Good morning, everyone and thank you for joining us for Bentley Systems’ Q3 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 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 operating results 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 today by reviewing business developments and our progress over the last quarter. And then David will 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, and thanks to each of you for your interest in Bentley Systems quarterly operating results. Our prepared remarks today will follow our usual format as I will discuss the tone of business and certain corporate developments. And over to David Hollister to review our quarterly financial performance. Our operating results, press release is one of two we issued today. By way of tone of business, we consider that '21 Q3 was a quite satisfactory quarter, and tracking towards our previously expressed expectations for the full year 2021. Particularly in terms of new business growth and ARR growth, which by virtue of our subscription preponderance tend to be closely correlated. With U.S federal infrastructure spending legislation having only just finally moved forward from its status when we last announced quarterly results, it is too late for our full year 2021 expectations, or those of infrastructure engineering organizations to be materially impacted or adjusted. But our user organizations seem already more receptive to going digital in order to be able to increase their workload more rapidly than they expect to be able to increase their workforce. As happens to have been the case throughout our now year plus history as a public company, the tone of business differs considerably by infrastructure sector. In each case, we monitor application usage, which for most of our business tracks tolerably closely with new business growth and ARR growth. For the third quarter of 2021, the pattern continued to correspond with what I reported for '21 Q2 in accordance with the stoplight relative color coding here. This refers to the trend direction since pre-pandemic in terms of unit volume, abstracting from almost 2 years of some commercial changes. The consistency with last quarter's report enables me to be brief…

Thanks, Greg. I'll start with our revenue performance. Our third quarter GAAP revenues of $248.5 million grew 22% over the same quarter last year. Because of the purchase accounting for acquired deferred revenue, primarily related to Seequent, we have a haircut which serves to deflate normal results. And accordingly, we also present adjusted revenues, which were $251.4 million, up 24% from the same quarter last year. There happens to be new accounting guidance, which formerly brings GAAP accounting up to pace with this more enlightened view of the historical acquisition haircut. Unfortunately, we can't adopt that guidance until our Q4, which we intend to do and apply to our full year 2021, which will render this adjusted revenue concept unnecessary, other than for the current quarter. Of course, most of that growth comes from subscriptions, which grew 23% over the prior year representing 85% of our revenues. Given this preponderance, I offer much of my business commentary here as it relates to subscriptions. We attribute the acquisition of Seequent to represent 10 of those 23 percentage points of growth over the prior year. Foreign currency effects account for just under two of those 23 points, and thus, our business performance comprises just over 11% growth. As has been the case all year, our Public Works and Utilities end market has led the way in overcoming the macro induced drag on our performance in the industrial and resources sector, where our footprint of EPC accounts continues to suffer declines induced by capital project delays and cancellations. We also see the effects of capital project delays on our commercial and facilities sector end markets. On a product and solutions dimension, we continue to see strong performance with our utilities offerings for electric and communications grades, as well as water and wastewater utilities.…

All right, we'll start with Matthew Broome from Mizuho.

Thanks very much for taking my questions. So it's great to hear about improving new business growth in the Middle East and Latin America. But to what extent do you anticipate this will translate into a broader rebound for resources customers? And given that many of those customers are on consumption contracts, is it possible that a rebound could happen quite quickly? If and when EPCs start rehiring.

Matthew, I think it would correspond to EPCs starting rehiring. I think that, my guess is that depends on their changing business mix to do with energy transitions as far as rebounding energy prices, it certainly clear that even fossil fuel OpEx is really important and is not in jeopardy, and that's a great opportunity for us. For instance, with asset lifecycle information management that we mentioned is on a good upward direction. But the nature of capital projects for fossil fuels, I do not think we can -- I don't think I know enough to be Sanguine [ph] about that. But yes, if EPCs resume hiring for projects of any sort, that will immediately put our ProjectWise and applications back to work. We have terrific new applications for wind power tunnels and so forth directions that EPCs would like to move toward. But they've got to change the direction of their ships, and build up new backlog and those directions and I don't feel qualified to comment on how quickly that can be done. In the countries, the energy prices are helping them spend money on Public Works and Utilities. That’s the immediate impact we already see.

I see. Okay. And then it sounds like virtuosity had another strong quarter. Do you anticipate further increasing the size of your inside sales force and other ways you can sort of further accelerate virtual season momentum?

