Q2 2021 Bentley Systems Inc Earnings Call
Business narrative with the directions of application usage within each respective infrastructure sector since that's where the trends of the pandemic impact have diverged most.
The natural reason to start with application usage is that it traditionally literally the leading indicator of our new business growth, which particularly underlies a or our growth and then in due course revenue growth.
The pushed proportions of revenue attributable to each of our commercial miles is shown here as of last quarter earlier. This year I showed the incentive plan, which all of our quota carrier share based on the same new business growth that is quota achievement measure, which I will remark upon today Ricky.
Call that our accretion and recurring revenue attracts higher quota credit coefficient van do for instance, 1 time license sales.
Fact, this quarter continues the trend of decline in license sales in favor of our mainstream subscription offerings for the first half of 'twenty 'twenty..1 license sales were down to under 5% of revenues from 7% in the first half of 2019 relatively benefiting our recurring revenue proportion we.
Have ever less exposure remaining to this amplifying source of cyclical volatility.
We have focused for a ton of business on directions and application usage because of usage presage is new business growth and eventually revenue.
That connection between application usage and a RR and revenue is increasingly short circuited as we have repeatedly emphasized by the increasing proportion of our business model, which is directly E 365 consumption based to the extent of the E 365 proportion of our business model.
<unk> in both our <unk> and the new business growth and revenues follow usage directions in the span of the calendar quarter or less this.
This was our revenue mix by commercial model for 'twenty, 1 Q1.
As you see here 21, Q2 was another successful quarter and continuing to upgrade our enterprise accounts to the <unk> hundred 65 subscription program.
David Hollister will help with understanding the obscure consequences under topic 606 of the counting of each such quarterly change in our business model mix and thus in our subsequent quarterly seasonality.
We expect new upgrades to $3.65 subscriptions for years to come including 2 of the majority by dollars of the accounts currently under select subscriptions.
And we returned to discussing comparative directions across sectors of our application usage bear in mind that our observations about application usage are as 2 totals, which count any day as usage of any application equally.
In fact, our AD applications very respectively by almost an order of magnitude in value of consumption and that is what the charge depending in general on the applications degree of specialization.
In response to your good questions of that drivers of organic growth earlier.
Earlier this year I introduced the term application mix of accretion to measure of the proportionate increase in our average dollar yield per application day and abstracting from pricing changes as we manage by degrees to upgrade users to more valuable products application mix of accretion is of virtually.
Unlimited source of new business growth for us over the long term as this as in this example from back then of Upselling. The Microstation user to become a user of open road much more valuable to the users and to the S. Y I mentioned this in connection with <unk> hundred 65, because 1 of the reasons.
<unk> hundred 65 is a priority for us and for our accounts instead of major of responsibility of our success teams that we virtually embed within E 365 subscriber organizations is to lead the way in Boeing digital through what we call success blueprints to new digital workflows advancing in digital.
Workflows naturally result in more application of the mix accretion.
So far in 2021. He 365 has helped us achieve overall application mix of accretion the annualized is the several percentage points of IRR growth.
And of course application usage doesn't include our project wise and asset wide enterprise cloud services, which has consistently grown faster.
Back to application usage by infrastructure sector now for trends in reference largely to pre pandemic usage levels.
I'm pleased to say that for us the overall commercial facilities sector, which had been variously sideways yellow from more than a year is now back to growth poll of the pre pandemic period. It does remain the case that usage by contractors and commercial facilities, primarily architects and building engineers lags behind usage.
By the owner operators.
Is the hypothesis to account for this I cite the example of Bentley systems.
I consider that prior to the pandemic our colleagues almost all in our company facilities every day, if not traveling where infrastructure dependent.
But next during the pandemic and largely still while maintaining our productivity primarily working at home I consider that all of us have been on the other hand.
Infrastructure deprived hi.
I, frankly think that while virtualization sustained or even increased our quantity of work.
Our work quality may have suffered without in person collaboration and the stimulation of purposeful bulk of settings. So my description of the improvement we should now be able to achieve as we transition to degrees of freedom, which take advantage of both workplace and home environments is infrastructure and power.
Mr images from our internal web site sharing this plan with our colleagues.
Each of our managers and colleagues will work out of hybrid work balance appropriately valuing quality versus quantity.
But to attract colleagues to our office by their choice I regard that we need to make our offices magnetic and their appeal to get more work done better.
It will be worthwhile for us to make the needed upgrade investments for infrastructure of empowerment.
And I think that's true across our economies.
A considerably larger scale example is Siemens start square, where Siemens began in Berlin, Siemens just announced its framework contract with the city to revitalize and construct this carbon district.
With 1 million square meters of diverse new space for Berlin's characteristic innovations.
Siemens real estate has contracted with us for exemplary project and asset digital twin cloud services to span the supply chain and lifecycle and turn we and Siemens mainstream smart infrastructure business are now of jointly pursuing opportunities globally for campus digital twins to support planning and construction.
The <unk> operations and asset management.
Moving on to our next larger industrial resources infrastructure sector I'm, sorry to report that the decline in our application usage has continued by.
By contrast, the commercial facilities.
Recall also that most E. P. CS the couple of dozen Earth necessarily large engineering procurement construction contractors, who perform.
The mostly fossil fuel related Capex project or industrial resources, the owner operators have.
Have elected they become <unk> hundred 65 subscribers.
Presumably to share with us the inherent cyclical volatility in their own work.
Their revenues fall within the 20% or so of our revenue mix from the industrial resources sector.
Which also includes the owner operators, who usage is whose usage is not as volatile because it relates primarily to continuous operations of maintenance, we're going digital has become a higher priority under cost pressures. Despite.
Despite this being the small minority of our business. These E. P. CS are responsible for a significant offset to what has otherwise been relatively consistent application usage growth and the great majority of our accounts and product.
To quantify this if.
If not for the pandemic macro impact upon these EPC account of our 106% recurring revenue net retention rate would have been about 2.5% higher 108.5 per cent.
