline assuming about the continuing trends of multi solution sales, particularly to your largest customers? Or conversely, given the current environment, are you seeing any possible signs of deal disaggregation, customers perhaps starting with something less than they might otherwise have done previously in terms of in terms of total, yeah, Bentley consumption?

And then relatedly, what are you thinking about or what are you seeing in terms of the work you’re doing for existing infrastructure versus new new infrastructure projects? Are you perhaps becoming increasingly tied to existing work and less so to new or the other way?

Greg Bentley, Executive Chair, Bentley Systems: Well, my first reaction is that this year plus backlog that that most of our constituencies have is is buffering and and making it a little bit hard to discern what you what we’re interested in just as much as you are in in in asking that question. Another another aspect of a buffer in any case is this tendency, which isn’t our idea, that the accounts on e three sixty five are glad to enter into multiyear escalation graduations because they know they have the backlog. They can see the incipient projects, see the return on investment, for instance, in The US where we’ve improved our our grade on infrastructure with IIJ and A, and want to know the boundaries of of what they’re gonna be spending as they do more digital contribution. They substitute technology for labor over time. So you can kinda read in what’s happening with the multiyear negotiation, which as I say, we we don’t we don’t ask for, but we’re glad to do it to kind of share the risk with our accounts.

But on the very most recent feelings from the market, Nicholas, perhaps you can bring us up to date.

Nicholas Cummins, Chief Executive Officer, Bentley Systems: Yeah, Jay. I’ll I’ll, I’ll make sure this is clear. Right? Our accounts are indeed cautiously optimistic, and I will put more emphasis on optimistic than cautiously. Cautious because they have to given the global economic environment, let’s say, discourse.

But when it comes to the fundamental of their business and therefore our business, it’s strong. Yeah? There’s never been so much demand for better and more resilient infrastructure. The the the the public funding is as strong, if not even potentially stronger in some region than it than than it than it was. So all very positive.

Therefore, there is quite the opposite of deal disintegration going on. You know, our accounts are more than ever leveraging e three sixty five to access as much software as they can. You know, we have great progress in SMB with our bundle of different products by engineering disciplines, structural engineering, for example, or civil engineering, which is, you know, working quite well. And then to your second question, whether we are shifting from existing to or sorry, net new or infrastructure to to to existing. I will say, traditionally, of course, a lot of our business is related to new infrastructure, but we see it as a major growth opportunity for the comp for the company to focus also on existing infrastructure.

We definitely want to grow our percentage of ARR, which is tied to, I said, operational and maintenance. It remains very much a growth opportunity for us going forward.

Greg Bentley, Executive Chair, Bentley Systems: It is Nicholas’ hallmark to accomplish that over his tenure to come.

Werner Andre, Chief Financial Officer, Bentley Systems: Yep.

Eric, Moderator/Investor Relations, Bentley Systems: Thanks, Jay. Next question will come from Kristen Owen from Oppenheimer.

Greg Bentley, Executive Chair, Bentley Systems0: Great. Thank you so much for taking the question. We focused a lot on the macro in The U. S. So I want to shift the conversation a little bit to what you’re seeing with your European customers, whether it’s the potential for a meaningful ceasefire in Ukraine or maybe some of the more robust defense and infrastructure stimulus packages that you mentioned in your prepared remarks.

Just wondering what you’re hearing from your customers there. If you’re seeing any of that optimism translating into backlog, where we might see mix of projects benefiting your, your portfolio. Thank you.

Nicholas Cummins, Chief Executive Officer, Bentley Systems: Yeah. So so our our growth in, in E and E overall was, was solid. That includes Europe as well. And, yes, in Europe, we’re still seeing the impact of major investments at the European level and then at the country level as well. At the European level, I think we’re not even at 50% of, the funding of the next generation EU plan, was, put in place a couple of years ago.

We must be at 48%, so there’s still more to come. And then in addition to this, there’s quite a bit investments, that has been announced related to defense. And even then, it will include additional investments in infrastructure, effectively for dual use. So making sure that infrastructure is good enough that we can move troops and, and, let’s say, military material as fast as possible. I think in the in the rearm Europe plan, they’ve highlighted something like 500 points, of infrastructure in Europe that must be upgraded in order to make sure that in case of crisis, we can move, equipment and people as fast as possible.

