Good morning, everyone. And thank you for joining us for Bentley Systems’ Q2 2022 Operating Results webcast. I’m Michael Fischette, Bentley’s Vice President, Deputy General Counsel. On the webcast today, we have Bentley Systems’ Chief Executive Officer, Greg Bentley; Chief Financial Officer, Werner Andre, Chief Operating Officer, Nicholas Cumins and Chief Investment 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. After the presentation, we will conclude with Q&A. With that, let me introduce the CEO of Bentley Systems, Greg Bentley.

Good morning, as the case may be, thanks to each of you for your interest and our operating results presentation will follow the usual sequence starting with the tone of our business. As we announced today, I'm pleased to say that 2022 Q2 proved to be a straightforward and quite satisfactory quarter, tracking toward our annual financial outlook, subject to ongoing FX volatility. And notwithstanding arbitrary FX impacts on reported revenues, our intrinsic natural hedge improved by the inclusion of Seequent substantially protects our operating margins. 2022 Q2 was characterized by substantial alleviation of the particular disruption which did affect us in 2022 Q1, the regional geopolitical drama, although 2022 Q2 brings about a conclusion to our business in Russia, this also concludes the uncertainty of our prospects there. And as to what I think was related counter globalism, which manifested in attrition in China, this fortunately appears to have been a shock confined to 2022 Q1, although there should still be concerned about bilateral trade and/or investment impediments from the Chinese and/or US governments. Although Northern Europe's new business declined during the quarter new business in Central Europe and Southern Europe rebounded sequentially and year-over-year. Drilling below these headlines, Chief Operating Officer, Nicholas Cumins will follow me as usual to break down our business performance where notable by region and by product domain. Chief Financial Officer, Werner Andre will cover all of our metrics -- Q2 due to our Russia exit constant currency ARR growth was 11.5% plus 2.5% from Power Line Systems year-over-year. Platform acquisition Seequent was included a year ago. I spoke last quarter about and will be highlighting further today, the intrinsic economic resilience of infrastructure engineering generally, which our first half business performance reflects. But beyond that these platform acquisitions of Seequent for environmental opportunities…

Thanks Greg. It's an exciting time to be involved in infrastructure and an even better time to be engaged with our engineering accounts. I started out in technology and quickly migrated to engineering. Over time I rose to be the CIO of what is now one of the top engineering firms in the world. I'm passionate about helping the industry as a whole advance which is one of the reasons why I'm so thrilled to Bentley's CIO Champion and Engineering Advocate. There are so many ways we can improve and move forward and now is the time. Engineering and construction firms are risk averse. They need to be. Quality is of the utmost concern when designing an asset and safety is paramount when constructing or operating that asset. If something goes wrong, people can get hurt. Going digital may once have been seen as challenging the priorities of quality and safety. However, technology has advanced to the point that engineering firms are now prioritizing going digital to enhance quality and safety along with environmental, resilience, and sustainability. After all, why have people hanging from ropes to inspect bridges and dams when one can use a drone. In parallel, the AEC industry has crossed an important tipping point which will enable them to advance their going digital ambitions even faster. Because most firms traditionally build through time and materials or cost-plus mechanisms adding efficiency through automation or component-based design could arguably reduce revenue, not ideal. However, recent industry surveys show firms taking advantage of lump sum and fixed fee opportunities, which provide direct incentives to accelerate going digital. And there's more good news. As the data Greg presents shows backlog is up. Depending on the survey being used, it's anywhere from 10 to 15 months on average. While firms have traditionally…

Thank you, Claire. Let me provide additional color commentary from an operational perspective, starting with regions. In every region, we're as busy as ever. Macro conditions for infrastructure engineering are favorable and there are good tailwinds. India, Southeast Asia, Middle East turned out. India in particular continues to accelerate. We have strong momentum with engineering and construction firms, and industrial and resources are up year-over-year. In our Q1 call, we noted some difficult market conditions in Europe. And I'm pleased to report that, new business growth picked up the pace in Southern and Central Europe specifically, with Northern Europe still somewhat lagging. As Greg mentioned in Q2, we made the decision to exit Russia. I would like to acknowledge the contribution of our former colleagues who have developed a thriving business there. Of course, following the decision we moved to wind down business in the region. All of the regions performed in line with expectations. Pipelines are strong across the business and continue to grow. Construction firms have healthy backlogs, pressure is still on projects to deliver and firms continue to invest in technology to address efficiency opportunities. Money is flowing and firms are prime for software, to add more efficiency, improve their workflows, enabling them to do more with less. Now, I would like to share some color regarding products, highlight, the strong performance. As you probably know, most digital twin start with capturing the asset condition of the project site, via photogrammetry or lidar, taken with drones or UAVs. We have one of the industry's leading products that accomplishes this called ContextCapture. It has the potential to transform inspections and safety reviews beyond traditional methods to establish virtual or even autonomous inspections gather much more detailed information, which can be processed using machine learning techniques and present data…