We can also now say having observed the year plus duration to date of the step in application usage by E. P. CS that even though E 365 caused the impact on our <unk> and revenues to occur much sooner than would have been the case under the predecessor E. L F program, which reset only annual annually.
In arrears by now even if there were still only E. L. F. These backward resets would have occurred and we would of been locked in and the resulting lower <unk> and revenues for the full future contract here under <unk> hundred 65, we believe we can better help the E P CS to diversify.
Their own project mix in favor of new energy transition projects and towards other infrastructure sectors.
It's also the case that energy prices have generally rebounded and the E. P sees themselves are somewhat optimistic that their backlogs will recover over the coming year.
By geography.
This unfavorable industrial resources sector phenomenon has designated our new business growth from the Middle East and has considerably decreased new business growth in southeast Asia, which is significantly reliant on producing offshore oil and gas facilities for the world.
And I want to bring attention to a new concern in China, which is now tending to offset the continuing subscription growth they're doing.
During this year to date, we have experienced a rash of unanticipated outright subscription cancellations within the population of mid size accounts in China, who have for years subscribed escalating fixed annual prices to our China specific enterprise program.
I suspect that Geo political issues are probably a factor because on the 1 hand, our Chinese channel partners manage these accounts now face burdens some differential tax treatment for foreign versus local software and on the other hand, the user organizations are now required to repeatedly and formally just.
The Fi why they can't use local software instead.
Together this unanticipated and unprecedented precedented attrition among this segment of the accounts in China compared to our normal global rate of attrition is costing us. So far this year about of further half a percent of net retention rate.
Because we don't think there are product issues. We want next try to reinstate these account relationships through E$..3.65 programs, where we can inherently maintained through success management greater continuous visibility as per their usage and engagement.
Overall, we think the solution will require us to work more creatively with local Chinese partners and we are prioritizing both commercial ventures and technical innovations local Chinese cloud services to accomplish this.
The unmatched upside scale of the Chinese focus ongoing digital infrastructure of engineering makes it more than worthwhile and we still have reasonable expectations I think to achieve as we ultimately did in 2020 road, leading new business growth rates in China by the end of this year.
Returning to infrastructure sectors I am pleased to report that in our mainstay public works and utilities infrastructure sector application usage and recurring revenue net retention continue to inflect upward globally since before and throughout the pandemic.
Most notable new business growth and magnitude and proportionate and durations since pre pandemic levels has been most recently led among applications by our synchro 40 construction offerings.
Of our geotechnical offerings, Praxis and open ground or.
Of our open flows water modeling software and.
And the open bridge.
Most notable new business growth geographically is led by the U K.
North America.
Continental Europe.
In Russia.
And corporate developments, we review the relevant external news of the day.
On August 5th literally as I prepared these remarks, we went live on the Microsoft commercial marketplace for the first transactions to distribute our instant on cloud Native project Wise 365 through this new E Commerce channel, which already serves 4 million users per month.
The project is 365 is well integrated with Microsoft teams and its accordingly, now easily accessible for discovery and self service procurement by the 250 million plus teens collaborators.
Going to market now through the Microsoft commercial marketplace reinforces our own direct e-commerce investment through our virtuosity initiative to reach especially new SMB prospects.
Our new business growth through virtuosity subscriptions grew by over half from 2021 first quarter to the second quarter. The majority of virtuosity of new IRR is from new SMB accounts.
New accounts largely F. N b contributed AOR growth of 1.5 per cent and this year's first half that is 3% annualized growth rate, which is much higher than in previous years.
I should say, however that we don't yet have representative experience with virtual oddity renewal rates, where attrition may turn out not to be as low as our norm at large.
Update our external market checks.
The studies here haven't been updated by the air Arthur but here are our penetration rates among E. N ours Twenty-twenty rankings published the spring of top design firms, respectively for our design applications portfolio, among all 640 and for a project wise among the top 2.
50.
And the Arc Advisory group has just published its annual market analysis study for engineering design and them software and we're gratified to see project wide earned the number 1 market share ranking in Cannes for collaborative thin.
The distinctively industrial strength collaboration which has earned project wise the role of workhorse for work sharing across the largest global design organizations became a necessity in 2022 of Virtualized and going digital the work of every infrastructure during the year engineer and virtually every day.
Organization.
In these combined markets current continues to rank our overall share second to autodesk, but.
With sequent, we are for the first time ranked number 1 in mining.
While we continue to be ranked number 1 in water and wastewater distribution.
And it is particularly significant to continue to be acknowledged as number 1 in electric transmission and distribution combined with communication networks with major investments in these areas being now explicitly prioritized all over the world.
In fact in this year to date notable standout in new business growth include both our open utilities applications for the energy grid and our open comms applications for communication networks and of course, the last quarter I spoke at length about the pace setting opportunity for communication towers digital.
Twins.
For all of these reasons I am enthusiastic about our recent acquisition of Spider establish software leader for the utility pole structures and distribution networks on which we all rely in North America to further extend open utilities for this last mile to.
To the extent that all plans for energy transitions and carbon reduction goals depend on electrification and non distributed generation and storage upgraded networks of utility Poles are key resources for a resilient growth.
The way of the digital twins for transmission and distribution and for communications represent appealing investment that merit our full attention.
The arc Advisory group is very thorough and comprehensive and its research as many of our subscribers operate industrial facilities arc has reported from the start on our joint development with digital Co-venture of Siemens of plant site or a digital twin cloud service for operating process plant. It took some year.
Our is to build out the scope of plant site as we insisted upon of native SaaS implementation based on our new lightweight platform, but it is now fully brought to market by both the S Y and Siemens digital industries.
Arc recently issued this report of case studies from representative plant site implementations, including extensive interviews with the responsible engineers and I recommend it.
Also by way of updated external market research recall that we have estimated our Tam based on the work of research firm can bashing, which estimated engineering software spending by respectively. All product engineers. It's my term, they say manufacturing compared to our infrastructure of engineers, where they saw.
Hey.
They have just completed for US an update from the year 2018 for the year 2019, and we havent prepared new materials, yet, but while 1 result is about a 5% higher Tam estimate.
