Good morning, and thank you for joining Bentley Systems Q2 2025 results. I'm Eric Boyer, Bentley's Investor Relations Officer. On the webcast today, we have Bentley Systems Executive Chair, Greg Bentley; Chief Executive Officer, Nicholas Cumins; and Chief Financial Officer, Werner Andre. This webcast includes forward-looking statements made as of August 6, 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 August 6, 2025. After our presentation, we will conclude with Q&A. And with that, let me introduce the Executive Chair of Bentley Systems, Greg Bentley.

Good morning, and thanks to each of you for your interest in BSY. Please pardon my voice, which is suffering from a summer cold. CEO, Nicholas; and CFO, Werner, will, as always, report in detail Bentley Systems continued excellent operating and financial results for '25 Q2, and thus, for the first half of 2025 as we track consistently towards our outlook range for this full year. Earlier this year, in reviewing 24 Q4 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 5 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 '25 Q1, I likewise looked back 5 years to quantify the respects in which we've purposefully gained further business resilience over the span. It is even more clear this quarter that we're currently benefiting from those improvements. Our excellent operating performance to date in 2025 is in keeping with a primary sustaining long-term growth driver over this period and which will prevail foreseeably. Going digital has become the enduring priority for infrastructure engineering, in particular, because of pervasive resource constraints. To keep up with the world's imperatives for infrastructure performance, resilience and adaptation, each BSY user and account needs each year to achieve step functions in productivity and value generation through enhanced utilization of software, cloud services and AI. To help quantify such progress and software consumption per engineer, I would like now to, again, but for the last time, I think, look back over 5 years but this time with reference to external market data. This slide, which we still use in our intro deck today, shows…

Thank you, Greg. We delivered another strong quarter despite ongoing global uncertainties. This performance underscores the resilience of our business model and the strength 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 ARR 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. ARR 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 ARR growth from new logos, primarily within the SMB segment. And for the 14th consecutive quarter, we added more than 600 new SMB logos through online store. Retention within the segment remained high, further signaling confidence in the demand environment this time from smaller accounts that are arguably more sensitive to economic uncertainty. Turning to our tone of business by infrastructure sector. Resources was our fastest-growing sector this quarter with Seequent delivering a particularly strong performance. Notably, growth for Seequent was led by mining, outpacing civil for the first time in 6 quarters. While we are seeing early signs of improvement in mining exploration, it is still too soon to call it a market recovery.…

Thank you, Nicholas. 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 million, 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 2 percentage points from the same period 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 E365 initiatives continued to be solid contributors. Perpetual license revenues for the quarter were $10 million, down $1 million 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 represents 6% of total revenues, down 1 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 12 months recurring revenues, which includes 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 12 months total revenues, up 2 percentage points year-over-year. Our last…

Thanks, Werner. [Operator Instructions] Our first question comes from Matt Hedberg from RBC.

Great. I hope you can hear me okay.

Yes.

I wanted to ask about the macros. It sounded like in some of the prepared remarks that macros remained 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 from your perspective?

Yes, Matt, I'll take this one. I would say it's just very consistent, yes. 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 has been noise with maybe a change of priorities, et cetera. 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. 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 are uniquely positioned to help them be more productive with the capacity that they have in order to cope with that demand.

Great. Thanks, Matt. The next question comes from Joe Vruwink from Robert Baird.

All right. Great. I 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 in the various disciplines you serve. In 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 $1,000, let's say, do you have the right product set and right reach, right go-to-market model to effectively address?

I think we have, indeed, the full range. And the -- our traditional product, MicroStation, by which we started the company is really the entry point for engineers to start working 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 we have accounts who 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 related engineering applications or collaboration software. So we have the full range. And I mean, a testament to that is just the continued growth that we see in SMB. There's just no slowing down. You heard it in the prepared remarks, more than 600 new logos for the 14th consecutive quarter. And again, very often, those new accounts that we're winning through SMB are actually starting with MicroStation.

Thanks, Joe. Next question from Kristen Owen from Oppenheimer.

I want to double-click on some of the TAM analysis and ask you about the data center opportunity. Is there a way to understand sort of 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? Just sort of unpack that data center opportunity for us.

I'm going to let Nicholas respond in the main, but I will say that I'm struck during the quarter by the U.S. AI strategy, which articulates that it needs to include an infrastructure investment strategy for the reasons you described. 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 other aspects of the portfolio beyond merely the building and its structures, our structural analysis software especially is used in that. But 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 particular.

Well, I will say, Kristen, the way you're looking at it is the way we're looking at it as well, yes, which is, indeed, there's a lot of infrastructure 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. And then whenever you have, let's say, high spatial density with engineering complexity, this is typically a great opportunity for us. So 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, the distribution lines, the water and so on and so forth. But we also offer software that helps put all of this together and understand the interrelationships between all of these infrastructure assets. Now I think what's interesting with the hyperscalers is they're obviously software first. They understand the power of software and they're quite receptive to the notion of let's make sure that when we design, we design well from the start for operations. And then we make sure that there is a digital twin that is being created at the moment of design, which is used to schedule and manage the construction then be used for the operations 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.