Thank you, Nicholas. Our particular corporate developments for '22, Q2 will all be covered by Chief Investment Officer, David Hollister. Transactions he will report on, include a divestment that has taken the form of a promising minority investment. Generally, as the emerging digital twin ecosystem gradually comes into a closer focus, we get involved in related endeavors that depend on our applications. A case in point is, our data vending business, Streetlytics. It was spawned by our Cube mobility modeling logic which was then acquired with Cube by BSY. I regard data vending businesses as being too far afield from our mainstream software and cloud services comfort zone. But we don't object to having an investment stake particularly when as in this case, our infrastructure modeling and simulation applications create demand for such data. David, please bring us up-to-date across these various investment aspects including some smallish recent programmatic acquisitions and then please introduce, Chief Financial Officer of Werner Andre. Thanks.

Thank you, Greg. I'll provide a little more detail on the Streetlytics transaction first and then give a brief update on other BSY investments activities, including a couple of recent programmatic acquisitions. As for our transaction with Teralytics as Greg mentioned late last month, we closed on the merger of our Streetlytics mobility data business with Teralytics. We originally acquired Streetlytics as part of our acquisition of Citilabs in 2019, which primarily brought us the Cube, open modeling and simulation solutions used to analyze the effects of new projects and policies on city transportation networks. Today our solutions for mobility, modeling and simulation include not just Cube, but also our inroad software solutions for advanced traffic and vehicle simulation as well as Legion for passenger and pedestrian simulation and open roads for comprehensive roadway and civil design. Together these solutions enable modeling simulation and delivery of comprehensive mobility digital twins of multimodal transportation systems at urban, metropolitan, regional and national scales. Obviously modeling and simulation requires a real-time dataset and the more robust that data set the more credible and useful are in simulations. As further evidence of the importance of robust data needed to design and optimize tomorrow's digital cities, I refer you to the Jacobs acquisition earlier this year of StreetLight Data. A key reason for our Streetlytics and its merger with Teralytics, is enhanced data and improved modeling logic of CUBE which is applied to complete and improve the quality of the street segment traffic data. From a financial perspective, we believe the transaction unlocks unrealized Streetlytics value in the form of our ongoing equity interest in Teralytics, and will be net revenue additive to Bentley Systems via the more robust data to be sourced from Teralytics and included and monetized, with the Bentley Systems modeling and…

Thank you, David. Our second quarter was strong and we are very pleased with the performance and resilience of our business across products and regions. Total revenues for the second quarter were $268 million and grew 20% over the prior year or 26% on a constant currency basis. For the first half of 2022, total revenues grew 22% or 27% on a constant currency basis. On a constant currency basis, our Q2 revenues grew 29% in Americas, 21% in EMEA and 28% in APAC. Most of that growth comes from subscriptions, representing 87% of our revenues and growing by approximately 31% on a constant currency basis. This growth is supported by our business performance across products and regions and our platform acquisitions of Seequent and Power Line Systems including their meaningful post-acquisition growth. The growth of our E365 program and consumption growth within our E365 accounts as well as the continued growth momentum of our Virtuosity subscriptions are solid contributors to our business performance. The recent strengthening of the US dollar resulted in significant year-over-year currency headwinds reducing GAAP revenues at actual currencies. Relative to the foreign exchange rates assumed in our 2022 annual financial outlook, FX headwinds dragged down our GAAP revenues for the quarter by approximately $7 million. To further quantify the impact of the US dollar strengthening on our annual financial outlook, if current exchange rates will prevail for the remainder of the year, our full year GAAP revenues would be negatively impacted by approximately $25 million relative to the revenues based on exchange rates in effect when we determine our full year 2022 outlook at the beginning of this year. Our business is otherwise robust even net of fully exiting Russia. The FX impact on our revenues is significantly mitigated by our natural hedge and hence…

Thank you. As a reminder, please unmute your microphone. And start only when called on and limit yourself to one question and one follow-up in the interest of time. We'll start with Matt Hedberg at RBC. Matt?