And, but those hotspots are used for both military and civil purposes. Right? So we can see a lot of investments coming. And then just yesterday, the new chancellor, Christian Metz first, was sorry, was elected in Germany. And you may recall that he has suggested a massive plan of something like 500,000,000,000 in infrastructure, including €100,000,000,000 for clean clean energy.

So this is, yeah, this is this is just massive. So the way we we’re gonna continue to benefit from that is investments going into transportation, investments going into energy security, investments going into overall resilience.

Greg Bentley, Executive Chair, Bentley Systems: And and water. I might say from The US perspective, I know, Kristen, we sit here in The US and and and hear blather about what’s going on in Europe, and I continue to be impressed by our performance by by country in Europe, also The Middle East, but but Europe are are serious and strong about infrastructure investments and especially for resilience, and and that’s prior to the impetus that’s occurred in the past ten days in with the grid.

Eric, Moderator/Investor Relations, Bentley Systems: Thanks, Kristen. Next question comes from Alexey Gogulov from JPMorgan.

Werner Andre, Chief Financial Officer, Bentley Systems: Hello, everyone, and great to see you all. Greg, with recent military events unraveling between India and Pakistan, could you elaborate on your ARR exposure to those markets, please?

Greg Bentley, Executive Chair, Bentley Systems: Well, I’m going to well, so, you know, what what I I commented that our r and d, for instance, is distributed all over the world. We we are we are a global citizen. An example is Pakistan. We have a significant r and d center in Islamabad. English skills are good.

Universities are good, and the availability of talent has always been strong there, but it isn’t much of a market. India in India, by contrast, where like other software companies, we have a lot of shared services and software development, but we are a net exporter to India because of their expenditure on infrastructure and their I mean, that’s it’s another great country for water along with road and rail and airports and grid. And and, Nicolas, maybe you can bring us up to date on the trends and directions. I know you called out India in particular.

Nicholas Cummins, Chief Executive Officer, Bentley Systems: Yeah. India has been and was again in q one a the the main growth driver in Asia Pacific. So we continue to benefit from massive investments on the local infrastructure by the Indian government, but we also have a lot of global firms who outsource work as structural engineering with local talent in India, and and this benefits us as well. Yeah? And we expect India to continue to be a a strong growth driver going forward.

Yeah? Those latest developments are very much I mean, there’s been constant tension between these two countries, as you know. Yeah? So we have to be very careful in interpreting interpreting what’s going on there.

Greg Bentley, Executive Chair, Bentley Systems: I I don’t wanna make light of it, but, Alexey, I remember asking our leader our our team leader in Islamabad when it was on the front pages for riots and insurrection and so forth. I I said, should should we be really worried about this geopolitical exposure in in this place where we do critical development? And he said, look. This is ambient around here. We don’t even notice it.

If you if you want to help us, help be sure we have twenty four hour power. And and so we’re able to help them get some generators. In other words, that’s the attitude of the Pakistani people. I I they they they expect some commotion around them, and they’re and they and they recognize that it gets what’s the right word? It gets overplayed in the in the world.

I hope that’s what’s the light the character this time, but, of course, we don’t know yet.

Werner Andre, Chief Financial Officer, Bentley Systems: Appreciate it. Thank you.

Nicholas Cummins, Chief Executive Officer, Bentley Systems: Yeah. I’ll just say that yeah. Sorry. Okay. Yeah.

Despite the the the the fact that it’s been such a strong growth driver, just to put things in perspective, India is is still a single digit percentage of our AR. Yeah?

Eric, Moderator/Investor Relations, Bentley Systems: Yeah. Around mid single digits. Think of think of it that way.

Werner Andre, Chief Financial Officer, Bentley Systems: Yeah. Yeah. Mid single digits.

Greg Bentley, Executive Chair, Bentley Systems1: Just to be clear. Thank you. Yep.

Eric, Moderator/Investor Relations, Bentley Systems: Yep. Alright. Great. Thank you. The next question comes from Blair Abernathy from Rosenblatt Securities.

