Summary of Bentley Systems Conference Call Company Overview - **Company**: Bentley Systems (NasdaqGS:BSY) - **Event**: 2025 Conference on November 18, 2025 Key Points Company Leadership and Ownership - Greg Bentley serves as Executive Chair and remains actively involved in capital allocation and investor relations [3][4] - Family ownership has decreased by approximately 1% per year since the company went public, but the Bentley family still holds a majority [4] Business Performance and Market Demand - Bentley Systems has shown consistent results since its IPO, with a strong demand environment for infrastructure engineering tools [7][9] - There is a significant shortage of engineers in the U.S., with one in nine positions unfilled, leading to increased backlogs for engineering firms [9] - The company is well-positioned to benefit from global infrastructure spending commitments, particularly in public works and utilities [21][22] Revenue Model and Growth Strategy - The majority of Bentley's Annual Recurring Revenue (ARR) comes from the E365 Pure Consumption Program, which relies on consumption-based billing [11][13] - The company aims for double-digit ARR growth, with negotiations for multi-year escalated floors and ceilings becoming standard [12][13] - Approximately two-thirds of enterprise accounts are in the process of transitioning to the E365 consumption model [15][16] Future Growth Opportunities - Bentley anticipates growth from asset analytics, which allows for immediate digital twin creation and optimization of maintenance costs [39][40] - The company is focused on acquisitions that enhance its asset analytics capabilities, with plans to consolidate in this space [41][42] Infrastructure Spending and Regulatory Environment - The successor to the Infrastructure Investment and Jobs Act (IIJA) is expected to focus primarily on surface transportation funding, with less emphasis on broadband and grid funding [27][28] - There is a strong belief that private investment will fill gaps in public infrastructure funding, particularly in public-private partnerships [28] AI and Digital Twin Integration - Bentley has been integrating AI into its products for years, enhancing capabilities such as reality modeling and predictive maintenance [29][30] - The company emphasizes that user data remains proprietary, allowing clients to train AI models on their own data for competitive advantage [33][34] Financial Outlook and Capital Allocation - Bentley aims for 100 basis points of margin expansion annually, driven by efficiency improvements and scale leverage [52] - The company has compounded free cash flow per share at over 14% since going public and plans to continue this trend [53] Conclusion - Bentley Systems is positioned for sustained growth through its focus on infrastructure engineering, digital transformation, and strategic acquisitions, while maintaining a commitment to shareholder value and operational efficiency [44][50]

