Good morning everyone, and thank you for joining us for Bentley Systems' Q1 2021 Operating Results Webcast. I'm Carey Mann, Bentley's VP of Investor Relations. On the webcast 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 webcast, including the question-and-answer portion of the webcast, may include forward-looking statements, related to the expected future results of 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 will begin, by reviewing business developments and our progress over the last quarter. David will then take you through a review of the financial results. We will then conclude with Q&A. With that, let me introduce the CEO of Bentley Systems, Greg Bentley.

Good morning, as the case may be. As in each of these quarterly operating results discussions, this being our third, I will start by reviewing the tone of business from perspectives behind and beyond the reported financial numbers. And then, we'll put in context our acquisitions and other corporate developments. Our CFO, David Hollister will follow to explain the reported figures, including where arcane accounting rules obscure our otherwise straightforward business progress and then we look forward to your questions. In both of the previous quarterly reporting occasions, we presented annual outlooks respectively for 2020 and 2021 and explained our ongoing medium-term initiatives. And reporting on '21 Q1, we are adhering to the financial outlook for this year that you've already digested. There is particularly no need to go over those numbers again, as we expect the Seequent acquisition to close during the remainder of this quarter, so when we report on '21 Q2, we will update our 2021 initial outlook, as acquisition grows half of quoting become financially significant rather than merely as we say programmatic. As a reminder, our March 2 report on '20 Q4, we saw most of you again on March 12, when we announced Seequent. In the short time since then, there have simply been no changes in the directional business trends since that last update. The same observations still apply equally, so I will not repeat them. Our first two quarters as a public company, spanned choppy periods during 2020, which were each unique, but '20 Q1, represented relatively unremarkable continuity. In general, each year's first calendar quarter appears undramatic for us in terms of business volume, primarily because of the seasonal pattern of scheduled annual contract renewals as David will quantify. Some differences this year from the usual first quarter are worth remarking…

Thank you, Greg, and good morning, everyone. I'm going to jump right in starting with revenues. Our first quarter revenues of $222 million grew 14% over the same quarter last year. Of course, most of that growth comes from subscriptions, which represent 85% of our revenues and grew 10.5% over the prior year. Very little of that subscription growth comes from acquisitions and a little over 4% of that subscription growth comes from the currency tailwinds of a weaker US dollar on average this year, relative to the same period last year. As Greg mentioned, several product lines led that subscription growth with each of ProjectWise, asset and network performance, civil and geotechnical noting as standouts. Our perpetual licenses revenues which are now less than 5% of our total revenues declined by about $700,000 likely influenced by the ongoing progression of our various subscription offerings including term licenses and Virtuosity Subscriptions. Our Professional Services revenues now about 10% of our total revenues increased by $10.1 million or 74% over the same quarter last year. Effectively all of this was stimulated by acquisitions concluded throughout 2020 and fully informed our full year 2021 guidance previously shared. Our recent first quarter 2021 acquisition of Ontracks did not contribute materially to 2021 Q1 results, nor do we consider it material to our expected full year 2021 results. Our acquired digital integrator businesses are growing even since we acquired them. Hence, technically there is some organic growth here which in effect I'm classifying as acquisition growth. So I'll offer a further comment on our services revenues and recent acquisitions. We obviously don't have an ambition to become a Professional Services business. That said, these digital integrator service business acquisitions have brought scale to our existing service offerings and are profitable as you will note…

All right everybody. We'll start with Gal Munda from Berenberg. Gal?

Hello. I was muted. So, thank you for taking my questions, and congrats on the first quarter. Greg, maybe the first question for you. What we've seen when there's an adoption of new technology in -- especially in the construction-related space like when we talked about BIM in the past has always been helped with some of the mandates that were happening, especially across the world? And then, when we think about all the use cases that we're getting now, we're talking about Mexico City, most recently, we talk about Genoa and Minneapolis and all that. Do you believe that, there could be a mandate that helps the adoption of digital twins in infrastructure that could be supported by the fact that all these use cases now the accidents are helping? And could that effectively help the adoption going forward?

Well, the mandate to add digital twins for existing infrastructure would be supported by the ROI case, along with safety and resilience. The UK, of course, you referred to I think when you talk about BIM mandates, the UK is coming far with digital twins. But remember, that governments have a particular opportunity and responsibility when it is government-funded infrastructure. They feel they are obliged in fact to going digital to help that be a better long-term investment. So, governments wouldn't have to mandate a technology preference in private investment, but for public investment, there are -- and especially public investment to hasten the adaptation -- energy adaptation and safety and resilience of existing assets. We're bringing to attention the -- bringing to the attention of governments as we can, the advantages of doing that, which largely are sharing what has worked. For instance here in the United States, sharing what has worked in other countries, but it has to be said, there's not a track record on our part or anyone's part of influence saying it has a lot to do with in the end contracting and procurement rules and those don't change very quickly. But it's a great opportunity when there is new public investment for it to be investment in extending the safe and resilient life cycle of the infrastructure existing already.

