Good morning everyone. And thank you for joining us for Bentley Systems’ Financial Results webcast and Conference Call for the Third Quarter Ending September 30, 2020. I'm Carey Mann, Bentley's officer for Investor Relations. On the call today we have Bentley Systems' Chief Executive Officer, Greg Bentley; and Chief Financial Officer, David Hollister. Before we begin, allow me to provide a disclaimer regarding forward-looking statements. This call, including the question-and-answer portion of the call may include forward-looking statements related to the expected future results for our company and are therefore forward-looking statements. Our actual results may differ materially from our projections due to a number of risks and uncertainties. The risks and uncertainties that forward-looking statements are subject to are described in our earnings release and other SEC filings. Today’s remarks will also include references to non-GAAP financial measures. Additional information including reconciliation between non-GAAP financial information to the GAAP financial information is provided in the press release and supplemental slide presentation. This webcast will be available for replay on Bentley Systems' Investor Relations website at investors.bentley.com. Greg we'll begin with an overview of Bentley Systems. David will then take you through a review of the financials, and then Greg will review business developments before we proceed to Q&A. With that I'll turn the call over to Greg.

Good morning. I'm going to briefly reprise our roadshow presentation from September in order to set the stage for our first quarterly update, which will be next. But first, in introducing Bentley Systems, infrastructure supports our economy and environment that supported by the work of infrastructure engineering. They depend upon infrastructure engineering software, and we go so far as to think of BSY as the infrastructure engineering software company. And that's because it's been our mission for these 36 years since our founding, during which we've developed the most comprehensive portfolio for going digital and infrastructure engineering. We've invested everywhere in the world become dependably growing and compounding including through 2020 by virtue in particular that the majority of our revenues, 87% are recurring. The majority of those revenues, renewed annually paid in advance, and the majority from accounts with whom we had enterprise relationships, they spend at least $250,000 per year with us. And our EBITDA margins are comfortably ahead of 30%. But it's particularly important to understand our end-market footprint, if you like, they are the sectors of infrastructure. I'm going to show the proportion of our revenues in each sector, each segment within a sector based on accounts specific to those sectors or products specific to those sectors. So the first of those commercial and facilities. So that would be vertical infrastructure buildings, if you like, which is the proportion shown here. The next sector, industrial and resources. And then the remainder of our revenue, our segments within the sector, we call public works and utilities and you see that those include roads and bridges, utility transmission and distribution, municipal and mapping, rail and transit, water and wastewater. And then together that's public works and utilities. We have also accounts and products that are generalized, that are…

Thank you, Greg. And good morning, everyone. I'm first going to discuss our third quarter 2020 results and then we'll offer some views on our full year 2020 performance expectations. I'll start with third quarter revenues, which grew 8.8% year over year to reach 203 million. This is fairly consistent with our year-to-date growth of 9%. Breaking that down further, subscription revenues, which are over 85% of our total revenues, grew 11.6% while our perpetual licenses and services revenues declined by 7% and 3.5% respectively. These more episodic perpetual license and services revenues are typically for us where we'll feel softness in the face of macro headwinds and cyclicality. To a lesser degree, we'll also see any macro-induced softness manifest in certain of our shorter term subscriptions, and, in particular, our E365 daily consumption-based subscription. As Greg will further discuss while, we're resilient and growing, we're cautious about the lingering effects of the pandemic on the capital project starts. In particular, within the commercial and facility sector, and industrial and resources sector; where the combination of these end markets represent about one-third of our revenues. The public works and utility sector, our largest end market representing about two thirds of our revenues, while not unaffected, remains relatively robust for us. You will have noted that our last 12-month recurring revenues, which include primarily our subscription revenues, but also will include certain services revenues delivered under contractually recurring success plans, increased by 11%. This is consistent with continued strong performance in our net recurring revenue retention rate of 110%. Our deep and long relationships with our accounts again are proven with our 98% account retention rate, and growing and expanding with those accounts continues to be our most prevalent source of growth in an area where we continue to invest with…