Hey, guys can you hear me?

Yes.

Great. Thank you for the time. Super informative. Greg, you mentioned -- something we talked about a couple of quarters ago, and it seems like it died down a little bit but you mentioned the Infrastructure and Job Act here in the US. I'm curious, could you double click on that, and because I think a lot of investors are curious how that plays out? I know it takes a long time for funding to unfold. But just a little bit more color maybe some of the green shoots that you're seeing from that?

Well, it is as anticipated a couple of quarters ago now the money is flowing. The appropriations are done each month. We read of another named program from one or another of the federal departments that is starting to entertain grant applications and so forth. So our impression has been that as expected it's ramping up. So I was very glad to see the ratification of that in the survey reported from ACEC, which showed the degree to which the engineering firms are seeing -- those are the jobs that as far as the design the start of the projects and then there will be construction jobs as well. But they are, you know, we're maybe one-third or one-fourth or one-fourth or one-third of the way into the ramp-up of the incremental spending now. Again that's most true happening first in highways and then some of the other newer programs in broadband and water and so forth are somewhat behind those, but everyone is confident about their progress also.

That's great. Now that's super good to hear. I know we've all been sort of anticipating this. And then for Werner in, sort of, the balanced growth and profitability is impressive. Can you give us a little bit of insight on how you're thinking about hiring for the second half of this year? And kind of how you look at -- I think you said Q2 is sort of straightforward. How do you think about that balance of growth and investment into what still looks like an uncertain second half of the calendar year?

Yes. Maybe first some of the our adjusted EBITDA margin is exactly where we were expecting it to be and hoped it would be to hit the target of 33%. We have approximately 400 open positions, which is a reflection of attrition that we had attrition that we project and growing the company. The company is going right across the board. We reset every quarter when we look at the revenue run rates and cost run rates and then open up the hiring relative to the run rate. So that combination makes very comfortable to target towards a 33% in Q1.

Got it.

I might add that attrition for us is real, but relatively favorable to peers and our probably success initiatives are going to differentiate us we hope in retention going forward. But our business is just not very volatile in the scheme of things either at the top-line or on the bottom-line. If you see we're mainly annual subscriptions. We -- our cost -- our people. With the open positions we just won't compromise our standard and it's taking longer to find the right quality of people, but we haven't made big changes to our hiring plans and we don't anticipate needing to do that hiring. And Nicholas do you want to add anything to that?

Hiring is a priority to support the growth of the company in the long-term. So, yes, there's no slowing down on our side in terms of hiring whether it's in go-to-market for the success organization for our product organization. All steam ahead.

Great. Thanks. Congrats on the results guys.

Next we'll go to Joe Vruwink at Baird. Joe?

Great. Hi, everyone. You know, if I just reflect on some of the things you've brought up on the call. So given an increase in projects with IIJ, positive tone of business across all sectors, new business improvement and geos that were previously seeing some pressure and a pretty good pipeline. How would you expect all of this to manifest in core ARR growth from this point onward? And do you think that an inflection towards the upper end of the 11.5% to 13.5% range is that possible when you think about some of these things and new ARR to be generated in the second half?

Well, Joe, thanks for the question. We say, we'll update our annual financial outlook only when the material change and we've decided it didn't -- it doesn't rise to that at the moment. What's to be remembered is we're a percent behind by virtue of Russia. If not for the Russia exit, our ARR growth year-over-year in constant currency would have been 12.5% in the first quarter and 12.5% in the second quarter. But we've lost that percent and we would have to make it up. So -- and then we have the uncertainty about China. You might say, well, wouldn't you be able to narrow your range as half of the year is behind you in ARR growth. In China, it's still such a question mark. As we mentioned the counter globalism didn't recur in the second quarter, thank goodness. And our teams there are enthusiastic, especially about new infrastructure programs in China that are meant to be quickly delivered and making a difference this year. But on the other hand when you look at -- consider the news of the past week and the government tensions, it doesn't seem like we could count on China, one way or the other. So I think that's -- remember that's 5% of our business. So that's a swing that we think remains in the range of ARR growth for the balance of the year, but it would be possible to make it up, but it would also be possible to encounter, for instance, recurrence of problems in China. So we're confident that the range is the right range at this point. Nicholas, you want to add to that?

