Earnings call transcript: Bentley Systems Q2 2025 beats EPS forecast

Bentley Systems Inc., a software company with an impressive market capitalization of $17.99 billion, reported a strong second quarter for 2025, surpassing earnings expectations with an earnings per share (EPS) of $0.32 against a forecast of $0.28. This 14.29% EPS surprise was accompanied by revenue slightly exceeding predictions at $364.1 million compared to the anticipated $363.49 million. According to InvestingPro analysis, the company is currently trading slightly above its Fair Value. Despite these positive results, shares of Bentley Systems saw a pre-market dip of 0.09%, reflecting a $0.05 decrease to $57.00.

Key Takeaways

• Bentley Systems achieved a 10% year-over-year revenue increase, reaching $364 million.
• Subscription revenues, which make up 92% of total revenues, grew by 12% year-over-year.
• The company reported an adjusted operating income of $105 million, maintaining a margin of 28.9%.
• Bentley’s ARR reached $1.379 billion, with an 11.5% growth rate year-over-year.
• Free cash flow projections have been raised to between $430 million and $470 million.

Company Performance

Bentley Systems demonstrated robust performance in Q2 2025, with total revenues increasing by 10% year-over-year. The company continues to capitalize on its strong position in the infrastructure engineering software market, driven by a focus on subscription-based models and innovations like the new MicroStation 2025 release with Cesium integration. The company’s consistent growth in annual recurring revenue (ARR) underscores its effective strategy and market demand.

Financial Highlights

• Revenue: $364 million, up 10% year-over-year.
• Earnings per share: $0.32, exceeding the forecast by 14.29%.
• Adjusted operating income: $105 million, with a margin of 28.9%.
• Free cash flow for the quarter: $57 million, $273 million year-to-date.

Earnings vs. Forecast

Bentley Systems outperformed expectations with an EPS of $0.32, surpassing the forecast of $0.28, marking a 14.29% surprise. Revenue also slightly exceeded forecasts, coming in at $364.1 million compared to the projected $363.49 million. This performance aligns with Bentley’s historical trend of meeting or exceeding market expectations, demonstrating the company’s ability to leverage its subscription model effectively.

Market Reaction

Despite the positive earnings report, Bentley Systems’ stock experienced a slight pre-market decline of 0.09%, with shares priced at $57.00. This movement contrasts with the stock’s 52-week high of $59.25, indicating a cautious investor sentiment. InvestingPro data reveals the stock has demonstrated strong momentum with a 22.44% return over the past six months, while maintaining relatively low price volatility. The broader market context and sector performance may have influenced this reaction, as investors weigh Bentley’s long-term growth prospects against immediate market conditions.

Outlook & Guidance

Looking ahead, Bentley Systems aims for low double-digit ARR growth and expects a 100 basis points margin expansion. The company is focusing on asset analytics opportunities and continuing investments in AI capabilities, which are anticipated to drive future growth. InvestingPro’s Financial Health Score of GOOD (2.82) supports the company’s positive outlook, with particularly strong scores in profitability (4.07) and growth (3.5).

[Access the comprehensive Pro Research Report for Bentley Systems, one of 1,400+ detailed company analyses available exclusively on InvestingPro.] The free cash flow outlook has been raised to $430 million to $470 million, reflecting confidence in ongoing financial performance.

Executive Commentary

Greg Bentley, CEO, emphasized the ongoing digital transformation in infrastructure engineering, stating, "Going digital has become the enduring priority for infrastructure engineering." Nicholas Cummins, COO, highlighted the potential for AI to redistribute value within the infrastructure ecosystem, noting, "The potential productivity gains for everyone involved in the ecosystem of infrastructure through AI are such that we’re gonna see value redistribution."

Risks and Challenges

• Engineer shortage remains a primary market constraint, potentially impacting project timelines and costs.
• Macroeconomic pressures, such as inflation and interest rate fluctuations, could affect customer spending.
• The integration of AI and new technologies may require significant investment and adaptation.
• Competitive pressures from other infrastructure software providers could impact market share.
• Geopolitical tensions, particularly involving China, may influence global operations and revenue.

Q&A

During the earnings call, analysts inquired about the consistency of demand across different account sizes and the potential evolution of Bentley’s pricing models due to AI enhancements. The company acknowledged the ongoing engineer shortage as a market constraint and highlighted the exploration of AI-driven productivity improvements as a strategic focus.

Full transcript - Bentley Systems Inc (BSY) Q2 2025:

Eric Boyer, Investor Relations Officer, Bentley Systems: Bentley Systems Q2 twenty twenty five 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 08/06/2025, 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 08/06/2025. 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 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 Verner will, as always, report in detail Bentley Systems’ continued excellent operating and financial results for twenty five q two and thus for the 2025 as we track consistently towards our outlook range for this full year. Earlier this year in reviewing twenty four q four, 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 twenty five q one, 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 and 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, Cambashi. 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 Kambashi 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 BSY 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 Kavatchy’s observation that in 2023, 17,600,000 infrastructure engineers globally spent $10,200,000,000 on engineering and GIS software, averaging a relatively higher annual spending of $579 per engineer. For this new 2023 data, Kambachie 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 level one countries, while nearly the least numerous, spend this 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 e three sixty five. 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 Kambashi data to understand how so much of this $10,000,000,000 in software spending by infrastructure engineers obviously goes elsewhere than to BSY.