Thank you, David, for covering the financial results and our range of financial performance expectations for 2020 as a whole. Obviously based on our assessment for this fourth quarter that we're now almost halfway through. Had we instead been a publicly traded company for the whole of the year, we would have first provided such annual guidance along with the operating results for the previous full year in March. Then, though, as you know, we declined to ever provide financial guidance for individual quarters. In such a volatile year as this has been, I believe we would have been updating those annual expectations for you upon such occasions as this, after the end of that, at least the second quarter, as well as now. I am momentarily going to cover at some length, our current soundings regarding the tone of business. This will also be more protracted than I expect to normally be the case because of the confluence of exogenous crosscurrents now unfolding around us. I want to share an abundance of the underlying observations to which we're managing so that under these volatile circumstances, you can be best prepared to draw your own interpretations. Then I will conclude with some plans and announcements for going forward. First, I'd like to cover our BSY corporate news since the IPO in September. There is more such news than will tend to be the case for most such quarters because we've just completed our annual Year in Infrastructure Conference and we tend to bunch up announcements to coincide with that. Of course, our conference format was all virtual for the first time. This enabled us to expand attendance by a multiple of the 1,500 or so thought leaders that we could invite to our traditionally alternating Singapore and London venues. But…

Thank you, Greg. We’ll start by taking a question from Joe Vruwink from Baird.

The commentary on industrial natural resources was really helpful. You’ve also seen some comments from some of your peers that maybe things started to improve a bit in the month of October, specifically with EPC customers in natural resources. I’m wondering if that was evident in your book of business at all.

Joe, thanks for the question. We do have excellent telemetry and in the fourth quarter so far everything has tended for the better. We talk about new business, new business for us is what we’re selling. It’s the accretion in ARR, it’s not our whole ARR, it’s just on the margin how much it grows and if it doesn’t grow, that’s a detraction from our new business. So that’s looking better than the third quarter looked at any point and usage has turned in the right direction. I don’t think that’s true however, for the EPCs, for the industrial resources firms. They use our software for really large projects. If you look at these EPCs and their own, the ones that our public companies and their own reporting, they’re down 15% to 30% on the previous year and anyone on the call would be as well able as me to predict when capital projects come back in the process, plant and energy sector, but we don’t see it yet I’m afraid. Everything else more than makes up for that thank goodness.

Okay. Great, that's helpful. And then one other thing that I think is interesting and it seems to be occurring maybe in this theme of kind of divergence or crosswinds, but the backlog work with civil engineers seems to be holding up comparatively much better than civil contractors and so it would suggest that the planning is still going on, project work is out there, there's still a good pipeline if you're a civil engineer. I suppose that speaks to your resilience but how does that type of environment maybe speak to the type of budget you're likely to see in 4Q with your civil public works customers and the degree of visibility that provides for your 2021 ARR performance?

Well, I think what you say is quite observable. It happens I was just on a panel during the past week with AEC Advisors there. They do surveys of all of these firms the world over. AEC, C for them is not construction but rather consulting as they say. So these are the infrastructure engineering firms in the world over and they survey most of them. They believe they have most of the dollars and the result of the survey for 2020 is the firms of late expect to grow slightly in 2020. Now when AEC Advisors weighted it then not average or median but by firm size, the growth came out to zero for the year, but compared to what's gone on with GDP and the economy, it is a relatively resilient sector and of course is spending more on going digital, which was the subject of the panel that I was on. In this country, and remember, the United States is a little under half or a bit under half of our revenue, we look like we'll be welcoming a new administration, and it's likely that we will join the rest of the world in focusing on infrastructure investment as a means of fiscal stimulus, because it's thought to be that which has been long the most enduring and best return on investment. Much of the world has already determined to do that and is part of the reasons we're encouraged about 2021 in particular. But in the U.S. we think that factors in, and in fact these firms that I'm talking about are expecting to grow in 2021 about to the extent they have grown annually prior to 2020. And as I say 2020 is a flat year which looks pretty good for the population you're talking about.