Revenue Growth - Total revenues for the three months ended September 30, 2025, were $375,549, up 12.0% compared to the same period in 2024, and $1,110,197 for the nine months ended September 30, 2025, up 10.7%[134] - Subscription revenues for the three months ended September 30, 2025, were $344,293, up 13.5%, and $1,020,063 for the nine months ended September 30, 2025, up 12.4%[134] - Annual Recurring Revenue (ARR) was $1,405,236 as of September 30, 2025, representing a constant currency ARR growth rate of 10.5%[134] - The last twelve-month recurring revenues increased by $155,106 million, primarily due to growth in ARR and new account additions[176] - Total revenues for Q3 2025 were $375,549, compared to $335,173 in Q3 2024, reflecting an increase of 12.0%[190] - Subscription revenues for Q3 2025 reached $344,293, a rise from $303,239 in Q3 2024, marking a growth of 13.6%[190] - The company reported a total revenue of $1,110,197 for the nine months ended September 30, 2025, compared to $1,003,273 for the same period in 2024, which is a 10.7% increase[190] Regional Performance - Revenues from the Americas increased by 11.8% to $196,345 for the three months ended September 30, 2025, and by 9.9% to $589,379 for the nine months ended September 30, 2025[145] - EMEA revenues increased by 13.2% to $107,887 for the three months ended September 30, 2025, and by 12.0% to $320,306 for the nine months ended September 30, 2025[145] - APAC revenues increased by 11.0% to $71,317 for the three months ended September 30, 2025, and by 10.6% to $200,512 for the nine months ended September 30, 2025[145] - The Americas region generated $196,345 in revenue for Q3 2025, up from $175,609 in Q3 2024, representing an increase of 11.5%[190] - EMEA revenues for Q3 2025 were $107,887, compared to $95,343 in Q3 2024, indicating a growth of 13.5%[190] - APAC revenues for Q3 2025 reached $71,317, an increase from $64,221 in Q3 2024, reflecting a growth of 11.5%[190] Operating Income and Expenses - Operating income for the three months ended September 30, 2025, was $84,497, compared to $68,630 for the same period in 2024, and $284,111 for the nine months ended September 30, 2025, compared to $240,738 in 2024[134] - Cost of revenues for the three months ended September 30, 2025, was $72,195, an increase of 11.4% compared to the same period in 2024, and $206,630 for the nine months ended September 30, 2025, up 8.8%[153] - Research and development expenses for the three months ended September 30, 2025, increased by 12.4% to $78,751 million compared to $70,068 million in 2024[156] - Selling and marketing expenses for the same period rose by 11.0% to $72,107 million, driven by headcount-related costs and promotional expenses[158] - Total operating expenses for the nine months ended September 30, 2025, were $619,456 million, an increase of 8.2% from $572,680 million in 2024[156] - Adjusted Operating Income Less Stock-Based Compensation (AOI less SBC) for Q3 2025 was $104,026, compared to $89,524 in Q3 2024, representing a 16.3% increase[188] - Adjusted Operating Income (AOI) for the nine months ended September 30, 2025, was $389,966, up from $354,250 in the same period of 2024, indicating a growth of 10.1%[188] Cash Flow and Financial Position - Cash flows from operations were $396,876 for the nine months ended September 30, 2025, compared to $353,660 for the same period in 2024[134] - Net cash provided by operating activities for the nine months ended September 30, 2025, was $396,876, an increase of 12.2% from $353,660 in 2024[195] - Cash and cash equivalents as of September 30, 2025, totaled $165,411, significantly higher than $64,009 at the end of 2024[193] - Long-term debt decreased to $1,247,378 as of September 30, 2025, from $1,388,088 at the end of 2024[199] - Net cash used in investing activities was $13,774 for the nine months ended September 30, 2025, a significant decrease from $135,680 in 2024[195] - The company had $1,299,850 available under the Credit Facility as of September 30, 2025, and was in compliance with all covenants[199] Shareholder Returns - The company repurchased 1,457,454 shares for $65,029 during the nine months ended September 30, 2025, compared to 912,737 shares for $45,769 in 2024[202] - The quarterly dividend per share increased to $0.07 in 2025 from $0.06 in 2024, resulting in higher dividend payments of $9,771[198] - Quarterly dividends paid were $0.07 per share for the nine months ended September 30, 2025, compared to $0.06 per share for the same period in 2024[205] - Future dividend payments will depend on the discretion of the Board of Directors and various factors including operational results and financial condition[205] Tax and Interest - Interest expense, net decreased by 41.6% to $(2,727) million for the three months ended September 30, 2025, primarily due to lower average debt outstanding[162] - The effective tax rate for the three months ended September 30, 2025, was 31.4%, up from 28.1% in 2024, mainly due to increased discrete tax expenses[164] - The company anticipates favorable impacts on cash paid for income taxes in 2025 and 2026 due to the One Big Beautiful Bill Act, particularly for domestic R&D expenses[166] Customer Metrics - The account retention rate remained stable at 99% for both September 30, 2025, and 2024, indicating strong customer loyalty[168] - Recurring revenues dollar-based net retention rate was 109% for both periods, demonstrating effective revenue growth from existing accounts[168] Financial Reporting Practices - The company uses non-GAAP financial measures to evaluate operational performance and assist in internal budgeting and forecasting[186] - There have been no material changes in market risk exposure as described in the 2024 Annual Report on Form 10-K[206]

Group 1: Earnings Performance - Bentley Systems reported quarterly earnings of $0.27 per share, matching the Zacks Consensus Estimate, and an increase from $0.24 per share a year ago [1] - The company posted revenues of $375.55 million for the quarter ended September 2025, exceeding the Zacks Consensus Estimate by 2.59% and up from $335.17 million year-over-year [2] - Over the last four quarters, Bentley Systems has surpassed consensus EPS estimates two times and revenue estimates three times [2][1] Group 2: Stock Performance and Outlook - Bentley Systems shares have increased approximately 4.8% since the beginning of the year, while the S&P 500 has gained 15.1% [3] - The company's earnings outlook will be crucial for future stock movements, with current consensus EPS estimates at $0.28 for the coming quarter and $1.21 for the current fiscal year [7] - The estimate revisions trend for Bentley Systems was unfavorable ahead of the earnings release, resulting in a Zacks Rank 4 (Sell) for the stock, indicating expected underperformance in the near future [6] Group 3: Industry Context - The Internet - Software industry, to which Bentley Systems belongs, is currently in the top 34% of over 250 Zacks industries, suggesting a favorable industry outlook [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can be tracked by investors [5]