Yes, I think one of the spending directions David Hollister referred to toward the end of his remarks here, where if we are, of course going to be sure to meet our margin target for the year. But when -- if we can add faster to headcount in virtuosity while doing that. We wouldn't because it's a fairly -- we're not at the point of diminishing returns in new application usage prospects in SMB. So, yes, we want to put that accelerator closer to the floor over the coming year,

Indeed, it's at the front of the line for resource allocation. And it's not just headcount, it's also continued investments in technology and marketing, marketing tools, and Google AdWords, and we're seeing success. So we're going to keep feeding the leader there.

That makes sense. And then maybe just one last one for me. Just in terms of M&A, does your current focus remain the geotechnical and environmental opportunity? Or are you looking at other opportunities as well?

I think the opportunity set presented by the infrastructure spending, though, and energy transitions are very significant and should have everyone's attention in terms of potential return on new investments.

Perfect. Thanks, guys, and David, best of luck in your new role.

Thank you. Next, we'll go to Jason Celino from KeyBanc.

Perfect. Good morning. Thanks for taking the time today. Maybe just a couple for David. The slight acceleration in ARR, constant currency errata 13%. Nice to see. It sounds like the businesses is doing well maybe help us unpack, that acceleration over the last quarter.

Yes, it's very much along the dimensions of the tone of business sentiment that Greg described in all of those areas. Again, it's an acceleration from, I think we showed 10% year over year growth in ARR constant currency. Net of onboarding Seequent in each of the first and second quarters. So this 13% is pretty impressive it includes some fairly nice wins related to communication towers solution, which contributed close to 3 million of that ARR growth during the quarter, which wouldn't have been included in prior quarters. So, yes, it's across the board. It's really impressive. But I'll again, caution, it's the third quarter. We need to do that again in the fourth quarter because so much of our ARR growth opportunity happens in the fourth quarters, just the business cycle we have and seasonality we have. So I'm cautiously optimistic about the acceleration. But I am also cautious, in particular, that the fourth quarter is much more important for us than the third quarter.

Got you. And that's probably the main reason as to why you're keeping the guidance unchanged but giving us some of those hands on direction.

Yes.

Okay, perfect. I'll keep it there and get back in queue. Thank you.

Yes. We will next go to Matt Swanson in for Matt Hedberg from RBC.

All right. I'm having a little trouble getting my video going, but that's okay. Greg, ESG certainly been a big topic which you guys came out, especially timely, like you mentioned with the infrastructure bill, the climate summit. Could you just talk to us a little bit about how this theme is tangibly driving your business today as well as maybe like any qualitative changes you've seen in customer conversations, that might give us some idea of the impact we could see in 2022.

Well, even with what can be spent under new government programs, not only in the U.S., but elsewhere. It's a fraction of a percent of our infrastructure capacity that can be new. So extending the lifetime of existing infrastructure assets is necessary, but they now need to be resilient for environmental adaptation, and energy transition. And digital twins are the way to do that. I think when these AEC CEOs, we referred to their going digital survey when they recognize that digital twins are going to help them participate in the OpEx, lifecycle of the assets they engineer, and everyone's doing that for sake of safety and resilience, and energy transition, it sort of puts the digital twin opportunity front end, center, digital twin opportunity and the ESG imperative, are closely linked, because we can't engineer enough new infrastructure to make a difference. It's improving and increasing the fitness for purpose of the infrastructure we already have. That is not only our focus now, but I think opportunity as the engineering firms see it on behalf of the owner operators. So remember, we want to help the owner-operators get to digital twins for better asset resilience and throughput with the engineering firms being developing for our AI twin platform, their cloud services that will be a new business opportunity for them and helping cover the owner-operators. So it's not limited to our sales, but sales via the engineering firm. So having surveyed the CEOs of the engineering firms for the first time, we're glad to see some alignment in the recognition of that opportunity, because we need all that help to get to the owner-operators.

Yes, that's fantastic. And I guess, kind of building on that same theme, we've talked about the pandemic going digital faster. So as we see recovery kind of progress at different states for different regions. Are you starting to get a better sense of the durable trends that are emerging from the pandemic, especially in terms of the long-term pace of going digital. I guess, as people go through the recovery, are you seeing any sort of hesitancy to continue the progress? Or is it kind of a newfound emphasis that will continue on?

I think it's a newfound emphasis that will continue on, but particularly for infrastructure engineers, a portion of their work had been on job sites, not limited to company offices, and when they had to virtualize everything, they realize they can virtualize that too, with digital twins, of the job sites, and for remote inspection of the assets and so forth. It was a necessity during the pandemic but it's an opportunity hereafter for them to work on more projects anywhere and have a greater set of opportunities. They also can grow their workforce by adding people anywhere. And that is already a huge focus. For instance, for these AEC CEOs, they realize that competition for talent is never going to end. It's all the more intense and being virtualized through our collaboration methodologies less than add the talent wherever they can find it. So those are things I think are never going to go back.