Okay, okay.

Just on China, I think, Greg you explained it very well. There's a lot of unknowns of course. On the other hand, if you follow the news, the President Xi Jinping has ask for an all-in effort -- all-out efforts to invest in infrastructure. So, obviously, the opportunity is as big as ever in China for infrastructure engineering. Now we are leveling the playing field, as we announced last quarter, with our JV strategy and the first JV that we've created. So if some of the companies over there, some of the organization over there want to procure Chinese software, we can do that. But we're also taking a lot of steps to invigorate our core business in China. We are creating a user success organization over there. We're going to launch E365 in China later this year. We are making a lot of the capabilities or product-wise or core product in China that were only available on the cloud. We're making them available on-premises, so that company organizations over there, who cannot use cloud solution, will be able to benefit from that innovation. So we think this is really going to help on the growth of China. But, of course, lots of uncertainties on the overall relationships between China and the rest of the world.

So, Joe, that's a lot of emphasis on China. But the point is the rest of the world and the rest of the products and the sectors are, pretty predictably, can be counted on now for the year. So the risk is -- and the risk of Russia behind us wasn't a good outcome, but it's an outcome. We have to make it up and China is the question mark.

Okay. Okay, understood. And then second question I wanted to focus a bit on the metals and mining exposure. Curious if you can just give maybe an updated rate of growth for Seequent? And then, when you think about some of the activity that's happening around geological modeling now with Micromine ending of AspenTech, of course, you've operated Seequent for a year. Does that tell you anything about maybe customer readiness to invest in a bigger way around these solutions and so the fact that you and peers are now gravitating over as kind of a reflection on a better market opportunity?

Well, it is the case that Aspen's acquisition of Micromine's kind of a change in their direction now under Emerson majority ownership, but does reflect secular opportunities in mining. Mining can be done differently and better and it starts with the subsurface modeling that Seequent plan here. As the growth rates -- each and both of Seequent and Power Line Systems are growing twice as fast as Bentley Systems. And that continues to be true as we grow faster, if you see what I mean. So we're very happy with the opportunities in, what I call, environmental digital twins including mining and in grid digital twins. Those are resounding opportunities for the foreseeable future, I think. Nicholas, what would you like to add about Seequent?

So Seequent is very good again this quarter, in mining for sure. I mean it continues to benefit from very large investments in mining to support the world's energy transition, not just in mining. It did pretty good in civil as well according to plan. Now if we look at mining, some of the acquisitions that Seequent made and we announced exactly a year ago actually, have done extremely well double to triple-digit growth, which is a sign of a market which keeps pushing the envelope in terms of digital transformation. It did very well in Africa. We had some existing large users in Africa who double down so to speak in their investment in digital for mining. Now with respect to Micromine, this was not a surprise, because we know that the founders had sold to key firms, so we knew that an acquisition was going to come. The overlap with the Seequent portfolio is in some area. I mean Micromine is actually more downstream. It's more on mining operations, right? So, we will take it more as a confirmation point that indeed mining is a hot business and mining software has a lot of potential. But I just want to reemphasize the fact that Seequent -- with Seequent, we do have I will say, the largest and the deepest portfolio of products available for geo-professional. It's really second to none, right? So, our breadth and depth of our capabilities remains leading.

Great. Thank you very much.

Next we'll go to Matthew Broome at Mizuho. Matthew?

Hi. Thank you. So, it sounds like Virtuosity has another good quarter helping to drive new business growth and I guess it's been just over two years now since you launched Virtuosity. What are the main things I guess you've learned since launching that business and your broader zero touch strategy in terms of approaching the SMB opportunity in particular? And then how material do you expect zero touch sales to become over the next sort of five years or so versus where they are today?