Financial Data and Key Metrics Changes - Total revenues for Q3 2025 were $376 million, up 12% year over year on a reported basis and 11% on a constant currency basis [25] - Year-to-date total revenues grew 11% and 10% on a reported and constant currency basis, respectively [25] - Subscription revenues grew 14% year over year for the quarter in reported and 12% in constant currency, representing 92% of total revenues, up 2 percentage points from the same quarter last year [26][25] - Adjusted operating income less stock-based compensation expense was $104 million for the quarter, up 16% year over year with a margin of 27.7%, and year-to-date adjusted operating income was $335 million, up 13% with a margin of 30.2% [30] Business Line Data and Key Metrics Changes - The resources sector was the fastest-growing sector in the quarter, with solid performance in public works/utilities driven by sustained global infrastructure investment [22] - Perpetual license revenues for the quarter were $11 million, essentially flat compared to the prior year, while professional services revenues declined 2% for the quarter [26] - E365 performance remained solid, contributing 300 basis points of ARR growth from new logos, primarily within the SMB segment [22] Market Data and Key Metrics Changes - Asia-Pacific had a strong quarter, followed by the Americas and EMEA, with North America leading growth in the Americas [23] - The Middle East continued to lead EMEA with strong performance, supported by robust investment in transport, water, and energy [24] - China's performance was consistent with expectations, representing only about 2% of total ARR [25] Company Strategy and Development Direction - The company is focusing on AI-driven innovations and partnerships, particularly with Google, to enhance asset analytics and infrastructure management [52][51] - Bentley Systems is investing in AI capabilities to improve engineering productivity and is engaging with customers to evolve its applications to better support AI use cases [46][18] - The company aims to shift from time and materials billing to value-based pricing, leveraging AI to enhance productivity and service delivery [49] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving annual financial targets, with expectations for stronger ARR growth in Q4 due to significant renewal activity [39][38] - The ongoing government shutdown has had minimal impact on revenues, with funding for awarded projects continuing to flow [40] - Concerns about permitting reform in the U.S. could affect future growth, but the company is well-positioned to benefit from upcoming developments in energy infrastructure [23] Other Important Information - Free cash flow was $111 million for the quarter and $384 million year-to-date, consistent with seasonal expectations [31] - The company fully paid down its senior debt, resulting in a net debt leverage of 2.2 times adjusted EBITDA, down from 2.9 times at the end of 2024 [32] Q&A Session Summary Question: Can you elaborate on the opportunity for better ARR growth and asset analytics? - Management indicated that they only monetize actual consumption and are not yet monetizing API consumption, but expect to see a strong renewal period in Q4 [36][37] Question: What impact has the government shutdown had on your business? - Management noted minimal impact, as direct revenue from the U.S. federal government is less than 1%, and funding for awarded projects continues [39][40] Question: How is the partnership with Google progressing? - The integration of Google Geo data across the portfolio is going well, with exciting opportunities for asset analytics and deeper infrastructure asset understanding [51][52] Question: Are you seeing proactive RFPs from customers around AI capabilities? - It is still early for specific AI capabilities requests, but there is a clear demand for data accessibility for AI purposes [53][54] Question: How do you plan to evolve your product development in light of AI? - The company aims to maintain a close feedback loop with users and iterate on product development to ensure readiness for market scaling [59][60]

Financial Performance - The company's LTM recurring revenues reached $1350 million, a 13% increase (CC +13%) [127] - ARR reached $1405 million as of September 30, 2025 [131] - The company anticipates total revenues between $1461 million and $1490 million, or $1481 million to $1510 million in constant currency for the full year 2025 [141] - Free cash flow for the full year 2025 is projected to be between $430 million and $470 million [141] - Q3 subscriptions revenues increased to $344 million [124] - Q3 services revenues increased to $21 million [124] Growth & Adoption - Data center construction spend has increased by 184% since December 2022 [28] - Approximately half of survey respondents are either piloting AI or have already implemented it [87] - The company's OpenSite+ delivers projects up to 10 times faster [89] AI Implementation & Concerns - 40% of respondents believe AI is a major consideration, and they are actively adapting their business model for significant future disruption [55] - Security and data privacy risks are the primary concerns across all firms adopting AI, with 45.7% of respondents indicating this concern [99] - 27.9% of respondents believe that faster AI adoption by competitors will surpass them in data-driven decision-making [45, 50]