To do this, let’s parse the full $14,000,000,000 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 catchall for what could otherwise be described as AEC, for architecture, 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 Kambashi are the market shares within the $6,500,000,000 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 Kambashi listed here in the fine print. To help understand the widely varied mix across infrastructure segments per competitor within BIM design, Kambashi 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 Kambashi’s estimates here seem to discount Sequence 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. Nenetschek’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 civil product share, its offerings for civil 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 geoprofessional 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 twenty five q two. Over now to Nicolas.

Thank you.

Nicholas Cummins, Chief Executive Officer, Bentley Systems: 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 fourteenth consecutive quarter, we added more than 600 new SMB logos through online store. Retention within this 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 Powerline 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 remained confident in their outlooks for the year despite ongoing uncertainty related to tariffs, policy shifts and regulatory changes. There is 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 Paradise Systems and Sequant businesses, both standout growth drivers since their acquisition three point five 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 ten year infrastructure strategy, which earmarks £725,000,000,000 in long term funding and aims to attract private investment into its national infrastructure. And in July, the European Commission put forward its €1,800,000,000,000 proposal for the next long term EU budget for twenty twenty eight to two thousand thirty four. The proposal clearly prioritizes investment infrastructure and should be a continued tailwind for funding in years to come. In Asia Pacific, the overall performance remained 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 two thousand and thirty two 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 Finally, I want to highlight the success of our first ever Cesium Data of the Perth conference, which brought more than 400 attendees from around the world to Philadelphia. We acquired Cesium for its market leading three d 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 AC 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 are using Cesium to deliver powerful three d geospatial experiences in applications for the built and natural environment. One example is HNTB, an engineering firm that leverages Cesium and Google’s three d photoresist tiles 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 have made integrating Cesium across our broader product portfolio at our upcoming year infrastructure conference this October in Amsterdam, alongside advancements in AI and Bende Infrastructure Cloud. And with that, I will turn it over to Werner.

Werner Andre, Chief Financial Officer, Bentley Systems: Thank you, Nicolas. We’ve had a strong first half of the year and are well positioned with respect to our financial outlook range for the year. Total revenues for the second quarter were 364,000,000, up 10% year over year on a reported basis and 9% on a constant currency basis. Year to date, total revenues grew 10% on a reported and constant currency basis. For the first quarter and year to date, strong growth in subscription revenues was partly offset by a reduction in professional services and to a lesser extent in license revenues.

Subscription revenues now represent 92% of total revenues, up two percentage points from the same periods last year, reflecting improvement in the overall quality of our revenues visibility, growth consistency, and margin contribution. Subscription revenues grew 12% year over year for the quarter in reported and 11% in constant currency. And for the first half, more normalized for mix and timing, subscription revenues grew 12% on a reported and constant currency basis. Our SMB and e three sixty five initiatives continue to be solid contributors. Perpetual license revenues for the quarter were $10,000,000 down $1,000,000 year over year.

Perpetual license sales make up only 3% of total revenues and will remain small relative to our recurring revenues. Our less predictable professional services revenues declined 7% for the quarter in reported and 9% in constant currency and now represent 6% of total revenues, down one percentage point from the same period last year. It is still the case that the largest portion of these nonrecurring services relate to IBM 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 in constant currency and represent 92 of our last twelve months 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 rounded down to a 109%, led in magnitude by accretion within our consumption based e three sixty five commercial model.

We ended q two with ARR of 1,379,000,000 at quarter end spot rates. On a constant currency basis, our year over year ARR growth rate was 11.5%, consistent with our expectations. Excluding China, our year over year constant currency ARR growth rate was 12%. China is now 2% of our total ARR. On a quarterly sequential basis, our constant currency ARR growth rate was 2.7%, slightly below our twenty four q two sequential growth rate of 2.9%, impacted by the timing of programmatic acquisitions and asset analytics deals.

With regards to seasonality, we expect twenty five q three to be our seasonal low quarter for year over year ARR growth due to the timing of potential acquisitions and anticipated asset analytics deals, which were particularly strong in twenty four q two and twenty four q three to be closer to year end in 02/2025. And the favorable impact from onboarding the Cesium acquisition will be dropping off in twenty five q three. Our GAAP operating income was 84,000,000 for the second quarter and 200,000,000 year to date. 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, our primary profitability and margin performance measure.