They're more immediately interesting finding to me is that from 2018 months of 2019, that's all pre pandemic.
Manufacturing spending on engineering software increased about 7%, while spending on E. C software increased about 12%.
So this is consistent with the premise of our Tam of approach that this GAAP and spending per engineer will close with infrastructure engineering engineering here confirmed to the already relatively accelerating and going digital.
The final external markets of element that I will remark upon is our successful offering of convertible notes during the quarter I leave to David Hollister, the discussion of its terms and our current capital structure to me. The significance is that this reinstates following the sequent closing our full capacity for opportunistic export Aqua.
<unk> in addition to our ongoing programmatic portfolio of development program.
To support my premise that such proper domestic acquisitions can well serve our shareholders and now of bondholders you will hear about sequent from both a financial standpoint from David Hollister and.
And as to its strategic synergies.
And to introduce sequence of Bentley business May I now introduce Bentley systems, Chief product Officer, Nicholas Cummins to whom the Sequent organization reports. Thank you Greg the world above ground is largely no 1 day will describe.
The world below ground isn't sort of because it is designed by nature and we cannot see it.
Here, you need specialist expertise to understand interest curves, great shape and nobody's been exceptions.
According to reports by the institution of Civil Engineers, the largest element of technical and financial risk lies in the ground.
Studies have shown an unexpected problems related to grow out of commission and council of more than a third of product over it.
But imagine if you could see what lies beneath.
You called the risk product delivery.
The call great increase the resilient the sustainability of the infrastructure.
Sequent is the unique and truly innovative company in the sub surface.
The quaint translating the gory of them that originated in medical science into geology to create a paradigm shift in how the subsurface is integrated.
This capability only the minerals industry, where sequent at very strong 2 day I've gone on to evolve into multiple industry verticals.
The deep competence is 1 of the language Bentley Bentley.
<unk> has the goal to advance the design construction and operation of the world the infrastructure to be more resilient and sustainable.
To do that successfully Bentley needed the bed subsurface youre starting to get better the role of that's the Walker and that its the quake.
Yeah.
Sequent brings a world class leadership team to the Bentley of family with the blend of Geoscience and commercial experience from multiple industries.
Headquartered in you'd seen in half of the executive team is in all the locations around the world I've highlighted here.
Okay.
With the very strong history of supporting the minerals industry secret net build offices in areas of strong mining activities, such as Africa, Latin America, Western Australia, and Canada and these are all highly complementary to bet the oxy locations.
Software development is concentrating, Ontario, Alberta, and as you know at.
At the time of close the corner was around 430.
True expansion and yeah. They should have been the truth that could eat it is now around 517.
Now I'd Bentley, we've always been aware of the importance of the sub surface infrastructure. That's why over the last 10 years, we've acquired especially as the product sets that lapses skin and kinetic which is now from ground zero.
Secret of our specialists in the subsurface in fact global leaders in their field. So it made sense to bring all of this together the.
The Bentley you take product and professionals have now been incorporated into the street quake, increasing the number of could ease by around 30 per cent.
Now why are we done day, well, we're bringing light minded and light skills, especially at the and products together into a single team and from that.
This will allow us to better address the need to connect these product to support improved and rapid decision making.
We now represent the largest share technical software portfolio globally with the potential to leverage our strength to advance solutions that will greatly improve the resilience and sustainability of infrastructure.
Let me explain how the different products can be used together.
Example, when approaching of New Road project the client will provide some initial sky data, but the consultant we're quickly pull on their database of ground investigations from neighboring site, starting again historically when increasingly in a program of cloud.
These inputs along with T. I S. From survey data are used to build a conceptual side more of the only treaty using leapfrog sequence flagship product for geological modeling.
This is laying the foundation of the subsurface digital twin for the site.
As the project progresses into the detailed design phase using products, which are Bentley promotes designer the.
Geological structures and data about the sole and walk properties from the site and distribution of our combined and the designs per cap and beckman and reinforce the Earth's retaining structures or 90 day to do you think the geotechnical analytical capabilities of Geo studio in classes.
It sounds complex it because it actually is true.
Technical professionals wrestling with the subsurface uncertainty.
They use different tools of different problems at times multiple tools true triangulate on the right outcome at the drive from the complexity to clarity.
This is why many of the users choose both black just since you're a studio because of the respective strength.
That's the better understand the Earth, we need the range of especially with Mexico, and the North site in Schiller Park innovation Sequent out the acquired businesses that broaden geoscience footprint.
Greg noted that the announcement of we fully expect that program of acquisitions to continue and to that point since we close we've announced 2 acquisitions that secret adding process the.
The first is the mango evaluate the relative to new innovative cloud platform to capture digital the majors of mining company exploration and personal training.
Drill of course and ships are incredibly valuable assets and form the basis of the evaluation of the mineral resource.
<unk> brings the majors 2 of Georges anywhere in the world to speed up the assessment process.
They're deploying machine learning to automate the assessment of characteristics, which you can see here.
The next acquisition that Ags <unk>.
It's worth explaining first spending the Geosciences arena. There are large number of data types that are used to build understanding of the subsurface.
Some of that data and historical and reuse and some of it's captured for the purpose. Examples can include diagram measurement using drill holes thousands of meters deep and even so if you could get the measurements from inside those drill holes.
There's a class of the measurement called geophysics that measure the response of the subsurface using sensing equipment and based on that response, a wide range of actually moves can be inferred and use as a proxy for the underground geology.
Example, secret acquired yourself in 2018, the company specialized in the measurement of gravity and magnetic changes.
Another class of geophysics, electrical message, where electrical current extent into the ground and the response measured.
EPS is the Danish software company that specializes in the electrical methods, which can inform us about the presence of groundwater.
<unk> sold types and geological threats, which asphalt for cavity.
EPS is only 5 years old and originated from research conducted by the Danish government to understand their national groundwater resources.
Yeah.
The acquisition of frequent unlocks multiple opportunities, we're focusing on 3 objectives and share of economic performance of infrastructure projects and share long term sustainability of infrastructure assets and accelerate environmental sustainability.