Financial Performance - Total revenues for Q3 2025 were $375.5 million, representing a year-over-year increase of 12.0%[2] - Subscription revenues reached $344.3 million, up 13.5% year-over-year, accounting for 92% of total revenues[2][5] - Annualized Recurring Revenues (ARR) grew to $1,405.2 million, reflecting a constant currency growth rate of 10.5% compared to the previous year[2] - Total revenues for the three months ended September 30, 2025, increased to $375.5 million, up 12% from $335.2 million in the same period of 2024[18] - Subscription revenues rose to $344.3 million, representing a 14% increase compared to $303.2 million in the prior year[18] - Gross profit for the nine months ended September 30, 2025, was $903.6 million, a 11% increase from $813.4 million in 2024[18] - Operating income for the three months ended September 30, 2025, was $84.5 million, up 23% from $68.6 million in the same quarter of 2024[22] - Net income attributable to Bentley Systems for the nine months ended September 30, 2025, was $219.2 million, a 19% increase from $184.7 million in 2024[18] - Cash flows from operating activities for the nine months ended September 30, 2025, totaled $396.9 million, compared to $353.7 million in the same period of 2024[20] - The company reported a basic net income per share of $0.18 for the three months ended September 30, 2025, compared to $0.13 in the same period of 2024[22] Cash Flow and Expenses - Cash flows from operations were $116.4 million, up from $86.1 million year-over-year[2] - Free cash flow for the quarter was $110.7 million, compared to $84.3 million in the same period last year[2] - Cash flows from operations for the three months ended September 30, 2025, were $116,376 million, compared to $86,105 million for the same period in 2024, representing a year-over-year increase of 35%[24] - Free cash flow for the nine months ended September 30, 2025, was $384,040 million, up from $345,161 million in 2024, indicating a growth of 11.3%[24] - Cash interest expenses for the three months ended September 30, 2025, were $2,520 million, down from $3,424 million in 2024, showing a reduction of 26.4%[24] - Cash taxes for the nine months ended September 30, 2025, totaled $34,027 million, slightly up from $33,023 million in 2024, indicating a year-over-year increase of 3%[24] - The company reported cash acquisition expenses of $9,354 million for the nine months ended September 30, 2025, compared to $5,571 million in 2024, representing a 67.5% increase[24] - Changes in operating assets and liabilities for the nine months ended September 30, 2025, resulted in a negative impact of $37,039 million, compared to a negative impact of $44,718 million in 2024, showing an improvement[24] Profitability Metrics - Operating income margin improved to 22.5%, up from 20.5% in the same period last year[2] - Net income per diluted share increased to $0.18, compared to $0.13 for the same period last year[2] - Adjusted operating income for the nine months ended September 30, 2025, was $390.0 million, compared to $354.3 million in the same period of 2024[22] - Adjusted EBITDA for the three months ended September 30, 2025, reached $129,722 million, compared to $110,001 million in 2024, reflecting a 17.9% increase[24] Research and Development - Research and development expenses for the three months ended September 30, 2025, increased to $78.8 million, up from $70.1 million in 2024[18] Strategic Initiatives - New AI capabilities were unveiled during the quarter, enhancing the company's portfolio and addressing the engineering capacity gap[4][5] - The company is positioned for potential acquisitions and stock repurchases to support long-term growth[5] Cash and Liquidity - The company had cash and cash equivalents of $165.4 million at the end of the period, significantly up from $72.2 million at the end of September 2024[20]

Core Insights - Bentley Systems and EARTHBRAIN have formed a strategic partnership aimed at advancing smart construction [1] Company Overview - Bentley Systems is a leading company in the field of software solutions for infrastructure engineering [1] - EARTHBRAIN specializes in smart construction technologies and solutions [1] Strategic Partnership Details - The partnership is expected to leverage both companies' strengths to enhance the efficiency and effectiveness of construction processes [1] - The collaboration will focus on integrating advanced technologies to promote innovation in the construction industry [1]