Adjusted operating income, less SBC expense, was 105,000,000 for the quarter, up 10% year over year with a margin of 28.9%, up 10 basis points. Year to date, adjusted operating income less SBC expense was 231,000,000, up 11% with a margin of 31.5%, up 40 basis points. Our margin performance for q two and year to date has been strong, particularly when considering that the year ago period benefited from head cost run rate savings associated with the twenty three q four strategic realignment program. Our twenty five q two margin benefited from our mix shifts towards higher margin subscription revenues and from certain discretionary OpEx spend being slightly more back half loaded in 2025 when compared to 02/2024. We remain confident about delivering our 100 basis points full year margin improvement target.

As a reminder, our OPEC seasonality is always more heavily weighted towards the second half with our annual races occurring as of April 1 each year and our larger promotional and event related costs also concentrated in the second half of the year. Our free cash flow was 57,000,000 for the quarter and 273,000,000 year to date. This is generally consistent with our expectation that based on our seasonality of collections and expenditures, free cash flow for the first half would be on the order of 60% of our full year free cash flow outlook of 415 to 455,000,000. In addition, we estimate that our 2025 will see cash tax benefits in the range of 15,000,000 from the recently enacted one big beautiful bill, primarily attributable to the restoring of immediate US tax deductions for domestic r and d expenses. As a result of this tax policy change, we are raising our 2025 free cash flow outlook to a range of 430 to 470,000,000 from previously 415 to 455,000,000.

With regards to capital allocation, along with providing sufficiently for our growth initiatives, during the first half of the year, we deployed free cash flow as follows, 135,000,000 fully paying down our senior debt, 75,000,000 in effective share repurchases to offset dilution from stock based compensation, 10,000,000 in convertible senior notes repurchases, and 42,000,000 on dividends. With our senior debt being fully paid down, our net debt leverage, including all of our 2,026 and 2,027 convertible notes as debt, was 2.4 times adjusted EBITDA, down from 2.9 times at the 2024. Our strong balance sheet and projected free cash flow generation will sufficiently fund our dividend, share repurchases, and growth initiatives, including potential programmatic acquisitions. Our five year senior secured credit agreement dating from October 2024 provides a currently undrawn 1,300,000,000.0 revolving credit facility. Combined with our strong balance sheet and anticipated future free cash flow generation, this affords sufficient flexibility if needed to refinance 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 the recent past.

Interest rates on our debt are protected for very low coupons on our convertible notes and very favorable terms on our 200,000,000 interest rate swap expiring in 02/1930. And finally, with regards to our outlook for the year, our financial performance for twenty five q two puts us in a solid position to deliver within our annual outlook range for AR growth, revenues, profitability, and now increased free cash flow. With regards to foreign exchange rates, for the second quarter, the US dollar has weakened relative to the exchange rates assumed in our 2025 annual financial outlook, resulting in approximately 7,000,000 of incremental revenues from currency and the total first half favorable impact of approximately 8,000,000. Based on more recent rates where the US dollar has further weakened relative to our outlook rates, if July exchange rates would prevail throughout the remainder of the year, our second half GAAP revenues would be positively impacted by approximately 17,000,000 relative to the exchange rates assumed in our 2025 financial outlook. And with that, we are ready for q and a.

Over to Eric to moderate. Thank you.

Eric Boyer, Investor Relations Officer, Bentley Systems: Thanks, Werner. Before we begin, I just wanted to remind everyone to please limit yourselves to one question so we can get to everybody today. Our first question comes from Matt Hedberg from RBC.

Matt Hedberg, Analyst, RBC: Great. Thanks, guys. I don’t know if you can hear me okay. Yes. Thanks for the thanks for the thanks for all the detail on the call.

I wanted to ask about the macros. It sounded like in some of the prepared remarks that macros remain strong, and you called out specifically strength in SMB. I’m curious, did you notice an improvement sequentially now that we’re past some of the initial tariff uncertainty? Or is this just kind of business as usual, you know, from from your perspective?

Nicholas Cummins, Chief Executive Officer, Bentley Systems: Yeah, Matt. I’ll, I’ll take this one. I would say it’s just very consistent. Yeah. It’s a very consistent, environment from the standpoint of all the investment that is going into infrastructure.

And, yes, there’s been noise with tariffs. There’s been noise with maybe change of priorities, etcetera. But overall, it’s just a very consistent environment. What we’re hearing from our accounts is that they are just very positive about their own outlook, whether they are big or small accounts. Yeah?

And, if there’s one thing that is also quite consistent is the fact that there’s really no problem with the demand. There’s a problem with the capacity. They just don’t have enough engineers. And that remains the backdrop for our own demand environment, which is we’re uniquely positioned to help them be more productive with the capacity that they have in order to cope with that demand.

Eric Boyer, Investor Relations Officer, Bentley Systems: Great. Thanks, Matt. The next question comes from Joe Verwink from, Robert Baird.