What I would like to do now is give you a couple of example of these objectives inaction with sequent software.
So here's a great example of where sequent software combined with Bentley greatly improves the performance of infrastructure projects.
This is <unk> to the high speed of product that is 1 of the most complex project ever undertaken in the U K and I am sure. Many of you are very familiar with.
The power of connecting people and software is well demonstrated with over 80 Geoscientists working on the 90 kilometer of section of the project.
The product is supported by sequent central platform to correlate analyze and share George equaled understanding where the wider project.
The model is the basis of design decisions that use mainly software.
We feel data arriving just in time the ground modal kind of data that we published weekly so the design team can respond it sort of T V to the updated share insights.
According to Mark Mcdonald and the single section called the Street day correcting the real time updates to save the 1.1 year of construction time and tens of millions of pounds.
Now all economies around the world are facing aging infrastructure as the major issue.
Here's an example of how sequence software is helping ensure long term sustainability of infrastructure the.
Our per children reservoir, whereas the origin of constructed over 200 years ago.
With 1 of the heat treated on the historic glacial landslide the reservoir of the history of seepage historical Struction record exciting litigation, where the blended with high accuracy of Lidar and new investigations to create a treaty, Georgia equal model and leapfrog that was integral to the design of grouting and of new steel weight.
Mcdonald Bentley.
The treaty reauthorization of can pick up of teachers on cash is that otherwise will not be seen in 2 of the cross sections of.
The result was highly targeted works that could be executed with confidence and overall cost reduced for the remediation.
Going forward, we have active collaborations between sequent incense metric in order to de book real time integration from Iot devices to the ground models to provide a framework for subsurface monitoring solutions.
For example ground condition of water level changes detected by Iot in relation to earthquakes kind of data growth model and in turn generic of data stability calculations and risk factors.
Okay.
I mentioned that 1 of the strategic objectives was to drive system. The ability we are seeing a vast emerging market supply geosciences to challenges that aligned with the UN sustainable development goals.
Sequence solutions of a rapidly expanding handprint of around the world by enabling our users to address environmental challenges such that.
Saltwater entering sub surface aquifers, and damaging the freshwater supply as a result of all of the pumping from agriculture.
Contamination from historical industrial activity or the <unk>.
<unk> pressure placed on scarce resources of clean the water by population increase in urbanization.
We are witnessing a substantive shift globally in energy consumption patterns and changes to how countries and societies you energy.
The transition from of hydrocarbons.
Sourcing minerals to support the transition now.
Now it's worth mentioning that it will be electrification depends on a massive renaissance for mining.
Sequence of poor state from conventional mining of course and so.
From less conventional sources for example, extracting the lithium from high temperature your Terminix grew it from underground.
Our development of sources of clean energy.
Now, let me drill down into 1 of the sources of clean energy and next year of terminal.
Tier of turmoil energy is about tapping into the surface of the fifth heat of the earth to produce either of electricity or heat.
Sequence is involved with over 50% of the world high temperature of geothermal electricity production, a true renewable baseload power source.
Although electricity has an upward as well known he may be less so Paris, where I come from has been using low temperature heating for 30 years.
<unk> Task force, which stands for the force here of sort of a true for geothermal energy is funded by the U S Department of energy. This is the test bed to develop technology to unlock enhance your terminal systems.
The heat is stimulated to come to the surface.
The progress in the pages of the Earth model design and is used to communicate to community than the regulators there.
Actually call it their go to true for communication.
<unk> believes that this approach could supply a quarter of the U S. Keeping energy demand in the future now this may be surprising, but the Vera in Germany, where I live as already said this is the heat generics of <unk> target.
These projects demonstrate that working together, we have the potential to tap the earth boundless resources of heat and systemically reduce Avon and fuel party.
Lastly, let me introduce Lyceum Lyceum, a sequence of thought leadership event and now to the place of its total net setup force colors to meet and debate sort.
So what are the 2016 in Paris at the small mining focused event. This now extends across a wide range of geoscience disciplined and industry and is fast becoming the go to EBIT, especially in the field.
The theme for 2021 is to get it towards tomorrow. The aim is to help fuel professional accelerate the understanding of the Earth.
A global event will be followed by 4 regional events.
Now I'd like to hand back to Greg to give an update on year on infrastructure.
Nicolas Thank you, especially for relating what sequence users accomplish for responsible mining and environmental resilience toward achieving the UN sustainable development goals.
I know that our new sequent colleagues all share zeal and responsibility for these advancements we can together now deepen infrastructure and digital twins and deepen our collective commitment to these imperatives.
In fact, I'm aware of that ESG is a priority for everyone here.
And it's especially of priority for us in the S..1.
But because and advancement in and through infrastructure engineering is vital to the world's consensus sustainable development goals and as you've seen for sequent going digital is the palpable key to such advancement.
I ask our colleagues to think of our own goals and this combined way.
To remind us through Bentley systems.
Of our quite unique capabilities, and hence the imperatives and Es D G empowering sustainable development goals.
Including the examples the Nicholas.
<unk> referenced.
And while our organization should of tend to be evaluated upon and minimize their environmental footprint within ESG.
For us the much greater imperative must be Es D G how're environmental handprint.
So to conclude I will briefly make the case that are imperative for Es D. G can and should be empowered by digital twins.
Both our accounts of <unk> initiatives and digital twins will of course be in focus at the year of infrastructure 2021, our global thought leadership event, which will again be virtual this year in early December and we will again have concierge arrangements for analyst Investor and Investor.
Attendees.
Our virtual going digital award finalist presentations and judging will lead up to the year in infrastructure.
By way of accelerating progress toward digital twins.
The 1 hundreds of projects nominated by our users again this year from going digital awards compared here to the year 2020.
Fully 1 third now credit reality modeling to our context capture software.
To produce the digital context from digital twins.
14% now credit high models are containers for semantic alignment of.
Engineering models.
And 11% now credit our <unk> platform cloud services.
This year I will be joined for keynote discussions by members of Siemens Managing Board, whom also prioritize what I call Es DG and digital twins when.