Greg Bentley, Executive Chair, Bentley Systems2: Thanks. Good morning, everyone. Just a, you know, a question on the product side, if I can, as it relates to AI. So if you look at the sort of chronic shortage we’ve been seeing in the last five years or so in civil engineering and related infrastructure work, how are you guys looking at at helping customers to really drive up productivity, specifically using AI? And and then also, can just give us an update on how you’re using or looking at using this new technology internally, to drive Bentley’s productivity.

Nicholas Cummins, Chief Executive Officer, Bentley Systems: Yeah. So AI is gonna be part of the solution for sure, to allow infrastructure organizations to do more with less. We simply won’t be able to hire enough people to fulfill all the demand for infrastructure. There is a a big potential for efficiency gains by automating through AI some very mundane task that are just not the best use of, of the engineer’s time. And the first, you know, mundane task that we’re going after and that we commented on in previous calls is drawings production.

Depending on on engineers, it can take 40% of their time in just going from a three d model to a two d plan and then, like, manually annotating it so they can be used in in construction. It is just not a not a good use of their time. Right? So this can be automated for site plans. That’s what we’re doing with our first application that is leveraging AI for engineering application called OpenSite Plus.

And then we are, making good progress in extending those capabilities to other civil engineering, disciplines. Yeah. Now we are in a a great position to help there because, one, we’re actually leveraging a very deep and broad portfolio of engineering applications to train AI agents. So we’re teaching those AI agents the rules of engineering. They don’t have to guess them.

And then we’re also in a great position because so many of our accounts are leveraging product wise as part of built infrastructure cloud, to store their engineering files. And as they do this, we are leveraging our own digital twin technology to unlock those files, understand the data that is part of those files, making it, ready to query, to reuse, and potentially to train AI if and when our users decide so. So one thing that makes us quite distinct is we made it very clear that we will not use our users’ data to train AI unless they explicitly ask us to do so. So our AI agents are trained with their own engineering, applications. They’re fine tuned with the data that the users, are putting into product wise and benefit to cloud if and when, they want so.

Greg Bentley, Executive Chair, Bentley Systems: For that user’s own purposes?

Nicholas Cummins, Chief Executive Officer, Bentley Systems: Exactly. For their own purposes. And then when it comes to our own internal use of AI, we are leveraging AI, let’s say, across functions. And, of course, where we see the biggest impact is in our own development teams where very similarly, we have AI taking over the very mundane tasks that they don’t like, like commenting. Yeah.

Or it can help us for, you know, like, repeat code parts, like mundane functions. All of that AI can can help and save quite a bit of time. You know, ten, fifteen, 20 percent of a of a developer’s time can be saved like this through AI. And we can see potential for even more. Yeah?

So we are constantly on the lookout for new technology that is available that that can help accelerate the productivity of our own developers.

Eric, Moderator/Investor Relations, Bentley Systems: The next question comes from yeah. Thanks, Blair. The next question comes from Joshua Tilton from Wolfe.

Greg Bentley, Executive Chair, Bentley Systems1: This is Ivan here for Josh. Thank you guys for taking my question, and congrats on a great quarter. We talked a lot about various funding impacts, but maybe just one on the Doge side. So how should we think about the resiliency of the budgets in relation to Doge? What is the impact of Doge and budgets, if any at all?

Thank you.

Greg Bentley, Executive Chair, Bentley Systems: Well, we we haven’t heard of any impact from that. I have not. But I continue to hope that in the process of diminishing returns, it won’t it won’t be long because infrastructure provisioning being a bipartisan priority of government, if there would be a question of can we get fundamentally more efficient at that. And it would there’s an opportunity in The US just to catch up with the rest of the world in the application of of of of digital twins. If you look in the 2024 infrastructure yearbook, you you see, candidly, more progress elsewhere in the world where where they’re more open where where the world is more open to new workflows in going digital in digital delivery.

That that has become a priority in The US in certain states, but there’s much more that’s possible, and we hope they’ll get to that.

Eric, Moderator/Investor Relations, Bentley Systems: Thanks. The next question comes from Kash Rangan from Goldman Sachs. Ash, I think you’re muted. All right. We’ll try again.

But next question, Michael Funk from Bank of America.