Joe Verwink, Analyst, Robert Baird: Alright. Great. Thanks for the time this morning. Thought the TAM analysis was good at the start. One thing that comes to mind that your products are typically thought of as the premium offering and the various disciplines you serve in, you know, premium because of functionality, but oftentimes that also comes with a certain price point.

When you think about reaching the long tail of engineers that are spending below a thousand, let’s say, do you have the right product set and right reach, right go to market model to effectively address?

Nicholas Cummins, Chief Executive Officer, Bentley Systems: I think we have indeed the full range and, you know, the the our our traditional product, MicroStation by which we started the company, is is really the entry point, for engineers to start, working with, with our software. And it remains one of the main growth drivers in SMB. So I think that’s quite telling, which is that’s where we start. And then when when we have accounts, we start to use the MicroStation software. They become great targets for upsell to more sophisticated application that will be more specific to certain, assets, or to a cross sell with, with, related, you know, engineering applications, or collaboration software.

So we have the full the the full range. And then, I mean, testament to that is just the continued growth that we see in SMB. There’s just no slowing down. You heard it, yeah, in the in the in the prepared remarks, you know, more than than 600 new logos for the fourteenth consecutive quarter. And, again, very often, those new accounts that we’re winning through SMB, are actually starting with MicroStation.

Eric Boyer, Investor Relations Officer, Bentley Systems: Thank you. Thanks, Joe. Next question from Chris Noen from Oppenheimer.

Chris Noen, Analyst, Oppenheimer: Hi. Good morning. Thank you for taking the question. I wanna double click on some of the the TAM analysis and and ask you about the data center opportunity. Is there a way to understand sort of the the Bentley Systems total addressable market there, whether it’s through energy infrastructure, roads that go out to the data center, or even some of the water infrastructure?

And beyond that, is there sort of a persona that you’re thinking about that you can bundle, any sort of potential external partnerships with hyperscalers, asset owners, sort of unpack that data center opportunity for us? Thank you.

Greg Bentley, Executive Chair, Bentley Systems: I’m I’m gonna let Nicholas respond in the main, but I will say that I’m struck during the quarter by The US AI strategy, which articulates that it needs to include an infrastructure investment strategy for the reasons you described. And and, of course, this isn’t limited merely to the place where the data center sits, but the way it’s connected up, especially with the electrical grid, that is a particular opportunity for us. But the the other aspects of the portfolio beyond merely the the building and its structures. Our our structural analysis software especially is used in that, but but a a data center is a small city altogether and includes all the other aspects of the ecosystem you mentioned. But, Nicholas, you’ve been looking at this, I think, more in in particular.

Nicholas Cummins, Chief Executive Officer, Bentley Systems: Well, I will say, Kristen, the way you’re looking at it is the way we’re looking at as well, yeah, which is indeed there’s a a lot of infrastructure relate when when it comes to data centers that is for the data center itself and then surrounding the data center, as Greg just explained, these are really more like mini cities or campuses. Yeah? And then whenever you have, let’s say, high spatial density with engineering complexity, this is typically a a a great opportunity for us. So we we do offer software to design many aspects of the data center and the surroundings of the data center. You mentioned the road, of course, you know, the the the distribution lines, the the water, and and and so on and so forth.

But we also offer software that helps put all of this together, understand the interrelationships between all of these infrastructure assets. Yeah? I think what’s interesting with the hyperscalers, is they’re obviously software first. They understand the the power of software, and they’re quite receptive to the notion of let’s make sure that when we design, we design right from the start for operations. And then we make sure that there’s a digital twin that is being created at the moment of design, which is used to schedule and manage the construction and which will then be used for the operation of data center.

I’m not talking about the inner operation of the data center, obviously, but all the surrounding infrastructure. I think a good, let’s say, testament to that is the uptake of Synchro, which is used quite systematically, for the construction modeling of data centers by hyperscalers.

Eric Boyer, Investor Relations Officer, Bentley Systems: Thanks, Kristen. The next question comes from Jason Celino from KeyBanc.

Jason Celino, Analyst, KeyBanc: Great. Thanks. Warner, I I don’t know if I heard you correctly, but did you say that the free cash flow guidance was moving up 15,000,000 because of the benefits from the the OBVA? I know there are a couple ways of recognizing the benefit. I mean, not to get too much in the nitty gritty, but is this the accelerated adoption, or or should we expect Not multiple years of benefit?

Werner Andre, Chief Financial Officer, Bentley Systems: There will be multiple years of benefits, Jason. The the 15,000,000 is for the for the first year, and it considers actually that we had prepayments already in the first half of the year. So the normalized annual benefit that we are that we’re seeing for ’25, would be approximately $1,010,000,000 higher than the 15,000,000. But based on the, prepayments that we that we took, this will roll over into the 2026 year. But we we are still evaluating, but we we don’t we don’t plan on an accelerated, adoption.

So that’s just a normalized benefit, if you will, and then you will see more benefits coming over there for the following years.

Jason Celino, Analyst, KeyBanc: Okay. Amazing. Thank you. Yep.