When we think of Siemens and sustainability, we come back to their distinctively impactful role in the world for electrification of it.
The restructuring.
By way of the example on the lower left here you see of unique Siemens innovation already being improvement in Germany, He highways with overhead electric.
Catenary lines to emission Leslie power heavy truck traffic on the Autobahn at the.
The infrastructure engineering for this can be advanced through our new open rail over of headline designer, which incorporated Siemens proprietary modeling algorithms that can be applied for any source of over headline hardware and the recent commitment to carbon neutrality by many countries such as the UK and is.
That success depends on electrifying hundreds of kilometers of the rail network here is the Siemens assessment of the significance of this new engineering application of ours crucially addressing E. S. T G imperatives through digital twins.
Moses our offshore weighted motion simulation software, which has been a market leader for analysis of offshore fossil energy platforms is also reaching notable new business growth levels. This year for ESD G led opportunities.
Because of another of our new infrastructure engineering applications in the realm of electric power generation open Windpower now caters for floating offshore turbines. In addition to fixed offshore wind structures that are necessarily closer to the <unk>.
<unk> the <unk>.
Most of abundant and consistent wind capacity is the 80% located within ocean depths, where direct seabed connections are uneconomical modes.
Most of this is needed to connect the engineering for interactions of waves with wind and tethering of floating offshore wind farm foundations I believe there will be many such examples where E STG and digital twin imperatives converge good business and good work and infrastructure engineering and billing day.
<unk>.
In this regard I'm pleased to say that later this month, we will be highlighted as the Microsoft sustainability partner in particular for our open flows water of modeling offerings, which now include new Azure based water side digital twin cloud services.
During this past quarter. We will we were also recognized by Microsoft U S with their U S partner of the year Award for Azure mixed reality.
Truly significant and competitive category for us and from Microsoft The award is for a Virtualized <unk> bridge inspections by drones and context capture reality modeling. So the inspectors can stay safe and engineers can work remotely altogether assuring the bridges remains safe.
This link you can watch Microsoft's own dramatic presentation of this breakthrough at the air Ignite partner conference with the users, Minnesota, the Ot and Collins engineering.
The subject of bridge safely brings back to mind this slide from last quarter.
The catastrophe on the Mexico City Metro caused by what amounted to a bunch of costs.
You may recall that I also talk then at some length relating such risks to our new and unique capability to analyze and infrastructure digital twins for the monitoring of environmental resilience made parcel bile by our infrastructure Iot programmatic acquisitions earlier this year of <unk>.
Metrics and the Savannah vision and their ongoing software integration into the twin platform.
While examples of infrastructure of vulnerabilities and we of reference such as Mexico City or the Genoa Bridge collapse may have seemed foreign and distance from the U S. Just since last quarter here are ongoing and perhaps compounding examples of dangerous environmental threats.
Our infrastructure here in this country.
Then since last time, we were together American suffered our own catastrophe from infrastructure collapse.
I bring this up not to be morbid, but to point out that as many of you know and have also been tracking most world economies have already committed post pandemic, because we'd all like to think to incremental infrastructure investment programs.
The most projects are not yet underway on the ground or even in the engineering.
Given that here in the U S. Our policymakers are still considering what could and should be on our priorities. We have formed a coalition to make the case for the imperatives of digital twin technologies for our country's existing infrastructure asset whose life cycles of Americans have no economical choice but to extend.
Living and deep infrastructure of digital trend, bringing together ETE with Iot and Ot.
What's feasible and what's necessary to sustain these aetna's assets fitness for changing purposes to facilitate energy transition and to enable environmental resilience and adaptation comp.
Compared to spending on new infrastructure capacity, the financial and environmental costs are modest or negative and the return on investment is unprecedented including for our safety and quality of life. We do think we've garnered garnered some support among policymakers for this if not yet as explicit.
And legislation as we would like so thanks for any help from those here in making this public policy case to further accelerate going digital and infrastructure engineering towards our ample Tam and full potential for us at the S..1.
In the meantime to review of our most recent financial performance and updated 2021 outlook.
Year to day with Hollister.
Thanks, Greg jumping writing here with revenues.
Our second quarter revenues of $223 million grew 21% over the same quarter last year.
Of course, most of that growth comes from subscriptions, which grew 17, 6% over the year prior and still represent well over 80% of our revenues.
So I offer much of my business commentary here as it relates to subscriptions.
Our recent acquisition of Sequent contributed nearly $4 million of subscription revenue growth during the quarter.
Accounting for 2.5 points of growth.
Continuing foreign currency tailwind contributed about 4 points of our subscription growth during the quarter. Thus.
The remaining growth in subscriptions of a little better than 10% comes from business performance.
As Greg mentioned, our stalwart performance in the public works in the utility sector of our market led the way in overcoming the macro induced drag on our performance in the industrial and resources sector, where our footprint of UPC accounts continues to suffer the declines induced by capital project delays and cancellations.
On a product dimension are synchro construction plexus geotechnical opened flows water modeling an asset wide inflammation management and inspection solutions, all had notably positive contributions during the quarter.
On a geographic dimension North America, the U K and Europe also had notably favorable quarters net of some disappointing our outperformance in China with its geopolitical challenges and in the middle east corresponding to the ongoing oil and gas exposures.
Our perpetual license revenues are down 1 million for the quarter relative to the prior year and now represent only 5% of total revenues.
We continue to observe from ongoing cannibalization of the perpetual licenses in the term license subscriptions and virtuoso subscriptions of <unk>.
We expected and walking.
Our professional services revenues now over 11% of our total revenues increased nearly $12 million or 83% over the same quarter last year.
The majority of this increase was stimulated by acquisitions concluded throughout 2020 and in 2021 year to date as we acquired and built our cohesive company's digital integrator business.
1 of more than half of this growth I would categorize as acquisition growth.
These businesses post the acquisition are growing in double digits and generating low double digit profit margins.
I'll also point out that the relative mix shift favoring our professional services has a modest impact lowering our gross margins. However, we absorb those in our commitment and delivery of improvement in EBITDA margins of wall.