Core Insights - Bentley Systems announced the winners of its 2025 Partner Excellence Awards, recognizing excellence in product sales, services, and training [1][9] - The awards were presented during the 2025 Sales Partner Summit held in Berlin, Germany from October 28 to 30, 2025 [2] Award Winners - **Partner of the Year**: CAD Journey, recognized for rapid growth and driving Bentley solution adoption in North America [4] - **Business Transformation**: Archway Systems Inc., acknowledged for strategic business transformation and delivering measurable value globally [4] - **Customer Experience**: Geomatex, honored for leveraging advanced reality modeling and digital twin technologies in the Administrative Capital Urban Development project in Egypt [4] - **Rapid Time to Value**: Astasoft Sdn Bhd, recognized for consistent growth and a customer-focused approach in Malaysia [4] - **Rising Stars**: - Software.com.br Tecnologia e Consultoria, recognized for strategic growth in Latin America [5] - Microgenesis CADsoft, acknowledged for rapid growth in India, achieving Million Dollar Club status in just over a year [5] Event Highlights - The awards showcased outstanding submissions from Bentley partners, emphasizing innovation, strategic thinking, and exceptional business results [3] - The winners and finalists will be featured in Bentley's Partner Spotlight Series, highlighting their projects and achievements globally [5] Company Overview - Bentley Systems provides infrastructure engineering software, helping professionals design, build, and operate resilient infrastructure across various sectors [7] - Founded in 1984, Bentley is recognized as a partner of choice for engineering firms and owner-operators worldwide, with a focus on digital twin solutions to enhance project delivery and asset performance [7]

Overview of the AI in Construction Market - The AI in construction market is projected to grow from USD 11.1 billion in 2025 to USD 24.3 billion by 2030, with a compound annual growth rate (CAGR) of 16.9% driven by investments in digital infrastructure, labor shortages, and stricter safety regulations [1][2] - The adoption of AI technologies is increasing among contractors, who utilize predictive analytics, cloud-based platforms, and autonomous equipment to enhance resource management, reduce overruns, and ensure safety compliance [1][2] Key Trends in AI In Construction Market - **Predictive Analytics for Cost and Schedule Optimization**: Predictive analytics tools allow contractors to simulate various scenarios using real-time data, helping to anticipate delays and cost overruns, thus reducing labor costs and project delays [3] - **Construction-Site Safety Enhancement**: AI-powered safety solutions utilize computer vision and sensors to monitor compliance and detect equipment issues, significantly reducing incident rates and insurance claims [4] - **Automation and Robotics Adoption**: Labor shortages are prompting the use of robotics for tasks like bricklaying and rebar tying, which improves accuracy and reduces manual labor hours [5][6] - **Sustainability and Cloud-Based Deployments**: AI solutions assist firms in meeting environmental standards by optimizing energy use and monitoring emissions, while cloud-based platforms facilitate real-time collaboration and data centralization [7] Market Segmentation in AI In Construction Industry - The market is segmented by components (solutions and services), applications (planning, safety, autonomous equipment, etc.), deployment (cloud, on-premises, hybrid), project lifecycle phases, end-users, and project types [10] Key Players in AI In Construction Market - Major companies include Autodesk, Smartvid.io, Doxel, Trimble, and Bentley Systems, each offering various AI-driven solutions for project planning, safety management, and efficiency tracking [9][12] Conclusion - The AI in construction market presents substantial growth opportunities, with a focus on efficiency, safety, and sustainability driving adoption across various regions, particularly in North America and Asia Pacific [11]

Core Insights - Bentley Systems unveiled new infrastructure AI capabilities and an Infrastructure AI co-innovation initiative at its Year in Infrastructure conference, emphasizing the role of trustworthy AI in enhancing engineering productivity and transforming workflows [1][19]. AI Capabilities and Applications - Bentley's OpenSite+ is the first engineering application utilizing generative AI for civil site design, achieving project delivery up to 10 times faster without compromising accuracy [1][12]. - New AI-powered applications for substation design and construction management were introduced, aimed at accelerating AI adoption in project delivery [4][12]. - AI enhancements will be integrated into existing applications like OpenRoads Designer and OpenRail Designer, with a new AI agent for automating drawing annotations set for general availability in November 2025 [6]. Industry Collaboration and Initiatives - The Infrastructure AI Co-Innovation Initiative invites engineering firms and asset owners to collaborate on developing next-generation AI workflows, reflecting the evolving balance between AI-driven and human-driven work [15][16]. - Nearly one-third of submissions for the Going Digital Awards incorporated AI, highlighting the growing integration of AI in infrastructure projects [2][3]. Survey Findings - A global survey revealed that about half of infrastructure professionals are piloting or have implemented AI, focusing on enhancing design productivity and automating documentation processes [3]. Commitment to Data Stewardship - Bentley emphasizes data stewardship, ensuring users retain control over their data used for AI training, with strict governance around AI model training [9][10]. - The introduction of the Data Agreement Registry aims to provide transparency regarding how data is utilized in training AI models [10]. Future Outlook - Bentley's vision for AI is to empower infrastructure engineers rather than replace them, with a focus on real-world context to ensure precision in engineering [2][11]. - The company aims to shape the future of infrastructure through collaboration with users, leveraging AI to optimize decisions and outcomes across the infrastructure lifecycle [14][16].