Eric Boyer, Investor Relations Officer, Bentley Systems: Thanks, Jason. Next question from Sidney Panigrahi from Mizuho.

Greg Bentley, Executive Chair, Bentley Systems: No. We can’t hear you, Sid.

Nicholas Cummins, Chief Executive Officer, Bentley Systems: Still not on.

Eric Boyer, Investor Relations Officer, Bentley Systems: Okay. Maybe we’ll move on and come back. Can we get Warren Myers from Griffin Securities, please?

Warren Myers, Analyst, Griffin Securities: Yes. Good morning. Thank you. This is Warren in for Jay. Quick question.

Aside from the plan to incorporate Cesium where appropriate in a portfolio, what are some of the other critical development and deliverables for the next six to twelve months even if you don’t expect an immediate impact to revenues? And related to that, over the past few months, Bentley has exhibited an uptrend in the number of r and d openings while keeping sales openings flat. Could you comment on the thinking behind those recent numbers as well? Thank you.

Nicholas Cummins, Chief Executive Officer, Bentley Systems: Alright. So on the on the first question, let me, take a step back and say that our, r and d priorities are AI, Cesium, and then integration of Cesium integrated across our portfolio, and then the deeper integration of Cesium with iTwin into a unique platform for the built and natural environment. Yeah? So with respect to Cesium and our progress there, so I think in last quarter, we talked about EVO, which is our data and compute platform for geoscience data, that is coming out of our Sequen business. And this one has already had already embraced, Cesium as the main user interface.

And then, as I commented in the prepared remarks, we brought very important iTwin capabilities into the Cesium platform, and we announced that at our, very first Cesium developer conference. The reason why this one is particularly, symbolic is you might remember that one of our strategic objectives with the acquisition of Cesium was to leverage the Cesium ecosystem to accelerate the adoption of our iTwin capabilities. And so there you go now. The iTwin capture capabilities that are used to create reality models, be able to visualize it with, Gaussian splats, being able to run AI on it to detect some features, etcetera. All of those capabilities are now immediately available from the from within from within the Cesium platform.

Now what is also a great validation of that strategy is that one of the longer term partners of Cesium, which is EarthBrain, a JV which is majority owned by Komatsu in Japan, has, agreed with us to expand their partnership from Cesium to iTwin and to add up iTwin capture and the iTwin platform, in order to support, their own applications for construction simulation and, and management. Yeah? And then just in the last few days, we released MicroStation twenty twenty five. So, again, our very core product, for generic modeling, which now, has built in the Cesium integration so you can actually visualize your designs in full three d geospatial context, including, by the way, with three d photo realistic tiles that are coming from Google, leveraging the same technology of of Cesium. So some some very exciting progress there, and there’s more to come.

There is the integration of Cesium and building faster cloud, and a lot that we’ll be discussing at our annual conference in a in a couple of months now in in Amsterdam. Yeah? And then to to the the second question, which is the fact that we you see openings in r and d, and you see, however, openings in sales quite flat. I will say probably two things. One is a, you know, a clear sign that we are able to scale the business without necessarily throwing people at it on the go to market side.

Right? So it speaks a lot to, again, the strength of our demand environment and the strength of our products. The other thing I will say is we’re, you know, quite fast, and probably a little faster in hiring go to market resources than we are hiring in r and d resources. Yeah? And our big focus when it comes to hiring r and d resources is AI, which, again, is our number one priority when it comes to investment this year.

Eric Boyer, Investor Relations Officer, Bentley Systems: Thanks. The next question comes from Taylor McGinnis from UBS.

Taylor McGinnis, Analyst, UBS: Hey, thank you guys so much for taking the question. So it seems like you’re well on your way to hitting the midpoint or even slightly above the constant currency ARR guide for this year. But in terms of the scenario that could push you to the higher end of the guide to 12.5%, what does that look like? You mentioned the permit reform opportunity earlier on. It sounds like emerging growth opportunities with asset analytics and maybe some of the AI stuff continues to move along nicely.

So are there any second half catalyst that you are particularly excited about that could be a source of upside for us to monitor?

Greg Bentley, Executive Chair, Bentley Systems: Taylor, I think you named them, to which I would add that our acquisition strategy this year is focused on asset analytics opportunities rather than broad programmatic acquisitions as has been the case in the past. And we’re fussy about those and and but nonetheless determined about it. And we have not had a significant acquisition since last year’s Cesium acquisition, which which will roll off here in the in this third quarter. But we are hopeful about such opportunities during the remainder of the year.

Taylor McGinnis, Analyst, UBS: Perfect. Thanks so much.

Eric Boyer, Investor Relations Officer, Bentley Systems: Yeah. Thanks, Taylor. The next question comes from Matthew Bullock from Bank of America.