As a reminder, our digital integrator strategy is not nearly creating professional services revenue bulk we are strategically investing for digital twin software pull through and to demonstrate an attractive business model and efforts to stimulate an ecosystem of such digital integrators.
To see them bring modest profitability contributions along the way is just the bonus.
Year to date revenues are the $440.445 million and 17, 4% improved over the prior year.
Similarly, subscriptions are improved 14% with about 4% coming from currency tailwind of 1% from sequence and the balance from business performance perpetual licenses are off $1.7 million year to date.
Cycling the trend towards subscriptions that I described from the second quarter.
And professional services are up 78% year to date also reflective of the dynamics of what I described for the second quarter.
Moving on to recurring revenue performance, our last 12 months recurring revenues, which include primarily our subscription revenues, but also will include certain services that we deliver under contractually recurring success plans.
Together increased by 12, 1% relative to the same LTM period last year.
As you've heard Greg explain and as I summarized in describing our subscription revenue performance, our subscription revenue performance and our recurring revenue performance and seeing a trough in our current constant currency net recurring revenue retention rate, which this quarter rounds down to 1 of those 606%.
Again that drop as significantly due to the drag being created by our industrial resources sector and the related EPC account performance.
On the other hand, we're fighting through this with new account growth, representing again, 3% annualized subscription growth in the quarter.
And in case it isn't clear of this growth happens outside of and does not contribute to the recurring revenue retention rates.
I call of the trough, but obviously, we just don't know historically, we've experienced the lag in seeing macro headwinds manifest but also of lag in seeing relief once the macro recovery is evident.
It's my anticipation that are nimble <unk> hundred 65, contractual provisions will benefit us by at least partially shortening of the lag once the recovery is evident.
On the far right you can see some rather dramatic constant currency growth in IRR.
Sequent onboard of significant IRR, which is the only grown further through June 30, and is contributing about $90 million of nearly 13% growth relative to the same quarter last year.
Even net of sequence. It was another 10% constant currency growth quarter for us relative to the same quarter last year.
Now moving on to profitability.
Our GAAP operating income was $32.2 million per the second quarter of 2021 down $12.4 million from the same quarter last year.
These GAAP results reflect rather substantial incremental charges for acquisition related costs, primarily sequence and for noncash stock based compensation.
There's a reconciliation schedule of quantifying these impacts in the appendix to the materials today and in the 10-Q for your study on.
On the right our adjusted EBITDA metric normalizes for this activity.
We thus show are more expected improvement in adjusted EBITDA of 20% relative to the same quarter of last year and year to date adjusted EBITDA of $152 million.
Is an improvement over 30% relative to last year year to date adjusted EBITDA margins are 3 of 4.1%.
In a moment, you'll see that I'm still going to steer towards the revised outlets for the full year 2021 towards an EBITDA margin closer to 32%.
You may recall from last quarter that I've tried to temper enthusiasm for our recent favorability of margins as we continue to ramp out of certain unsustainable COVID-19 related cost savings.
And as we reinvest cost savings into growth initiatives and recognize the seasonality of our expenses is heavier in the last half of last year.
We'll go through that again, but remind you that it is still available for study.
They have to admit the 32% adjusted EBITDA margins in <unk>.
Safe and conservative.
It also represents the result of our carefully choreographed targeted of 100 basis points of margin improvement each year. Once the turbulence of 2020 is normalized.
We're both investing for long term growth and delivering on our margin expansion business model targets I Hope you can appreciate the chart the the.
The tradeoffs that we navigate the need to do this.
Moving on to the liquidity or.
Our GAAP operating cash flows are 9.4% of improved year to date compared to the prior year in.
And 21% improved.
For the second quarter LTM period, this year compared to the second quarter LTM period last year.
These cash flows continue to outpace our adjusted EBITDA.
We're focused and efficient with cash flow, but I don't represented volatility bad or good to be anything other than timing.
We continue to believe that on average our business will efficiently generate cash flow from operations at a ratio of 85% to 90% of adjusted EBITDA.
The relatively outsized cash flow generation for the periods shown here are unusually favorable.
Due to the conversion of certainty of loss contracts with historical quarterly payment cycles.
<unk> hundred 65 contracts, where we seek to collect those of the positive the estimated consumption for a full year at the outset of the contract.
Further continued expansion of our term license program, where we also seek to collect the year end consumption on deposits in the form of the CSS.
<unk> also has generated strong cash flows.
As these programs grow their cash flows outpaced the historical usage and the resulting revenue recognition.
On the flip side the.
The cash flow sport, just the second quarter 2021 in isolation were unusually unfavorable due to the inclusion of $12.5 million of.
Of sequent related.
The transaction fees paid in the quarter as.
As well of $16.7 million paid incrementally in the second in the second quarter of 'twenty, 1 relative to the second quarter 'twenty for income taxes, which are currently reflected in prepaid taxes the benefit future periods.
Related to this let me just take a moment to describe the unusual tax benefit thats reflected now in both of our quarter and year to date results.
The company gets the tax deduction, when deferred compensation share distributions occur and when certain stock options are exercised.
The tax deduction is the discrete tax benefit recognized only when these distributions and exercises occur and thus the subject to the fair market value of the underlying shares at the time.
This significant tax benefit resulted in the second quarter and year to date tax benefit rather than provision and also rendered our prior estimated tax payments to be overly conservative.
You'll see in a moment that I am revising our estimate for the full year 2021 effective tax rate down to be less than 15%.
During our second quarter 2021, we successfully executed another placement of convertible notes of $575 million.
Market conditions in receptivity were favorable for us and we took advantage of the opportunity to tidy up our capital structure by lowering the cost on our outstanding indebtedness.
And free enough capacity on our $850 million.
Revolving credit facility.
As enhancing flexibility for continued growth.
Obviously, we also closed on the sequence transaction in the.
At June paying $911 million in cash and issuing $3.1 million shares of our class B common stock.
Also worth highlighting is the $69 million and paid during the second quarter.
Related to net settlements for deferred compensation plan share distributions and taxation of stock option exercises.