Great thank you very much.

We'll next hear from Brian Essex from Goldman Sachs.

Brian, you're muted I think. There we are.

Hear me?

Hey, Brian.

Yes.

Great. Thanks and congrats on the results and emerging as a public company. I was wondering if you could touch on, you've spoken previously about an initiative to penetrate some of the smaller customers on your platform. Obviously the larger customers are pretty substantial in terms of their contribution, any thoughts that you'd like to outline in terms of those plans for the other 33,000 or so smaller customers or mid-market customers on your platform and the trajectory that you might expect from penetration of those accounts?

Well, it's very much our priority for 2021 has everything to do with the reinvestments we're making now of our cost savings. We want to be going digital in the way that we develop e-commerce capabilities. We didn't have any e-commerce capability until very recently, our new Chief Marketing Officer is very much dedicated to that and our remix of resources will help us with direct engagement and increase in marketing effort and effectiveness as a public company and we have a very significant appetite to improve our penetration there. Some of our initiatives are underway but more so will be in 2021. The engineers in the smaller firms need the same superior software as the engineers in the larger firms, it's just late in the game that it's getting our full attention but it has that now.

I might just add, Brian, that as a proof of concept for us and a head start, one of our acceleration initiatives, Virtuosity, where we're targeting individual practitioners, which tend to be of course, the small or medium sized enterprises, through an e-commerce platform and embedding expert services with them, is actually performing as expected and something that's going to serve to light the way for us as well going after these small, medium size accounts.

Great, that's helpful, maybe just a follow up. In terms of expectations of potentially as we saw yesterday with news of the vaccine progressed, you think about the scenario where the economy might start to open up a little bit more, particularly with the respect that we've seen a little bit of pressure on utilization from some industries that have been pressured in this macro environment. Are there any kind of key economic or macro indicators that you'd typically look at to kind of anticipate what the impact or the magnitude of reopening might have on utilization on your platform and how meaningful that might be?

I do want to emphasize that other than in industrial in resources and perhaps commercial in facilities, all that that's relatively small for us. That's why we haven't dwelt on that. In public works and utilities, any decline in application days we think is kind of institutional about scheduling changing and I don't think application weeks or months would be down in some of these organizations that literally have responded to lockdowns with changing their work schedules. The most significant aspect of reopening are the infrastructure plans around the world. And, if I look at Asia in particular, we stay focused on Asia because it's been such a reliable source of new business growth for us. This year so far it's not been better than last year as it normally is, but a lot of that depends on the fourth quarter. The fourth quarter is always the strong quarter for Asia and countries like China has just done a new five-year plan that emphasizes digital plant and digital cities and environmental initiatives and so forth, all of which are great for us and open up new opportunities. Australia, their new budget has a 10-year infrastructure plan for transport infrastructure where we're particularly strong and the same is true in most countries in the world. Anyone can handicap it but likely to be also true in the United States, we think. And focus on energy adaptation also is good for the work of infrastructure engineers. And if I come down to another factor that could be helpful looking forward, it is that in our own country to be less antagonistic about globalization will serve us well for instance, in China. So these factors are coming together to as you say, make us rather optimistic about 2021.

Great. Very helpful. Thank you.

We'll next hear from Brad Sills from Bank of America.

Great. Hey, guys. Thanks so much for taking my question here and maybe just a follow up to the comments you just made, Greg on China. I think it might be helpful to talk about how Bentley's position, what's your presence in China? You mentioned this five-year infrastructure investment plan, how is Bentley positioned to participate in some of these projects? Thank you.