Greg Bentley, Executive Chair, Bentley Systems0: Hi. Good morning, guys. This is Matt on for Koji Ikeda. I wanted to ask a little bit more about asset analytics. Maybe if you could just help remind us the growth profile there, the run rate today, you know, the key areas of, you know, execution focus for that business outside of the programmatic and potentially larger acquisitions in that business line?

And then finally, it sounds like there’s some seasonality on Nuance this year, slightly tougher comps from an ARR perspective this quarter and and third quarter? Just maybe help us understand the shift in seasonality in 2025.

Greg Bentley, Executive Chair, Bentley Systems: Matt, I’ll I’ll say that the the business the asset analytics business isn’t yet of such magnitude that we break it out and track it. What I can say is it contributes a lot of our volatility. Such volatility as we have is largely related to that because the rest of everything is subscription oriented and renewing floors and ceilings and so forth. In asset analytics, we’re we’re chasing the major opportunities in the world because we wanna get our elbows out and and have those proof points. So they’re they’re large and lumpy when they come.

We have also discovered that sometimes they last only a year because the asset analytics are during a construction phase of something, and then you have to sell again to the upper owner operator constituencies. And so we’re learning this business as we go. And there was reference to the second and third quarters last year in 2024 being when we won the big deals, and we’re working on a bunch of them now. You may want to speak about one, Nicholas, that has a particular qualitative aspect that we think is auspicious for the future in the case of Blinksy.

Nicholas Cummins, Chief Executive Officer, Bentley Systems: I I I will. Before I talk about Blinksy, which is our road monitoring solution, I will say that with the other analytics business we have, which is for cell towers, it has indeed been historically volatile because of the reasons that Greg just explained. I think as that business gets bigger, the volatility will decrease. But, also, as we are refocusing on slightly different type of accounts with slightly different use cases. You know?

Historically, we’ve been working a lot with equipment manufacturers, for example. They will use our software to inspect ours before and after the installation of that equipment. But more and more, we’re targeting the actual owners of the cell towers or the mobile operators, and their use case is different because they actually want to monitor those towers on a continuous basis. Therefore, as we win some of their business, we will decrease the volatility. But now back to road monitoring solution, indeed, a very auspicious opportunity here as Greg just indicated.

Traditionally, we are selling to transportation authorities, and, you know, those can be long cycles, by the way, but very worthwhile. And I I think at some point, we’ll pass a tipping point where there will be so much, you know, great examples of success of transportation authorities with our software that others will follow much quicker. But we now have one very large global engineering services firm, which is leveraging the capabilities to offer their own high end value services to a US territory. The reason why we like that a lot is because it fits exactly our strategy of Fastenatix where we don’t wanna necessarily to go after all the owner operators under the sun. We do want to leverage our strong relationship with engineering services firms.

And as they divert diversify their own business beyond product delivery, going into asset operations and and and in order to offer these high value services for asset operations and maintenance, we wanna be right there with them, with our software, with our technology, with our platform in order to allow them to do that. So so we welcome that very positive development, and we hope it’s the first of many to come.

Greg Bentley, Executive Chair, Bentley Systems0: Fantastic. Thank you.

Eric Boyer, Investor Relations Officer, Bentley Systems: Thanks. Let’s move on to Wolfe Research for the next question.

Warren Myers, Analyst, Griffin Securities: Hey. Hey, guys. This is Ivan here for Josh. Thanks for taking my question. Can you elaborate on on what drove the slight downtick in NRR?

And then when do you sort of expect that to go back to the double digit range? Thank you.

Greg Bentley, Executive Chair, Bentley Systems: Well, I’m gonna say first, I think it’s teetering between a 109 and a 110%. If you think of our business generally, you know, half of our NRR or so is from price escalation, the other half variously from the contributors to consumption otherwise, And then there’s another 3%, which is from new names on top of the NRR that makes up our ARR growth as that is 11 and a half ish or so percent. So the it it’s all rather consistent, but rounds up or down, you could save it from nine to 10%, but I realized that’s from one to two digits also. I think it’s it’s kind of accidentally in that in that range. But, Garner, would you like to comment more quantitatively than than that?

Yeah.

Werner Andre, Chief Financial Officer, Bentley Systems: I think I think you’re spot on like this. If I go to the numbers, I think it was, like, 9.45 rounding down to to nine. It is within that nine to 10% range, and it did round down to nine. So there’s nothing really significantly driving kind of a shift from 10 to nine. It’s it’s within that range, and that’s a that’s a solid range for us.

Greg Bentley, Executive Chair, Bentley Systems: I guess something to remember about NRR is it look looks back altogether fully two years, and there’s a lot of China in that China pressure in in that still. If at some point, the China ARR downdraft has to slow down because it’s down to only 2% of ARR at the moment. But when you look back fully year ago versus two years ago, it’s pretty significant.

Eric Boyer, Investor Relations Officer, Bentley Systems: Thanks. Last questions will come from Mizuho Securities.