Well, it will take to five years to get to the zero touch. It's a strategy not yet quite the norm but it is our major investment initiative I would say in terms of people and the investment we're applying there. What Virtuosity has done for us is validated the potential we can reach with direct engagement these practitioners engineering practitioners who are mainly an SMB firms that can really be a way to beat the competition that's coming at it from a channel approach. And here again I'll ask if you want to add anything to that Nicholas?

Yes, what Virtuosity allowed us to prove is two things. One is the real potential for indeed a zero touch engagement with our accounts. For sure it's started in SMB, but we see really no reason why at some point, it shouldn't be available as well for some of our enterprise accounts who are not yet on E365 for example. But the other thing that it helps us prove is the strength of an inside sales team right? So, we've done it with the core business of Bentley the core portfolio. Actually one of the things that stood out also for Seequent in the last quarter was the inside sales team. So, it was a clear standout in terms of revenue acceleration. So, those are two muscles that we are building up now as an organization, zero touch and low touch if you want with--.

It just shows a differentiated strategy. The market is ready for a differentiated strategy there we think. And our products are suitable to extend our balance SMB becoming a comparable portion of our business to the enterprise business over time as you say the five years.

Right. Okay. Thanks for the detail there. And then secondly just curious in terms of your current M&A focus, are you open to additional platform acquisitions in the near-term? And is there any area of your business you're looking to strengthen using M&A?

Well, the platform acquisitions of course don't depend on us but availability and I haven't sounded very optimistic about that. David Hollister, could you help answer?

Yes sure. Yes, platform acquisitions those obviously that we have completed are doing quite well, but the prospects for more of those are not great. But we do continue to have appetite at a programmatic level. Our strategy hasn't changed. It's certainly obvious that the velocity of deals we're closing this year is off the pace of what we were closing last year. We're still seeing opportunities but not as many. I would suggest that we're not seeing as many PE-sponsored opportunities in terms of volume, which is not surprising. They probably are reverting to the playbook of prior years where they had to be more patient and just hold acquisition -- or hold portfolio of companies and grow them until they're more ripe and market conditions are more receptive. Those PE-sponsored deals that we are seeing get done are closing at valuations that we're not willing to venture into. We haven't seen the market correction in those M&A multiples that we're seeing in the public multiples. And we're just going to be disciplined about valuation. So we're looking hard. We're working hard, but there are deals that are just at a price we're not willing to go to. We did close this year on a few. ADINA last quarter as you know. PLS to start the year. A couple of small deals MaximoCon, which is -- there was a theme here that we're growing and we're recruiting and we want talent. This was effectively a talent acquisition. MaximoCon. And then just today, we're announcing the acquisition of Eagle IO which is additive to our infrastructure IoT tech stack and talent team. Both of those together, the MaximoCon and the Eagle IO are our smallest as Greg described, but together they don't get to eight figures in terms of acquisition price. But the pipeline is robust. We continue to work our strategy and our appetite hasn't changed. So we'll get back on pace with velocity soon enough.

All right. Perfect. Thanks very much.

Next, we'll go to Devin of KeyBanc. Devin?

Great. Hi, everyone. So I do think going to hop on today. I just have maybe just one question from my side. I'm encouraged to hear that macro in Asia and some regions in Europe improving in the past quarter. I just want to ask about the linearity of improvement in those regions. The improvement sort of happened more so in the beginning of the quarter, or is it towards the end of the quarter? Any commentary you can provide on that?

Well, I'm sure Asia has been strong throughout the quarter, but Europe we've been monitoring closely and it hasn't been the same story across Europe. And now, when we reported new business, of course new business for us is ARR growth. When there is new business, there is ARR growth. We mentioned for instance Northern Europe, new business declined during the quarter, but there's still was new business. It just slowed down. But maybe Nicholas can you help with the notion of where in the quarter and I think our quota carriers all feel that there's excellent pipeline and prospects at the moment. But perhaps you can elaborate on that.

Yeah, pipelines are very strong and growing. So Europe, we saw a growth last quarter, but the growth has accelerated in Northern -- sorry in Southern Europe and in Central Europe. In Southeast Asia and India, if you recall the previous quarters, we already called them out. So the growth keeps accelerating over there and it's following the same pattern. It's very much related to industrial and resources. So in that sense it is predictable. Is the linearity exactly where we would like to be? It's still not on the enterprise side of the house. So we're making sure that commercial offerings there is not any contra incentive for accounts to it as long as possible at the end of the quarter in order for us to close a deal. So we're improving linearity, but it's not exactly where I would like it to be. In SMB that's quite different. This is more of a volume sales. So this is actually really throughout the quarter and way more linear yeah.