Thanks, Kristen. The next question comes from Jason Celino from KeyBanc.

Great. Werner, I don't know if I heard you correctly, but did you say that the free cash flow guidance was moving up $15 million because of the benefits from the OBBA. I know there are a couple of ways of recognizing the benefit. I mean, not to get too much in the nitty-gritty, but is this the accelerated adoption? Or should we expect multiple years of benefit?

There will be multiple years of benefits, Jason. The $15 million is 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 seeing for '25 would be approximately $10 million higher than the $15 million. But based on the prepayments that we took, this will roll over into the 2026 year. But we are still evaluating, but 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.

Thanks, Jason. Next question from Siti Panigrahi from Mizuho. Okay. Maybe we'll move on and come back. Can we get Warren Meyers from Griffin Securities, please?

Yes. This is Warren in for Jay. Quick question, aside from the plan to incorporate Cesium where appropriate in the portfolio, what are some of the other critical development and deliverables for the next 6 to 12 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&D openings while keeping sales openings flat. Could you comment on the thinking behind those recent numbers as well.

All right. So on the first question, let me take a step back and say that our R&D priorities are AI, Cesium and an integration of Cesium integrated across the portfolio and then the deeper integration of Cesium with iTwin into a unique platform for the built and natural environment. 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 Seequent 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 that with [indiscernible], being able to run AI on it to detect some features, et cetera. All of those capabilities are now immediately available 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 our partnership from Cesium to iTwin and to adopt iTwin capture and the iTwin platform in order to support their own applications for construction, simulation and management, yes. And then just in the last few days, we released MicroStation 2025. So…

The next question comes from Taylor McGinnis from UBS.

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 catalysts that you're particularly excited about that could be a source of upside for us to monitor?

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 -- but nonetheless determined about it. And we have not had a significant acquisition since last year's Cesium acquisition, which will roll off here in this third quarter. But we are hopeful about such opportunities during the remainder of the year.

Yes, thanks, Taylor. The next question comes from Matthew Bullock from Bank of America.

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, the key areas of 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 nuance this year, slightly tougher comps from an ARR perspective this quarter and third quarter. Just maybe help us understand the shift in seasonality in 2025.

Matt, I'll say that 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 had is largely related to that because the rest of everything is subscription oriented and renewing floors and ceilings and so forth. And asset analytics, we're chasing the major opportunities in the world because we want to get our elbows out and have those proof points. So 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 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 Blyncsy.

I will. Before I talk about Blyncsy, which is our road monitoring solution, I will say that with the other asset 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. Historically, we've been working a lot with equipment manufacturers, for example. They will use our software to inspect towers 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 businesses, we will decrease the volatility. But now back to road monitoring solutions, indeed, a very auspicious opportunity here, as Greg just indicated. Traditionally, we are selling to transportation authorities and those can be long cycles, by the way, but very worthwhile. And I think at some point we'll pass the tipping point where there will be so much 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 U.S. territory. The reason why we like that a lot is because it fits exactly our strategy of asset analytics where we don't want necessarily to go after all the owner-creators under the sun. We do want to leverage our strong relationship with engineering services firms. And as they diversify their own business beyond product delivery going into asset operations and in order to offer these high-value services for asset operations and maintenance, we want to be right there with them with our software, with our technology, with our platform in order to allow them to do that. So we welcome that very positive development, and we hope it's the first of many to come.

Thanks. Let's move on to Wolfe Research for the next question.

This is Ivan here for Josh. Can you elaborate 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?

Well, I'm going to say first, I think it's teetering between 109% and 110%. If you think of our business generally, half of our NRR 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 11.5-ish or so percent. So the -- it's all rather consistent, but round up or down, you could say they're from 9% to 10%, but I realize that's from 1 to 2 digits also. I think it's kind of accidentally in that range. But Werner, would you like to comment more quantitatively than that?

Yes. I think you were spot on like this. If I go to the numbers, I think it was like 9.45% rounding down to 9%. It is within that 9% to 10% range and it did drop down to 9%. So there's nothing really significantly driving kind of a shift from 10% to 9%. It's within that range and that's a solid range for us.

I guess something to remember about NRR is it looks back altogether fully 2 years. And there's a lot of China in that -- China pressure in that still. 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 2 years ago, it's pretty significant.

Thanks. Last question will come from Mizuho Securities.

For the earlier mix up, wrong button. But excellent. So we also look at other vertical names like the Cadence, Synopsys. And one of the common themes we hear across all the verticals these days is shortage of engineers and how AI is helping to kind of like help that problem through agentic AI. That is like the rave in AI world these days. So given all the acquisitions and Cesium and the inroads into the AI world, I'm curious how you're thinking about agentic AI in your products going forward? Where are you in the process right now? And what's your vision going forward? And how does it help elevate the shortage?