Greg Bentley, Executive Chair, Bentley Systems1: For for the for the earlier mix up, wrong button. But excellent. Thank you. So the so we we also look at other vertical names like the cadence synopsis, and one of the common themes we hear across all the verticals these days is shortage of engineers and how AI is helping to to kinda, like, help that problem through AgenTik AI. That is like the rave in AI world these days.

So given all the acquisitions and and and Cesium and the the inroads into the AI into the AI world. I’m curious how you’re thinking about AgenTeq AI in in your products going forward. Where where where are you in the process right now, and what’s your vision going forward, and how does it help alleviate the shortage?

Greg Bentley, Executive Chair, Bentley Systems: Cici, I I I’m gonna ask Nicholas in the main to respond, but that that this notion of quantifying consumption volume number of engineers especially is a reason that I wanted to look back and get new data from Kambashi on the census of engineers. And, of course, the past five years won’t be like the next five years with Magentic AI, but in in effect, we’ve been experiencing some of what comes about when there are fewer users. I think there are fewer users in the advanced economies in those level one countries. They are fewer, but they’re spending more. But you can’t assume there’s gonna be more of them or that they will be spending more time on doing one thing Because for one thing, they’re gonna be having their agents spending some of the time.

And and I know Nicholas is gonna talk perhaps about some of the directions commercially that that implies. But, generally, what I’m confident about is that they’ll each spend more. The the particularly unique aspect of this for infrastructure engineering is that the bulk of our end markets or half of them, the engineering firms themselves, have primarily been charging per hour. And that AI is going to change the ways in which they will need to monetize their services. So we can help them and participate with them in in ways of getting compensated for value over time.

In other words, we’re not on the other side of that. We’re on the same side of that with our with our users and helping them to generate this step function. They need to generate more value because there are fewer of them doing more work, but they need to be paid for that step in in valuation. So we’ll be measuring things in different ways and incremental ways and so forth that I know Nicholas and team have already been exploring as we’re about to bring one AI native if I that’s a strict stream term, but one AI based product to market, as you know or might know. So, Nicholas, pass over to you on that.

Nicholas Cummins, Chief Executive Officer, Bentley Systems: CT, thank you for asking that that question, and it’s great to to end this conversation with this question because it is so so much about the future of of of infrastructure overall. Yeah? AI comes up in every CEO conversation I have with engineering services firms. It’s really top of mind because of this backdrop we’ve been in discussing quite a lot on so much demand, yet so few so few engineers to do to do the work. And engineering services firms are absolutely leaning in to adopt AI.

It it start with simply using AI for normal business tasks, like I’m sure many of of you here in the in the call are doing already, but it’s also more and more leveraging AI for engineering task. It will start there by leveraging whenever they can capabilities that are coming from software vendors. You know? We talked about one very large global engineering services firm leveraging our own solution for, road monitoring, which is BlimSea for asset analytics. But, of course, they’re also very, interested in leveraging the capabilities that we’re building for design.

So coming to, to, agentic AI now. Yeah? I I I think this is where we’re gonna see indeed a step function in productivity from those firms. Now we’re talking about their core market. We’re talking about the core engineering design work where through AI, we can automate all the mundane tasks as you’re sucking time away from engineers to do what they really like to do, what they’re, you know, really supposed to do.

For example, automating joints production, etcetera. Yeah? So we announced early access to our site engineering application called OpenSite plus at YI last year, and then we’ll talk about the progress we’ve made at YI this year. The engagement with accounts with this product is is, is truly impressive. I think everybody sees the potential with this product itself, but everybody sees the potential beyond for other engine disciplines, for other engine applications.

So while we are hardening that product to make it available for a a a a more general availability, we are also, you know, working actively and expanding those capabilities to other engineering applications. Right? And then last thing I will say is we see many engineering services firms who are building up their own teams with AI specialists, with data scientists. They’re creating their own AI agents. And here, I think we are, you know, very well positioned to support because, many of them, and we would like all of them, are leveraging Bentley Infrastructure Cloud where, you know, they bring all of their, engineering files that are coming from all sorts of vendors, very often Bentley, sometimes not Bentley.

Now our platform is completely open. It can ingest all sorts of file formats, but the more important thing is when we ingest those files, we basically map the data in those files to schema so that we make that data available for AI. So we’re beautifully positioned to help them, you know, tap into past designs, in order to provide a context context for the AI agents to make recommendations going forward. Yeah? Now we’re really very much at the beginning of this, but we’re all very encouraged to see those developments.

We’re very excited about it. We’ll discuss it more at at our annual conference, later this year. What I will say is that the and I will end there. The potential productivity gains for everyone involved in the ecosystem of infrastructure through AI are such that we’re gonna see value redistribution. We’re gonna see business models changing and potentially our own business model changing in order to support it.

Greg Bentley, Executive Chair, Bentley Systems1: Great. Thank you.

Eric Boyer, Investor Relations Officer, Bentley Systems: Thanks. We we have one more. Dylan popped on from William Blair. Go ahead, Dylan.