Yes, fantastic. Thank you guys for the time.

We will next go to Gal Munda from Berenberg.

Perfect. Can you hear me now?

Yes.

That's awesome. Hi, guys. Thanks for taking my questions. The first one is just I'd like to expand a little bit on, Matt Broome's question earlier when you said -- 4when he was asking about the trends in the underlying business, especially on the energy side? So, David, you mentioned that if you didn't have the headwind from E365. usage? You'd probably have about 2.5 percentage points better, better net retention rate with what you're seeing today. My question there is, at what stage do you anniversary that kind of headwind where the current trends, normalize. So that headwind year-on-year -- like-for-like isn't a headwind anymore. Maybe not a tailwind, let's forget about rehiring. Just if the current trends continue, at what stage you feel like you've cleared the path for kind of a normal run rate of what you're seeing.

Yes, if you look at sort of the quarter-by-quarter progression of the net retention rate, we've now got two quarters of 106%, which is we certainly acknowledged is disappointing, certainly as for us, but it's a trailing 12 month metric. So there's -- we're not going to bounce back to 110% next quarter. It's just going to sort of gradually pick up. And what will help is, yes, we anniversary usage reductions from the EPC accounts that were affected by those macro headwinds, where they're going from really great performance to the lower performance, but we also begin to include the effects of new accounts, right. So our ARR seems to be going in the opposite direction as the net retention rate. And that's because the new accounts, they're not part of the net retention rate. Yes, so when those starts to roll in as well as we anniversary fully 12 months behind us, the good performance from the EPCs, then we will see that start to come back.

It's a modest caveat to that as we don't have experience with the SMB subscription annual renewals yet, and we will 6 months from now.

I would also add to just probably more fundamentally and thinking about this long-term. Our investments in user success, 600 people focused on retention and adoption and expanded adoption. We will continue to build and grow momentum going forward.

Right.

Now we're doing the E365, we see the difference in greater accretion. I mean, the accounts that are in E365, then the universe of other accounts for that reason, but it's obscured by the EPCs all being on E365 still.

Right. Got you. As a follow-up, we felt [ph] quite a bit about the opportunities in infrastructure bill in the past. But now to -- thinking about the climate incentives that, that are coming, it almost sounds like it could be a new era, a new opportunity or investment of CapEx that will go into the green CapEx side. So maybe Greg, for you, if you think about the green carpet opportunity today, the way you see it, maybe from a total exposure of the business versus the growth contribution to the business. And how do you imagine that kind of shifting over the next five years? Is it fair to assume that traditional OpEx is the one that provides subscription revenues for you from that side. But a growth especially in utilities and stuff comes mostly from the green in the future because that's kind of a trend that will help you.

I think it is most that's why I wanted to show the mapping between the green CapEx priorities and the Public Works and Utility sector plus resources which for us is going to be environmental, mainly in the future. So I think that there is a strong correspondence between what civil and structural and geotechnical engineers work on and green CapEx, and it doesn't have to take long, for everything that's done industrially for renewables, you need to connect up the grid. And that needs to be considerably expanded and fortified. And there isn't yet enough funding allocated for it. But it won't happen that we add renewables and not capacity to use the power where it's needed for electrification. So, I think our accounts feel very good about their backlog for years to come. Not only is it good business, but it's good for getting green and getting safer.

Do you think there could be a super cycle in terms of CapEx investment that drives a very long-term opportunity.

So, this gets into for a super investment cycle, we would need to have private investment in infrastructure as well. But there's more than enough private investment that would like to invest in infrastructure and how that gets enabled then, and facilitated is a question for policymakers. But the enthusiasm in ESG investing easily translates to an enthusiasm for infrastructure in green CapEx investing, I guess, you hear some of that coming out of Glasgow, with banks supporting green CapEx investment and so forth. Together if we get private investment added to the government investment, instead of either or that that could lead toward a super cycle, I suppose. I believe it's necessary. Also, I just don't know how quickly that can come about.

Thank you so much.

We will next go to Joe Vruwink from Baird.

Okay, great. How is Greg and David. Other than 4Q being an important quarter in terms of magnitude and wanting to appreciate that appropriately in the forecast. Is there anything you're seeing from either a pipeline standpoint, or hearing in customer conversations, that's giving you pause as it relates to execution here at year-end, and do business growth targets?