The participants in these plans are entitled the net settlement the company, leaving the company of the obligations of remit taxes on their behalf.
It effectively manifests as the share buyback these transactions occur to a much lesser degree in every other quarter, but each year, our second quarter is most impacted.
As of the end of June our net debt was $1.1.7 billion and net total debt leverage was 3.5 times, our net senior debt leverage rounds to zero times, given the only $37 million was drawn on our $850 million senior secured revolving credit facility.
$813 million remains fully available to borrow on the revolving credit facility.
Had previously projected less than 4 times total leverage after the <unk> acquisition.
We're actually slightly more favorable at present.
The trending downwards.
Further deleveraging.
As I've mentioned I think leverage of 2 times of 3 times of optimal for us, but our business with its predictable and visible cash flow carries that well.
Our capital structure is in very good shape and fully able to support continued growth in the investment, which we intend.
As we committed we are now revising our 2021 full year outlook metrics I show here of bridge on our revised revenue outlook, where the first adjustment we make is.
As downward for the effects of foreign currency the currency tailwind, we anticipated in our initial outlook, which basically where exchange rates at the beginning of the year.
Since shifted such that our portfolio of business and currencies yield of slight yield of slightly stronger U S dollar and thats $10 million less of an expected revenues for the full year 2021 of.
Of that $10.3 million as already manifested in the first half of 2021 and another $7 million, we expect the manifest in the last half of 2021.
Exchange rates remain.
Where they were as of late July on average.
Of course, the next adjustment is to pick up the revenues from sequent. When we expect to reported $45 million of gross revenues, but that will be netted down by the opening balance sheet fair value adjustments to deferred revenue.
So we have actually.
As the acquisition haircut courtesy of the accounting rules.
Secret revenues are rather seasonal.
Based on renewal patterns in the last half of the calendar year represents its seasonal low period and I'll show this in the moment.
The last item to note is the modest expected increase in our business performance relative to that assumed prior initial outlook.
With us raising our outlook and narrowing the range. So now the 945 millions of $960 million for the full year 2021 total revenues.
And as mentioned here is the CS the seasonality of our secret in its business profile based on past and expected near term performance.
Due to its legacy as the New Zealand company end of March 31st fiscal years the.
First calendar quarter of each year is by far its heaviest renewal quarter and thus the strongest quarter of the revenues and <unk> improvement.
Building this into Bentley systems should help to counterbalance that the systems fourth quarter renewal seasonality.
Also because of sequent tends to bill in the U S dollars and incur expenses in other currencies going forward it should contribute slightly to improve the Bentley systems natural hedge against foreign currency fluctuations.
So I'll conclude by summarizing the updated outlook for our key financial metrics.
We'll say it and in driving this update we don't assume any of them any meaningful changes in macro conditions were better off of worse relative to what we're seeing and experiencing today.
Walk you through the bridge in our updated revenue outlook, which is increasing out of $945 million to $960 million, which again is net of $10 million reduced for exchange rates of $5 million reduced because of the sequence.
The acquisition deferred revenue haircut.
Constant currency <unk> growth is now expected to be 22% to 24%.
Which includes 12% to 13% from the acquisition and then subsequent growth from sequent and 10% to 11% from all of the business.
Adjusted EBITDA as I mentioned has been calibrated towards of 32% adjusted EBITDA margin, which based on the updated revenue outlook should be between 305 and $310 million.
This reflects expected ongoing reinvestment of cost savings in the growth initiatives seasonality of our core billing systems expenses weighted to the last half of the year.
It also absorbs the margin dilution in the in the last half of the year from sequent due to its seasonality loans as I just share.
We're also now spending a bit more on interest where we expect total expenses to be $11 million not quite half of which is actually cash interest of.
Describe the discrete tax benefits that are driving a more favorable effective tax rate.
Which I expect from this year to be less than 15%.
Those discrete favorable tax benefits will continue for at least the next 5 years, providing ongoing favorite of ability towards higher effective tax rate, which of course is otherwise subject to any pressures from major tax reform.
We've updated our expectations on fully diluted average shares outstanding due to the convertible notes issuance you've taken on and are now expecting that to be between 328 and 330 million shares.
And this also anticipate no change to our pace of Capex investment more of our current quarterly dividend.
And with that Gary I think we're ready to do volume for some questions.
Our first question will go to Matt Hedberg from RBC.
Okay.
And we're not hearing alright, yes, hey, guys can you hear me now yes.
Hey, guys, Hey, Thanks for taking the question and congrats on a really strong quarter.
Greg.
I guess, what really stood out to me. It was it was a lot of good detail.
It really feels like you're returning now to pre pandemic levels of a lot of aspects of your business.
And I think you guys noted that license revenue was down about the favorable trend at 365 usages up I guess I'm wondering when you look across the broad business.
Are you seeing consumption patterns change in some of these customers that may be more impacted by the pandemic in other words, our people leveraging your technology, even more so 2 of greater extent than they did pre pandemic because of some of the stuff that they learned about digital transformation leveraging technology.
Just sort of wondering on a broad scale it keeps symphony change there.
I think so all of the <unk> hundred 65 accounts and you see how thats growing or because of these accounts want.
Success programs for new digital workflows, I like to say they expect their workload to grow and are concerned that they won't be able to grow their workforce to the extent that day.
Of the new work and hence new digital workflow method of the plan of course for us that can be application mix of accretion with more specialized.
The products such as the examples we show here I think youre right.
That's helpful. And then maybe just 1 more David you noted that youre, not making any additional macro assumptions within your guidance.
I think the delta variance, but not of lot of People's minds recently anything there that you're sensing from the field or is that still too early to get a sense for that.
Yes, I think I think it's still too early I have not heard.
1 negative free.
The back from the field so far.
On the other hand on it is by the.
Good day are our poster child the floor back to work has been China and and the recent news is.
Concerning there.
Got it well well done thus far in the first half of the year Congrats on sequent clothing. Thanks, guys.
Matt will go to Jason <unk> from Keybanc.
Hey, guys. Thanks for taking my questions, maybe just 2 from me.
It looks like the implied <unk> guidance from the sequence is like $94 million.