Greg Bentley, Executive Chair, Bentley Systems2: Thanks, Eric. Hey, guys. Maybe, Nicholas, to to that point in particular as well too, it sounds like, the idea of permitting reform kind of coming through incremental productivity productivity and maybe conviction that you’re seeing from customers with higher floors on kind of the E365 collars, if you will. Wonder how you think about kind of that evolution playing out from a pricing perspective as they’re maybe able to work through those backlogs a bit faster, drawdown on that spend faster, does that mean accelerated growth for Bentley? Maybe is it visibility into the durability of that growth?

Like, how should we be thinking, of the implications, within the pricing structure?

Nicholas Cummins, Chief Executive Officer, Bentley Systems: I mean, so the the the confidence that we’re we’re seeing from our accounts, whether, large or small, is, what’s really playing out at the moment of renewals. And with our larger accounts, this is where we agree together on both higher floors and higher ceilings. Of course, they come together, you know, in the low double digit percentage, let’s say, around 10%. So it’s just a just a sign of the confidence. Right?

I think from a pricing standpoint, we always make sure that we we we capture our fair share of the value that our software provides. When it comes to our applications overall, you know, we’ve been quite consistent with our price escalations in the mid single digits. We were quite reasonable at the time of very, you know, high inflation not to go too high, and therefore, we’re able to continue to increase our prices in the mid single digits. Now when it comes to, AI, we’re gonna see if, you know, the way we I’m not talking about the the price point now, but the way we price, the metrics we use are adapted. You know?

You know, for for for for the most part, our applications are are are are based on users. They are either subscription when it comes to SMB business or their application days usage when it comes to our enterprise accounts on e three sixty five. And, of course, we have a number of applications targeted for asset operations that use different metric like assets, yeah, number of assets. Definitely the case of asset wise historically and the case of the new applications we have for us analytics that we talked about, road monitoring and, and and and cell towers. But now when it comes to AI for design, the feedback that we’re getting for the first accounts that are, you know, testing OpenSite plus is that maybe, indeed, right now, it’s a bridge too far to change completely the pricing metric.

We still need a user component, but maybe application based usage is not the most appropriate pricing metric because the the value of the software cannot really be necessarily translated in the actual usage and number of days. Yeah? And the the productivity gains are so much that we may need something else. So with them, at least the agreement is we’ll start with a subscription, term based subscription, and then we will have a, you know, add on or additional charges that kick in as soon as the extents the the usage of AI is extensive and goes way beyond what a normal engineer will be able to do in a in a in a given time. Yeah?

But that’s gonna be an evolution. Right? So we’re doing this not in isolation. We’re doing this constantly discussing with our accounts on what is appropriate going forward. We’re seeing openness for alternative pricing metrics going forward, but this is gonna take a little while.

We’re very much early stage.

Greg Bentley, Executive Chair, Bentley Systems2: Very helpful. Thank you.

Greg Bentley, Executive Chair, Bentley Systems: I I will, make sure that we don’t fail to do a commercial for our infrastructure conference in Amsterdam in October. Many of you have attended and found it very worthwhile. Just to tease a bit this year, the Going Digital Awards, the finalists are all there and will be presenting their presenting their projects. We asked them each this year how they were using AI, and and I was very impressed with the the things that we didn’t anticipate that that we heard in terms of ways in which they’re using AI, and they’ll be talking about that at the at the in their presentations. And we announced the finalists earlier this week.

And of note, I think I have this right. There’s nine from The US, 10 from Europe, and then that number put together, 19, I think it is, or 18 from Asia. So it’s it’s just a picture of where in the world innovation is occurring. And I and I hope you’ll try to join us there in Amsterdam. One last thing as we have time here about and your beginning of your question was about permitting reform.

And, know, here in The US, there’s there’s not gonna be apparently one big beautiful permitting reform bill, but it’s it’s everything that’s going on is is encouraging and enabling and accelerating infrastructure investment generally, but especially for the electric grid. And I like to say that that data center isn’t the main reason for that. Data center just being added at the margin to what is already an overtaxed electric grid. For reasons of data center, it’s having to run at even greater capacity beyond design capacity with issues of resilience and so forth that we’ve seen elsewhere in the world. So those are those are what what it feels like.

And and and Nicholas mentioned, in addition to power line systems, Sequent seeing green green shoots as well with new mining. We hope we think it’s too soon to to call a change there, but we may be reporting further about that at your infrastructure as well, I hope. And I hope to see you there. I I’m not sure I’ll be there in favor of Nicholas, but it will be well worth hearing more about the subject we’ve been talking about today in in October and Amsterdam.

Eric Boyer, Investor Relations Officer, Bentley Systems: Thanks, Greg. 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 ups, and we look forward to updating you on our performance in the coming quarters. Thanks.

Nicholas Cummins, Chief Executive Officer, Bentley Systems: Thank you.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.