The other thing I'd like to emphasize on that deal is I mentioned really for the first time that the bulk of our ARR growth is in our E365 account and that is consumption growth which does occur linearly during the quarter. So sort of underneath we talk about deals and we -- and our quota carriers still chase deals and so forth. But the underlying volume-based daily consumption in E365 which adds up to most of it now and of the accretion we get and most of our ARR growth is that accretion that is that has become linear, if you see what I mean.

Great. Very thanks. I’ll leave out.

Thanks, Devin. Next, we'll go to Kristen Owen from Oppenheimer. Kristen?

Thanks. Good morning. Thank you for taking the question. Wanted to ask – I know we've talked a lot about the IIJA, but more recently the inflation reduction at $60 billion for renewable infrastructure. You've got a limited time window for that extended investment tax credit. So the question is, really about market readiness to capture expanded wallet share, whether that's through PLS on the grid side or even Seequent to support the EV incentives. If you have the market readiness or the capacity to capture greater market share than you otherwise would have given how early you are in sort of the integration process of those acquisitions?

Well, the integration process of the acquisitions wouldn't hold that up and renewables are putting a real smile on our face across the resources sector that we've broken out now, and showing that growing faster than anything else. Perhaps embarrassingly, I haven't sufficiently studied the inflation act to know how much of it can be applied to CapEx, if you see what I mean. But enabler especially for grid mobility and renewables depends on grid capacity is the improvement in the permitting that will allow especially in the US, new transmission capacity to be added faster. And I hope that, that legislation continues to address that bottleneck. It's a bottleneck around the world. But we're seeing excellent progress with Power Line Systems. But it's a fraction of what it can be, and it needs to be to hook up the renewal capacity that's being added, or has already been added in some parts of the world.

Great. And wanted to ask about player's appointment, if I recall correctly a significant portion of your TAM sits within your existing customer base. When I think about her realignment to really focus on that part of the business, how are you thinking about your ability to accelerate wallet share gain with these leading engineering firms?

Well we look at each of the top firms, and they're – we look at their spend with us, their run rate with us, per $1 million of their design revenues, which they report to engineering news record, and that's kind of a report card on how important we are to them and how aggressive they are in going digital. And most of them are on E365 or destined to be on E365, and have the benefit of our success team and new digital success blueprint. And so what I'm getting at is, if in each side of ban, you might recall – we measured our service addressable market are saying by saying what about – what if each of the firms in each size band among engineering terms would spend per millions of dollars of their design revenue, which we know because they reported the engineering news record what the one that spends the most on that is? And none of these are small. So these are not – then there's no aberrations in that data, and apply ourselves to do that, and we can multiply our revenue and engineering firms by achieving in all of them the density we have in some of them. And Claire will help us understand that and communicate better and focus more. Nicholas, maybe you want to talk a bit about the solutions group and the evolution of that?

Yes. So we established a solutions group about a year ago now. And the focus as Greg commented during the prepared remarks was very much on owners operators and was a line along all the major infrastructure sectors, such as transportation or mobility, electricity, water utility, so on and so forth. And the main purpose of that group and the same will apply from now on to engineering firms with Claire was really to look at the world through the lens of the industries we serve, understand the big trends in that industry, the big themes of that industry and clarify how we, Bentley can best support those trends. How could we support the transformation of these sectors? So this is what Claire is going to, do focusing on engineering firm, which is indeed the majority of our revenue scale, looking at the world through their lens, how can we help them be more efficient and more effective, whether at the individual engineering practitioner level using our engine applications or as an organization, using our enterprise systems such as project-wise. And how can we help them, if this is something they want to do transform their business. If they want to become digital integrators, if they want to offer they own digital services to owners and operators and have more of a recurring revenue stream, how can we help them with our experience there and our software.

That’s very helpful color. Thank you so much.

Great. Next we'll go to Andrew DeGasperi from Berenberg. Andrew?