That's very helpful. That's what I was thinking because most of the investment there is coming from public works. So from that perspective, they could have a big influence on it. Okay. My second question is just kind of a follow-up on the transition from ELS to E365 and maybe it's the question for a combination of yourself and David. In terms of -- in the previous quarters, we've said it's kind of going to take its natural path. I don't know if it's correct to think, but Q1 seems to have accelerated that a little bit more. And you sound a little bit more open on -- as well on the transition going forward. I understand the benefits of it. But maybe, if we just revisit, what would you like -- what would your ideal model look like in the future because, you're probably not trying to convert all the ELS licenses effectively into the E365. And like what would the normal outlook look like maybe in a couple of years the way you see it?

I think in a couple of years, it will all be converted, but we were cautious to start with because, any software company venturing into charging per application per day, when previously you were paid a fixed amount for the year would be concerned about the risk we're taking on of volatility in end market activity. And guess what that came to roost in the industrial resources portion of our -- it's not a huge part of our business, but it's a large part of the E365, not surprised me those firms, which know about their volatility prefer to be on a program, where they are costs likewise track with their workload. But that's pretty much behind us now and we wish to participate in the upside to come. And that is something, we're seeing even now and in quarters of slow renewal activity, we work hard on evangelizing and introducing the E365 upgrade to accounts that can convert and upgrade later in the year. But we think, that will continue to be a natural progression. The other thing, we've adapted over the past year is, we tend to have collars on the contract now that the accounts don't mind that either because, they expect fairly rapid growth in their own consumption as the economy recovers. So, we're learning as we go and I'm glad we didn't do it all at once, so that we could factor in this learning.

So Gal, I wouldn't characterize Q1 as accelerated in terms of conversions. It's -- the lower hanging fruit has been picked early. We were smart in a bit from some of that daily volatility. We learned to introduce these collars, which by the way about 40% approximately of our outstanding E365s had some form of this collar protection. It's also the case that the pipeline of conversion that's going to go for multiple years here isn't just ELS contracts. It's the larger select contracts too that we would look to convert as well. And we're at this point not even halfway through what could be the potential part of conversion into E365.

That’s very helpful. Thank you.

Next we'll go to Matt Hedberg from RBC.

Hey, guys. Thanks for taking my question. Greg, adding 1000 customers in the SMB market was certainly impressive over the last year. Given that I think I would assume a lot of them were pressured by COVID. Can you talk about the durability in sort of SMB strength? And remind us how big of an opportunity longer term? I think David said, it's about 23% of revenue today. How big of an opportunity is SMB relative to your typical large enterprise focus?

Well, I think for the potential of it, one can look at our competitor Autodesk because I think that's the mainstay of their business. I -- which I had otherwise knowledge about the distribution of infrastructure engineers and the size of the firms they work in. But I'll say we're encouraged. I would have thought it would have taken us much longer to add 1000 new SMB accounts. But of course, the products they need are the same products. I don't by the way think it had much to do with COVID because with COVID, you'd like collaboration and ProjectWise. But ProjectWise is not the offering for SMB accounts. These are individual applications. They are practitioners. They are smaller firms or in some cases maybe sole practitioners in infrastructure engineering. And we just haven't tried to find them before or have them find us. And we are certainly encouraged that it's not only a large number of accounts, but can be a substantial portion of the business. We're sure of that when we look across the fence at the greener grass in our competitive landscape and where our strategy is different because we're focusing on inside sales, on efficient e-commerce, on self-service, on connecting up with these -- this expert assistance which is virtually delivered and machine learned and so forth. It's something great for us to work on. But it's also, I think going to be quantitatively significant we can now for the first time say that.

Thanks. I'll keep it there for the sake of time. Thanks for the answer, guys.

All right. Next we'll go to Jason Celino from KeyBanc.

Great. Thanks for taking my question. Maybe -- so digital twins big opportunity albeit relatively early. Aside from the straightforward financial metrics, how should investors measure the pace of progress here?

Well, it's a reason I promote our year book. This is where accounts nominate their own projects for going Digital Awards. And increasingly, it's more and more of a digital twin approach. I grant that's qualitative in assessing that, but it provides great case studies for others to look at and be encouraged from and learn from. But I think this ecosystem is helping when you have NVIDIA and Microsoft recall their Ignite conference showed the bridge inspection case in point that will be on all of our minds now with actual bridge failures. But it's creating mind share among owners that they would expect to have a digital twin and that's an opportunity they can't fulfill for themselves. They need an ecosystem to do that. It's the future of infrastructure engineers to not be working on road things that can be automated, but to be working on analytics that is enabled by the data that comes out of silos and goes together. So where problems have multiple causes, you can put them together in a digital twin. You can add the sensor real-time inputs and avoid these problems. But to talk about extending the life usefully and safely, it's what most engineers will be working on for most of the future and promoting cases you can see that I am working on that myself to get the word out.