Siti, I'm going to ask Nicholas in the main to respond, but 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 Cambashi on the census of engineers. And of course, the past 5 years won't be like the next 5 years with agentic AI. But 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 1 countries. They are fewer, but they're spending more, but you can't assume there's going to be more of them or that they will be spending more time on doing one thing because for one thing, they're going to be having their agents spending some of the time. And I know Nicholas is going to 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 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 way in which they will need to monetize their services. So we can help them and participate with them 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 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 valuation. So we'll be measuring things in different ways and incremental ways and so forth. But I know Nicholas and team have already been exploring as we're about to bring one AI native -- that's extreme term, but one AI-based product to market, as you know or might know. So Nicholas, perhaps, over to you on that.

Siti, thank you for asking that question and it's great to end this conversation with this question because it is so much about the future of infrastructure overall. 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 discussing quite a lot on so much demand yet so few engineers to do the work. And engineering service firms are absolutely leaning in to adopt AI. It starts with simply using AI for normal business tasks like I'm sure many of you here in the call are doing already. But it's also more and more leveraging AI for engineering tasks. It will start there by leveraging whenever they can capacities that are coming from software vendors. We talked about one very large global engineering services firm leveraging our own solution for road monitoring, which is Blyncsy for asset analytics. But of course, they're also very, very interested in leveraging the capacities that we are building for design. So coming to agentic AI now, yes? I think this is where we're going to see, indeed, a step function in productivity from those firms. Now we're talking about the core market. We're talking about the core engineering design work where, through AI, we can automate all the mundane tasks that are sucking time away from engineers to do what they really like to do, what they're really supposed to do, for example, automating drawing production, et cetera. So we announced early access to our site engineering application called OpenSite+ at YII last year, and then we'll talk about the progress we've made at YII this year. The engagement with accounts with this product is truly impressive. I think everybody sees the potential with this product itself, but everybody sees…

Thanks. We have one more. Dylan popped on from William Blair.

Maybe, Nicholas, to that point in particular as well, too, it sounds like the idea of permitting reform kind of coming through incremental 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 are may be able to work through those backlogs a bit faster, draw down on that spend faster. Does that mean accelerated growth for Bentley? Maybe is it into the durability of that growth? Like how should we be thinking of the implications within the pricing structure?

I mean, so the confidence that 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 agreed together on both higher floors and higher ceilings. Of course, they come together in the low double-digit percentage, let's say, around 10%. So just a sign of the confidence, right? I think from a pricing standpoint, we always make sure that we capture our fair share of the value that our software provides. When it comes to our applications overall, we've been quite consistent with our price escalations in the mid-single digits. We were quite reasonable at the time of very high inflation not to go too high. And therefore, we are able to continue to increase our prices in the mid-single digits. Now when it comes to AI, we're going to see if the way we -- I'm not talking about the price point now, but the way we price, the metrics we use are adapted. For the most part, our applications are based on users. They are either subscription when it comes to SMB business or they are application-based usage when it comes to our enterprise accounts on E365. And of course, we have a number of applications targeted for asset operations that use different metrics like assets, number of assets, definitely the case of AssetWise historically and the case of the new applications we have for asset analytics that we talked about, road monitoring and cell towers. But now when it comes to AI for design, the feedback that we're getting for the first accounts that are testing OpenSite+ 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 value of the software cannot really be necessarily translated in the actual usage in number of days. And 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 an add-on or additional charges that kick in as soon as the usage of AI is extensive and goes way beyond what a normal engineer will be able to do in a given time. But that's going to be an evolution, right? So we're doing this not in isolation. We're doing this constantly discussing with our accounts, so what is appropriate going forward. We're seeing openness for alternative pricing metrics going forward, but this is going to take a little while. We're very much early stage.

I will make sure that we don't fail to do a commercial for our Year In 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 we'll be presenting their -- presenting their projects. We ask them each this year how they were using AI. And I was very impressed with the things that we didn't anticipate that we heard in terms of the ways in which they are using AI and they'll be talking about that in their presentations. And we announced the finalists earlier this week. And of note, I think I have this right, there's 9 from the U.S., 10 from Europe. And then that number put together, 19, I think it is or 18 from Asia. So it's just a picture of where in the world innovation is occurring. And I hope you'll try to join us there in Amsterdam. One last thing as we have time here about the -- beginning of your question was about permitting reform. And here in the U.S., there's not going to be apparently One Big Beautiful permitting reform bill, but it's everything that's going on is encouraging and enabling and accelerating infrastructure investment generally, but especially for the electric grid. And I'd like to say 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 what it feels like. And Nicholas mentioned in addition to Power Line Systems, Seequent seeing green shoots as well with new mining. We hope -- we think it's too soon to call a change there, but we may be reporting further about that at Year in Infrastructure as well, I hope, and I hope to see you there. I'm not sure I'll be there in favor of Nicholas, but it will be well worth hearing more about the subjects we've been talking about today in October in Amsterdam.

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.

Thank you.