We're really well-positioned in China, fully invested there. It's only about 5% of our revenues now, but a lot higher portion of our potential. The question in China, the challenge for us, well there is an immediate challenge that there are not Azure Cloud Services, so we're engineering around that and Chinese accounts need to do their own private cloud stack and so forth, which they can and have accomplished with their iTwins ambitions and so forth, but we really have to scale up to that opportunity. And the cities of China, for instance, have assigned industrial design institutes to be responsible for their BIM and digital cities strategies and we often have experience with them already. So there's just a lot of headroom in China over 2020 to date. It hadn't gotten easier but there are some export controls now that slow things down and generally trade tensions have not been helpful but I think all changes for the better as far as that. And, we really are very well positioned in China in terms of talent and resources and there is a very good pipeline there and we stand a good chance we think of reaching last year's new business level by the end of the fourth quarter and we're applying ourselves assiduously to do that.

Great. Thanks so much. And David, one for you please if I may, gross margin came in quite a bit better than where we were modeled. Can you talk a little bit about the puts and takes there, what's driving the upside in the gross margin at least to our model?

Sure. I assume you're talking about adjusted for the…

Yes.

The non-recurring items that I've highlighted. Yes, it's – part of it is cohesive, the acquisition, is a strong margin performing services business for us. So that's a bit of a lift. And as I've said, the other piece of our cost of goods that goes into that gross margin is our cloud costs, our cloud delivery costs and we continue to find efficiencies in delivering our cloud services. So that's contributing to some improvement there as well.

Great. Thanks so much, guys.

We'll next hear from Matt Hedberg from RBC.

Hey, guys. Good morning. Thanks for taking my questions. So I wanted to ask about E365, it's obviously, as you alluded to Greg, been a great competitive advantage for you guys over the years. When you think over the next several years what's the right way to think about the pace of adoption of E365 in your base? What would that mix look like longer term? And then when a customer moves to E365, what typically happens to their spend?

So really E365 you might say, oh Greg, you've taken on this risk are you so sure about that? Our predecessor ELS program also had a mark to market based on consumption but was only once per year. So it was lagged and now we don't have that lag but it's so much preferable to the account for us to share the risk and cyclicality and we're prepared to share that risk. It isn't a large risk in proportion to our huge book of annual resets if you like. The reason we prefer the E365 format, despite taking on a bit more immediate volatility, is it includes the success plan component, where we're really competitively distinguished by having more civil engineers and structural engineers and geotechnical engineers who can help in digital workflows that our accounts want and taking full advantage of the software we embed them and we charge for that in the application day charge. So typically the spend does go up somewhat but from our standpoint that's not the opportunity we're seeking. It's the more, it's the accelerated accretion from application usage growing faster when in effect, we can virtually embed our experts to help the software get better used. We can, with our cloud services for our applications, we can see what functions are being used and not used and be helpful in direct engagement, going digital ourselves to embed our Success Force and better enable them. That's what is for us the motivation. So we suppose it will take another several years but we'll end up migrating the ELS book to E365 and a year like this doesn't deter us because in the combination of forces that creates economic challenges and so forth, we're pretty well able as you see, to absorb this additional volatility on the margin and we have an appetite to do more of it.

That's great.

So just to frame the scale of that for you, Matt. So about a third of our ARR is these enterprise-scale subscriptions and we're give or take about halfway through in terms of the ELS to E365 migration.

Super helpful, David. And actually just one more quick one for you on the margin side. Services revenue I believe has been about 8% of your year-to-date revenue. Can you talk about the long-term trend of services revenue in your overall mix and do you think you're going to be able to leverage the channel a bit more for some of the lower margin services work?

Well, the better job we do with our ProjectWise and AssetWise offerings, the less services would be required in the scheme of things. The future of services for us is the digital integrator opportunity to literally help with the data in the case of an infrastructure digital twin. When you open up what's been dark that so you can bring the ET along with the IT and the OT for this evergreen digital twin opportunity, you see there needs to be improvement in data quality. It's a good job for engineering firms. When you say channel, I encouraged in the panel that I described I said the future for the engineering firms is to be the creator and the curator because it's never done. You need to maintain the digital twin up to date and to be in the business of the analytics and the benchmarking and so forth which we don't wish to be in those businesses. Those are opportunities for digital integrators and the best channel for us would be the engineering firms themselves to bring the digital twin opportunity to the owner operators. That's the-- that'd be the long-term way in which that occurs. As you know, we need to incubate some digital integrator experience and so we have that under our Bentley Acceleration initiatives but we sort of compartmentalize that, so we manage that differently than the software business. But yes, we do not wish to grow professional services within our core business. We wish that to be an opportunity for others, but especially for engineering firms, who need to improve on their business model of selling their hours and wish very much to do so. And as they virtualized this year, they have much more receptivity and motivation to do that than ever.