Okay. Great. And then maybe just one quick one. We've seen a number of these smart tuck-ins so far this year in addition to obviously Seequent. But how should we think about the near-term pace of your M&A strategy going forward?

David, I'll ask you to take that one.

Yeah. So it's been a busy first quarter, and we've still got a pipeline. I wouldn't expect us to keep up the pace in the second and third and fourth quarters that we've had in the first four months to-date. But they're still out there, Jason, where this is still part of our normal development of our portfolio. Do we spend multiple years to develop it or can we fill that gap and that wide space more efficiently with an acquisition? And it's still part of our strategy. It's still part of how we're going to grow, but in terms of pace we can't keep up that first quarter pace. Just bearing through, we're pretty disciplined about integration as you know and we've got some work to do with all that we've taken on so far this year.

Okay. Excellent. Thank you.

Next we'll go to Joe Vruwink from Baird.

Great. Hi, everyone. I thought it was interesting. I think I heard this right that AssetWise was actually the strongest area for new business growth in the quarter. Any particular solutions within the broader kind of category that were better than others or maybe certain sub-sectors that showed greater incremental demand for AssetWise in the quarter?

Well, rail is the subject of investment programs across Europe and Asia. We have particularly strong offerings there. Roadway we're bringing together mobility digital twins and asset performance. I think most of that opportunity is still ahead for us. And in industrial, you do have owner operators spending more to make their existing assets more efficient and adding on our solutions to their enterprise environments for asset reliability. That I mentioned that third, but it isn't -- it's new capital projects that are curtailed than industrial and resources not better utilization and resilience of existing investment.

Okay. That's great. And then just final one for me. The constant currency ARR growth picking up relative to what have been the case in 3Q and 4Q, just to make sure I understand that slight acceleration. Is that really the E365 upgrades that are doing it? And then can you just maybe relate the 10% growth in 1Q? I think the guide for the year was $8 million to $10 million. So starting out at the high end, I would have maybe thought the comps get easier in the back half. So you're starting at a good point. Maybe you can just talk about kind of how you would expect the year to progress relative to starting at 10% constant currency growth?

Okay. So Joe, it is the case that any uplift we get upon conversion into E365 does accrue to ARR as does the 1,000 new accounts we've taken on board, which are largely subscriptions accrued ARR. So, all that helps as does usage, as does modest pricing, et cetera, et cetera and it always has. In terms of 10% year-over-year growth in the first quarter even compared to a largely pre-pandemic fist quarter of 2020, it's a good sign. But remember when I described the pattern of our ARR growth in the year, it's 10%, 25%, 25% and it's a big fourth quarter of 40%. Do I wish I'd had that 10% in the fourth quarter? Yes, but that's still in front of us, but the 10% growth as of the first quarter is a good sign and we'll take it.

Great. Thank you.

Next we'll go to Matt Broome from Mizuho.

Great. Thanks very much. Hi, Greg and David. So it looks like you've recently raised pricing on Virtuosity across most product lines from what we can tell. Have you similarly raised prices across your enterprise-focused plans? And going forward how are you thinking about pricing particularly in terms of contributing to your longer-term revenue growth target of 10% per year?

I would say for Virtuosity on the learning curve that follows its own cycle. The Virtuosity subscription includes these expert assistance keys, which are literally people who are embedded and so forth. And we may be getting experience in how they're utilized and so forth. Otherwise, we do adjust for escalation once per year, and David I think that takes effect with renewals that start in the second quarter. Is that right calendar-wise?

Correct. That's correct.

And it is a usual escalation, which is related to cost of living maybe it's a little higher than that, but it's not an extraordinary program for us.

Okay. And then, just curious how did your partnerships with the likes of Microsoft, Siemens and Topcon perform during the quarter?

Well, with Siemens, where we created a lot of new cloud services over the past couple of years and now the focus is on go-to-market for them. In the case of Topcon, it's largely to do with our digital construction works joint venture that has a considerable footprint in the industrial space. So that has slowed that down somewhat and we're diversifying it a bit. With Microsoft, there are a number of different initiatives that have us and Microsoft pretty excited and occupied. One of them is ProjectWise 365, which is the instant-on ProjectWise, which could be an entry point for SMB. I don't think it has been quite yet. That's why I answered the earlier question that, that's mainly applications. But with Microsoft, the Microsoft Store is going to be part of that and so forth. We're both interested in this SMB potential and the integration of teams with ProjectWise, especially it's something we'll be talking about for quite a while.

Okay, excellent. Thanks very much.