Thanks. Good morning. Maybe Greg, thanks for breaking out the Resources contribution recently. And I just wanted to ask, you mentioned oil and gas had a recovery. I just wondered how that much does it contribute to AR right now? Maybe could you elaborate a little bit how fast it's been growing relative to Bentley's core revenue?

Well, that was the portion that was previously in industrial. So, you saw that that was at most 20% of -- and even a bit less than that. But it's gone down of course to be with the CapEx since 2019. It's now headed back in the right direction, but slowly. So I would say it's not a significant contributor to ARR growth now, but it was a drag on ARR explicitly because they were all on the E365 program. That's the particular significance of turning it around. It helps E365 as a whole look as good as it really is.

Thanks. And then maybe one on Virtuosity. I know you mentioned the 600 new SMB customers that are adding on. Have you seen that momentum continue so far in Q3 on that? And do you expect any slowdown given the challenging conditions that customers are facing?

Well, I don't think we comment much on Q3 yet, but I -- but slowdown doesn't characterize anything about Virtuosity. I think, it's green light. If the more capacity we put in there with -- and it's been adding more inside sales reps, but we need to add the digital multiplication of their reach is -- and that we're working on as fast as we can.

Thank you.

Next we'll go to Michael Funk at BofA. Michael?

Yes. Good morning guys. Thank you for the question. One for you, Greg. So I always appreciate the commentary on exposure by project type and then ARR growth by project type as well. Do you have any thoughts or comments to have though on funding the project type meaning public versus private funding as you think about rates increasing and capital budgets potentially getting cut?

Well, the industrial sector as we now narrow it not to include resources and renewables is privately funded. And that's where that exposure would be the commercial facilities sector. You see that's relatively small. I think we've moved the discrete manufacturing into industrial that's privately funded and by rights would be interest rate sensitive. To tell you the truth, I keep expecting that to turn down and it hasn't yet. It may be because in commercial facilities, the way we're differently using space now in the commercial and facility spaces requires enough adaptation that it's making up for what would otherwise be lower capital investment there. But you're right, it's necessary to break that down by infrastructure sector. Certainly, in public works and utilities and resources it's mainly government or public expenditure that is not at risk we think.

No, it's great commentary. Thank you.

Thanks. Next we'll go to Kash Rangan at Goldman Sachs. Kash?

Hey, thank you very much. Appreciate it. Greg, great to you see and rest of the management team. Great results. You made a point about engineering labor, design labor being in short supply and how the role of software is even more paramount. I'm curious if you could expand your thoughts because it has implications for how you've been making acquisitions adding more depth to the product portfolio. But if engineering talent is in short supply, how does the company go about getting more product adoption in a labor-constrained market. I was just curious to get your thoughts on that? Thank you so much.

That has become the priority for the engineering firms. They do not expect this to turn around. And it couldn't because the new civil engineers and geotechnical engineers and structural engineers need to be in school now and they're not. So I'd like to say the engineering firms and engineering organizations for whom the pandemic prove to them that going digital was necessity they wouldn't have thought they could conduct their business, if they couldn't come to work. But they were able to do that, thanks to going digital. And now that occurs to them is the same solution to their capacity problem to as we say be able to do more work without a greater workforce. So I think that is the main theme within those firms. It's not our theme. It's their theme, thankfully and we'll have clear to be able to help communicate that. Automation replication as Claire mentioned component-based designs, those are the way to get more work with fewer engineering hours. And with the backlog I just saw at 135% and they expect it to increase from there. It's – everyone is on the same side of taking advantage of this.

And finally, is it your view that the company is gaining wallet share and market share? And if that's the case how could you possibly accelerate share gains? Thank you so much. And that’s it for me.

Thank you. Well, I think that the share of engineering work that is infrastructure engineering work is growing in the world as among all engineering work. You see because of the priorities we call ESDG to do with resilience and energy transition and so forth. We are – we don't tend to beat our test about our own share but I think that's gaining as well at least in the SMB sector. And we'll – we are in a position of relative confidence now. We're sorry to have the Russia exit behind us still worried about China but otherwise, the lights are green and we're confident about achieving our original annual outlook despite the concerns that have come and gone and will continue to come and go in 2022. So thanks to everyone for their time and attention today.

Yes. With that I see no more questions in queue. So we'll end the call on that note. Thank you for your time everybody and we'll see you next quarter.

Cheers.

Thank you.