Thank you.

Great. We'll next to hear from Matt Broome from Mizuho.

Thank you, Greg and David. So during the quarter you announced an expanded relationship with Microsoft. I guess more broadly, how did your strategic partnerships and ventures with the likes of Microsoft, Siemens and Topcon perform during the quarter?

Well, with Microsoft and Siemens both, we sort of transformed our relationships in each case because we've – for the past few years, focused on technical collaboration and now that has blossomed into these what I call digital co-venture, these cloud services that are ready for a market and we need to focus on joint and go-to market where either of us can sell them. So that's not just one initiative but a bunch of initiatives which happen at the same time to be occurring with each of Microsoft and Siemens, transforming from merely technical collaboration to also go-to-market collaboration. With Topcon, our joint venture is Digital Construction Works and that's not the best place to be at the very moment and needs probably to diversify itself. What we're working on, focusing on, heavy civil construction where there are particular opportunities for we call it constructioneering, where design- build approaches consider the design and construction at the same time and innovate in that respect.

Yes, the DCW-Topcon joint venture is just right in the cross-hairs of capital projects delays and implications. I think we picked up about a $0.5 million loss in the quarter relative to our equity method investment in that joint venture. The focus there has shifted from revenue generation in the face of some pretty severe headwinds towards demonstrating some reference of those successes and building out their capabilities.

Okay. That's definitely helpful. Thanks. And I'm just interested if you could maybe provide a little more color on the sort of regional trends that you saw playing out during the quarter, especially in Europe?

Well, Europe has been a bunch of separate regions. It's tough to generalize. I will say for us EMEA, we include Middle East, and Middle East is still depressed in terms of application usage. Really hasn't come back as has most of the world after the lockdowns, which we think is now not regional but a matter of the sector, the industrial resources sector affecting that. We've done all right year-to-date in ARR in Europe. New business I think is regaining momentum, but if I just turn my attention to Asia for a moment, in Asia there are economies that depended most on face-to-face travel and even for procurement processes they weren't ready for being digital. And India and other parts of South Asia they were not the cultures of working from home and laptops and so forth. All that has been surmounted now, in general, I think, all of infrastructure engineering has virtualized successfully, is better off for it, can now everyone can work on projects anywhere with collaborators anywhere. And I think they're energized by it and will never give up that level of virtualization with the collaboration tools that they've learned and honed. But Europe, it's tough to generalize, but has still some improvement to return to. Is there more to say on Europe?

No.

Okay. Thanks very much.

We'll next here from Jason Celino from KeyBanc.

Hey, guys. Can you hear me all right?

Yes we can, Jason.

Great. I really appreciate all the color on tone and the different businesses but looks like renewal rates are still pretty strong, but how should we think about the relationship between some of these usage trends and revenues for the non-E365 business?

Well, I'm going to let David add more but they're unrelated. When we count application days that has a direct bearing on E365 revenue and therefore on ARR and therefore on what we call new business. I realize new business is our own quota; it's not something we measure for you necessarily but we're not far from last year's new business and we can catch up even, we think but all of that is impinged upon by application days that's on E365. Otherwise, it makes no difference. For the great bulk of our renewals that are not based on application days, there isn't the direct impact and renewals are recurring and accounts are not expecting to spend less and I think all expecting to spend more.