And finally, we'll go to Brian Essex from Goldman Sachs.

Hey. Thank you very much. Thank you for taking the question and nice set of results. I was wondering, first I could dig into -- I know that obviously subscription revenue growth contributed nicely in the quarter. But services revenue growth also accounted for a couple of hundred basis points. Can we maybe unpack that a little bit and maybe understand a little bit better what the implications are for that for the rest of the year on the growth of the business and what's going on there, particularly as it also nicely had positive gross margin with the business?

Yes. Thanks, Brian. So -- yes, the growth in services, year-over-year for the quarter, is like -- was like 74%. And almost all of it, look, we're pretty transparent about it, because it's still material of the services. Almost all of it is from the 2020 acquisitions that we made. Back in middle of the second quarter last year, we acquired Cohesive. Then in the fourth quarter we acquired PCSG and SRO. All of those are these digital integrator services businesses. And those fully informed the guidance outlook that we gave. We obviously who we had those on board, and they are part of that guidance outlook that we've given. And yes, actually we're really pleased with their contribution to margin. They've brought us some scale, and they've turned our services business profitable. They're well-rounded professional services businesses whereas historically that has not been our business. So, there are some learnings we've brought on board that are also helping the margin performance. Of course, it's a bit of a mix shift overall, right, because they're never going to have software margins. But that's not the goal. The goal is the strategic element of it, which is to create that pull-through of digital twin software, and then stimulate this ecosystem of digital integrator out there and light away from that.

All right, that's helpful. Maybe to follow-up, Greg. I think last year we saw a bit of an impact from oil and gas industry. And I was wondering if maybe you could pull on your experience, now that gas prices are coming back the other way and are spiking up. Any inference that we might have on the performance of the oil and gas industry in kind of the macro environment there and how that might drive incremental usage of your platform, particularly going through this year?

Well, as I say, there's not been a slowdown in performance at existing asset performance and reliability initiatives. In fact, those are moving toward digital twins and digital twin is a terminology used by the majors there in their strategy for improving their efficiency of their existing assets. But, on the capital project side, it's more to do with energy transition opportunities. And I mentioned the example last time of our offshore structural software primarily used for fossil-based platforms, but now it's used for wind power platforms which is a big enough opportunity that actually is -- has resumed growing well. So infrastructure engineers are always going to be busy when there is a need for transitions and so forth. However, sometimes it takes time for projects to start-up and make-up to the lapses in workloads.

Have you seen -- historically have you seen when gas prices are high like this an increase in conversations with regard to alternative asset projects?

I think that that conversation is committed and it's going to go on forever. I don't think there's any cyclical hitches to energy transition that has everyone's full attention and prioritization and its fun to work on.

So apologies to Brad. We'll go to Brad unless you have a follow-on?

.:

Great. Hi, guys. Thanks so much for taking my question here and squeezing me in. I wanted to double-click a little bit on your comments on strength in China. Why don't -- if we could drill into that a little bit is that business representative of the subsectors that you see in the rest of the business? In other words is there more weighting towards public works versus industrial over there within -- are there any segments that you're seeing greater strength in China, or is it pretty representative of the broader business?

It may not be quite representative, but I think it's more accidental and institutional than it is some larger pattern. We do well in state-owned enterprises and their design institutes for rail and road and cities. We have some penetration in metal industries. We do well in electric grid and substations are starting to do better in water. But I don't think it is a public versus private. It just has to do with probably good salespeople, good reference accounts and so forth. But one maybe concluding thing to say about getting better -- back to better business in China is they resumed in-person work sooner. And I want to reiterate my belief that all of our businesses are going to improve with in-person work and then we had that ahead in the rest of the world now based on the empirical observation about the pace of business in China.

Great. Thanks so much, Greg. And then one more if I may please. Earlier in the call you had cited some uptick in E365 consumption on some renewals I believe. And I think your explanation was anticipation of a broader infrastructure spend coming with perhaps a bill. What are you hearing from customers with regard to that?

So no, I'm glad you asked about that. It's not that consumption is up yet in -- that I was referring to. It is that interest in converting to E365 from ELS is up because accounts that will otherwise face their ELS renewal are saying, we'd like the success plan aspect of E365 so that you can embed people helping us in going digital so that we can do more work faster without taking on people faster. That -- but that's not the same thing as consumption in the existing E365 book, which continues to follow the pattern of green for public works and utilities; yellow almost green in commercial and facilities; and red still for industrial and resources. There's just nothing those folks can do to bring back projects very much sooner. They'll be entering into energy transition projects, but they have to sell that work to get everyone busy. In general, the big EPCs are talking about expecting bringing back their furloughed employees and so forth. I think that's looking better as well, but they're already on E365.

Got it. Okay. Thanks so much, Greg.

Thank you.

Thank you very much for your attention. Cheers.

Thanks everybody.