Joe, there was something I was hearing that gave me pause. It was at the AEC Advisors, CEO Summit. So you had the firm, the CEOs there, who did have the infrastructure engineering work in the world. And there was -- there were murmurs of apprehension that this infrastructure bill in the U.S might get put off for a year. That is to say, from previous experience, on roadway bills and so forth. If it's not going to happen, sometimes a year extension occurs, that would have been very, a very big concern to the expectation everyone has of their order books filling. So it's a great relief, that we now know that doesn't need to be a concern that the infrastructure release in law yet. But the obstacles are out of the way. Of course, it mainly refers to next year and years after at this point, but there was a weight of some worry, from the experience, that if you put something off for a year, it could end up getting put off forever. We don't have to worry about that now, thankfully.

And maybe the infrastructure bill will just be my follow-up without quantifying anything because I know that's still tough to do. What would be your expectation for timeline? If funding gets allocated, 1Q of next year, when might be the earliest Bentley's starts to see activity as it relates to just your customers planning, they're going to have to spend or higher to support increases in their backlog. When does Bentley see that in your own new business growth?

Well, I don't think it needs to take many quarters or a couple quarters after that, but the most precious thing I think I heard at that AEC Advisors CEO conference, and we're going to have the head of AEC Advisors be with us in our keynote on December 1, as I mentioned, but the head of the largest firms said, look as an industry in AEC, we're only going to be able to add to our workforce 1% per year. That's based on all the available engineers in school and coming into the pipeline or back out of retirement or whatever. And obviously, the ambitions just to continue the growth rate, let alone increase the growth rate, require much greater productivity therefore, and going digital is everyone's best idea for that there's just no impediment to it as once there was. Will some represent some of the findings of this survey, but generally, the CEO said that the impediments to taking to going digital in general, are people in their own firm who haven't adapted yet to that not constraints on funding or demand or needing to meet client deliverables last week, as we talked about.

Great. Thank you very much.

We will next go to Kash Rangan from Goldman.

Okay. I just unmuted myself. Congrats on the results. Greg, curious to get your perspective on the economic headlines that have been invoked lately, which is labor demand, being very high relative to supply and also inflation. How is that impacting your customers? or maybe it's not impacting your customer. What is your overall view on those forces, as it pertains to your end markets, willingness to invest in technology? And also secondly, I’m curious to see what are the milestones that we should be looking at, as this infrastructure build really takes hold and leads to actual tangible business? What are the things that you're looking for that we should be looking for there for to see how that could start impacting Bentley more positively? Thank you.

Well, on the first question, the labor supply constraints are already affecting infrastructure engineers there. There are not the engineering firms are hiring from one another. But there is not a fresh supply possible to do the increased work of structural and civil and geotechnical engineers. So that's why going digital is important. As far as inflation and materials and supply chain constraints and so forth, that, that doesn't as much affect the portion of the project cycles where we're involved, which is closer to the front end. I might say with the infrastructure bill, the port, half of it is about, of course, roads and bridges, and there's a template for that happened in the past. But the other half of the expenditures are in these other categories. Where I think the milestones would be that the legislation directs the government to set up new programs for grid, for transit and so forth. Some of the programs explicitly encouraged digital investment not in big tangible ways, but how those get organized. And when they get organized and who's leading them up will make a difference. They’re new, that's there's not -- you can't look at the history to see how that's going to happen.

Got it. Just the final thing. This metaverse being that potential to more consumer. How does -- does Bentley have a take on metaverse? Is it basically digital twins, your way of playing the metaverse concept? or is other broader implications for your business, if metaverse were to take off?

Well, recently enough, it's going to start with immersive 3D environment for consumer things. But the technologies for greater immersion and performance are going to be great for ways of experiencing digital twins. So we want to with our iTwin platform support any of these visualization environments. In other words, it's way beyond the HoloLens and so forth. There's tremendous investment going into, but the content you will want to be immersed in on the industrial side, on the infrastructure side has to do with immersing yourself not only statically through a rendered image, but using that computing power to say, what was the history and the construction, the design alternatives that were considered, and what's the path of construction and time and space, and what's going to happen if we don't maintain this asset and so forth. That's the time slider, we say the digital chronology. And that's where you don't get that from an immersive environment. You get that from a ledger of change in our iTwin platform to bring together the ET the IT and the OT. So we think, we never have had in mind specializing on the last mile on how that immersion experience occurs. And it's just great that there's going to be lots of investment in making that better and better. It will make the content in a infrastructure digital twin, all the more valuable, because it can be experienced in these better ways. That's the -- that's what in the case of Nvidia was being demonstrated today to show the potential of their own neighbors.

Good to see you, Greg. Thank you.

All right, everybody. We're going to wrap it up there. Thank you for attending the call and we'll see you next quarter.