Yes. I would throw into the category of application-day usage that's already manifest in our ARR and our revenues. These are term license business, the monthly and quarterly term licenses obviously would have been picked up in the results you see already. But with the majority of our business being annually renewing, the implication is a matter of how prolonged is the impacts of the pandemic, and if it carries on for another year you'll start to see that in some of the annually renewing contracts.

Okay, great. And maybe a quick follow-up on some of the operating margins. So if I look at adjusted operating margins of 34%, highest watermark in company history, any particular thing about expense management, and then how sustainable are these margin levels?

Yes. So a good question. And I'm not here to provide our 2021 margin guidance but I would like to at least comment directionally on some of the trends you're seeing and where we're headed. So – as I said 2020 is a fairly opaque, unusual year in terms of our profitability because of some pretty significant cost savings initiatives. So even backing up from there and looking at 2019 as a normalized baseline to start thinking about margins, you would have expected us to see our normal 100 basis point or so embedded improvement just from efficiencies and scale. Then we have pretty significant cost savings in 2020 in the neighborhood, Jason, of $40 million. And at least at least half of that is going to return to our cost structure in 2021. The other thing I will point out for 2021 relative to 2020 is that effective October 1st, we're taking $30 million annually of compensation to executives that previously was cash based and will be stock based going forward. We're not seeking or expecting margin expansion credit for that but I just want to make sure it's understood that in the fourth quarter you'll see $7.5 million and for the – fourth quarter 2020, moving from cash base to stock base. And then in 2021 a full year of $30 million, which is give or take 3.5 margin points. We'll add that back when we're reporting adjusted EBITDA just to be benchmarked and aligned to our peers. And then of course in 2021 you can also expect normal scale efficiencies of 100 basis points or so coming back to improve our margins. And, we're committed to do that and we demonstrated ability to do that regularly and annually going forward.

Okay, great. Appreciate the time.

And for our last question we'll hear from Gal Munda from Berenberg.

Yes. Hi good morning. Thanks for taking my questions. The first one is just I really like the Shell example you gave, Greg. And I was wondering if you could talk a little bit more about the usage, what happens between the more advanced owner-operators like Shell versus an average customer that you have on the owner operator side site today? Maybe specifically, how much of the uplift then there is when they did adopt other part of the technology all the way to the digital twin versus just the modeling side?

Well, Shell of course is a private company. It is in the private sector and wouldn't be so surprising if innovation happens faster in the private sector as in the case of Shell than in the case of publicly owned infrastructure with departments of transportation and government management. So but the great thing about selling to owner-operators in public works and utilities is they don't compete with one another, so they're glad to share advancements and so forth. So the single thing that I'm most pleased by this year is at the Year in Infrastructure Conference, again, I hope you will all watch at least some of the sessions there, but the fact that you have some of these owner-operators wanting to present and share with the affinity group of other owner-operators around the world. It's one of the reasons it's so important to watch the Chinese. We sometimes say that in infrastructure who does R&D. In China they do, they wish to adopt everything as quickly as possible in terms of digital twins and it's great to see those examples. When we come back to the United States and changes that we may expect here, we hope we may be able to influence an infrastructure spending bill so that it would encourage digital twin approaches to improve the economics for the whole lifecycle, and I think that's not out of the question. But generally, what holds us back is levels of ambition and levels of ambition to go in going digital have discernibly improved. That's my take on our Year in Infrastructure this year and the owner-operators themselves sharing these success stories. I know we're at the end of our time and we've used more time than usual because of this notion that we had to include our introduction to the company and then this tone of business. And in conclusion, I would like to thank our Bentley colleagues, the 4,000 whom are now all shareholders, but I want to thank all of them for their sacrifices to start with and then commitment and resourcefulness in this year so far. And we all look forward to 2021 as I've said, but first let's deliver, which is in our sights, a terrific end to the year of resilience, 2020. Carey, was I supposed to say that now, are you going to sign us off?

Thank you everybody. Thanks, Greg. Thanks, David. And we'll see you next time.

Thanks all. Bye.

Bye.