Joe Vruwink, Analyst, Baird: This is Matt Bullock on for Mike Funk. My question is on the asset analytics business. Could you maybe provide you know, a little bit more color on the progress there and maybe help us frame the upside case for the remainder of 2025?

Greg Bentley, Executive Chair, Bentley Systems: Well, upside case is is what we’re after with asset analytics. The rest of our business is so predictable. You’ve heard me say I I really want us to go after some of this stuff that can can really take off, and maybe, Nicolas, you can tell us your expectations for this.

Nicholas Cummins, Chief Executive Officer, Bentley Systems: Abs with with great pleasure. So asset analytics performed as expected in q one. Yeah. With Blinci. Greg mentioned that we won two DOTs, Florida DOT and Michigan DOT.

And we expect, you know, more coming because we see so much interest in The US and then beyond The US. I talked about our partnership with Google, stronger integration now between our our Blinxie solution together with Google Street View imagery and and Vertex AI. This will help for sure in increasing our market potential and our our our win rate. And then when it comes to our telecom solutions, OpenTireIQ, we saw solid growth in q one with many new towers to process that are definitely exceeding the number of towers that have been, let’s say, rolling off after construction. So all all quite positive.

You know? This is a growth opportunity for the company going forward. Yeah? At some point, we do hope to to add through acquisitions some additional capabilities in order to accelerate our our AR in that space.

Eric, Moderator/Investor Relations, Bentley Systems: Okay. Great. Thanks. The last question, I believe, comes from Jackson Bogle from William Blair.

Greg Bentley, Executive Chair, Bentley Systems3: Great. Thanks. Hey, everyone. This is Jackson Bogle on for Dylan Becker. Maybe staying on the analytics side, the new capabilities with the Google Maps imagery, I know we talked about that a lot.

Could you just talk through how the convergence of data analytics and imaging is kinda driving the next wave of innovation and client needs and and maybe how that ties into your prior push around advanced visualization? Thanks.

Nicholas Cummins, Chief Executive Officer, Bentley Systems: So we we, like, by the way, the accounts that we serve, the engineering firms, see the operations phase of the infrastructure life cycle as a very interesting growth opportunity, an opportunity to also have some, recurring recurring business. Now when it comes to asset operations, the, let’s say, standard way of understanding, what’s the the the the the current conditions, of their assets is to send some people to do some inspections. That’s highly inefficient. Yeah. The more this can be automated, the the better for everyone, yeah, in in in involved.

When it comes to our road network solution, the way we’re automating is by processing, for example, the Google Street View imagery, to understand, the full inventory of a road network, to understand where, you know, the traffic signs or etcetera. We are able already to process a little bit their conditions, but then we’re comparing with some crowdsourced data, primarily coming from dashcam providers actually to understand the exact physical condition at this point in time, and then we can compare with some with how it looked in in the past. Yeah? And this is so much more efficient can if you can imagine, right, than sending sending off people. Yeah?

Because that data, when it comes to Google’s preview, it’s readily available. And then the data that is coming from dash cams is is also something that can be immediately processed in order to understand what’s going on with those assets. Yeah?

Greg Bentley, Executive Chair, Bentley Systems: Nicholas, the the further inefficiency of sending someone out to inspect is normally, while they can inspect, they can’t update the as operated record of what’s there because that’s in a GIS system that’s in a different kind so the Cesium to sort of connect that all together so that the process of continuous surveying can also provide the needed updates. And then the AI, as you say, can compare across time. So you have this digital chronology and the digital twin that but, yes, it it it is the innovation in graphics and surveying that that can lead to an organic and evergreen digital twin during operations and maintenance and kind of bypass traditional workflows. And when I talk about the rest of the world where where the imperative is get projects done and get maintenance done, You you you see, you know, traditional two d surveying being done as a matter of record, if that, and the three d geospatial approach being the primary way of both projects and in asset performance going forward.

Eric, Moderator/Investor Relations, Bentley Systems: Thanks, Jackson. That concludes our call today. We thank you for your interest and time in Bentley Systems. Please reach out to Investor Relations with further questions and follow-up, and we look forward to updating you on our performance in coming quarters. Thank you.

Thanks, everyone.

Greg Bentley, Executive Chair, Bentley Systems: Thank you.

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