That's an uptick from the kind of $80 million commentary that you gave previously I guess any further thoughts from sequence growth.
The margin profile, none of the acquisitions finally closed from them.
Yeah.
Yeah, just Jason I would I would say just the confirmation that.
The sequence is growing.
The twice as fast as Bentley systems.
The App and that's confirmed.
And on an annualized basis I describe their margin profile as similar to that in the systems.
You won't see that in the last half of the year because of the seasonality that on an annualized basis. The margin profile will look like systems, and we're going to we're going to program. It to look like the systems, because we're going to keep investing in that business to fuel that continued growth.
I guess Alex.
The SaaS Nicholas.
I think we.
We're organizing as well so that that momentum continues and that we add to it through the reverse integration of our existing <unk> business.
A quick tour of strong momentum right.
That's exactly right. So we are keeping.
Frequent at the stand alone business unit reporting to me, but they are keeping all of their core business functions. The only changes were making to the operating model are to either accelerate their growth of for compliance purposes.
Our objective is really to continue to grow that business of faster growing standard if not even faster now than they were part of the Bentley from <unk>.
Okay excellent. Thank you and then 1 quick 1 for Greg you talked about the 5% higher Tam based on this new study and that AAC is growing and spend more then so on the manufacturing side is there any I guess, what is driving that that out performance and growth is it investments in certain areas certain.
<unk>.
I mean any thoughts there. Thank you.
Okay.
Well of course, the report goes from 18 to 19.
And and.
We will.
Published a report in due course, you will see the day.
The number of <unk>.
The engineered the number of infrastructure engineers as well.
We're spending in there.
We're also able to.
Research this and more and more countries make before.
Think going digital and going virtual will have the accelerated that even more so but this notion of that.
The infrastructure engineering had had been behind but has the appetite to catch up now that third.
And of lots of new work coming and we can't produce in the world.
More civil of structural Geotechnical Bank of America.
More productive and make the collaborate better in Golar goodwill of the answer to that of last year not within the study.
At Chalmette.
Great. Thank you.
Now go to Matthew Broome from Mizuho.
Thanks, very much just from funds of digital.
Maybe just a little bit about <unk>.
The momentum.
For battery and the caution in terms of interest in pipeline.
And given your ongoing efforts to evangelize by technology and then.
Uh huh.
1 of expand are you seeing ecosystem partners ramp their investments in this area.
Well we are.
Working hard to evangelize, especially among the ecosystem partners Nomar acceleration venture fund.
<unk> net technical support efforts and so forth the help with that.
And an ecosystem the exist within our own applications, where our effort now is the half the platform underlie the digital cleanup from all of our Alex of use the term by twin empowered increasingly for our products.
I think we are making headway there to see 11% of the projects nominated this year referred to our <unk> platform and they could be using just parts of it not not all of it necessarily but we're trying to go broad.
With either of the iPhone platform at the same time as we go deep with examples like the communication towers that I talked about last time that are moving ahead and then eventually call of last everything somewhere in between.
So we're working on both of those at the same time going broad and going deep, but it's still very early.
Right of course, and and then just longer from.
Do you have any expectations on the pumps of what's the E 365 license mix will be for you.
Okay.
There are of very many large select subscriber kind of true.
Current never went onto our E L F.
Graham.
That's the next.
Set of priorities for us some of those.
Have all of them.
The best interest of Oregon to <unk> hundred 65.
We think there is another equal amount of the 365 that we can.
Game there.
The feedback from <unk> hundred 65 has been very strong net accounts 1 of the success initiatives from the Virtualized embedded an expert.
The better at having just started it a year ago.
Very encouraged by it and of course, the acid test will be the EPC of those accounts want new digital workflows. They wanted to be doing things like changing their offshore.
The mix of business to floating to win the offshore wind fixed and floating platform also floating solar is the horizon for them and.
Something like a success blueprint in any 365 program get their of their full attention. So yes, we think even though the 8.
The Elas.
The program will absorb that within the coming weeks price yet.
Yet more years of.
Such.
Opportunity Corp.
Great.
Okay. Thanks, Thanks, very much Greg.
Well next go to cash Rangan from Goldman Sachs.
Yeah.
Okay, great and congratulations Greg good to see you on this.
This webinar.
I was intrigued by your comment.
Do you really are differentiating recovery income.
In commercial versus.
Some of the infrastructure I would've thought that.
Probably we see a rebound in the civil infrastructure first before we see commercial because of our strength.
First the sort of working from home.
Wondering if you can expand your thoughts on that and I think you also made a comment that.
The owner operator, so it's still lagging as far as the sentiment relative to the contract base. So you can just expand the dose collinson finally, any thoughts of the competitive environment I know that you acquired sequence.
Youll see the larger Tam.
So.
As a result of are you seeing less.
The less competition more competition of about the same any thoughts there would be appreciate it. Thanks, a lot Scott congratulations well.
Start with the last part of the question I think everyone sees infrastructure as a great opportunity fulfilling bids or advancements of the lights are there more competition. All the time I don't think thats. The bad thing because of there is so much of our Tam.
As such of multiple.
Based on what product engineers already spent just catching up on that.
Let me go back to by sector and be more clear so public works and utilities. There never was a slowdown in the fuel out there that continue to grow it at various rates through the pack.
<unk> commercial and facilities that and now has rebounded above the pre pandemic levels.
<unk>.
In public works and utilities.
Contractors.
<unk> busy the owner operators some of them had.
Work schedules that changed the head.
Carload workers and so forth, so that where that was.
Institutional.
The variation of public works and utilities the civil side of you say generally has stayed strong and commercial and facilities, we see the owner operators.
Responding faster and I just use of for example, maybe like US we believe we need to make.
Changes in the fitness of our.
Of our office facilities to attract.
Our workforce.
Back.
That's just the surmise on our part so the.
Of course, all facilities owner operators of coming back sooner of the parks and utilities nobody ever.
It was slowing down.
But there were some work furloughs and so forth on the younger side that the amount reflected on the.
On the contract the side.
And generally I think the public works and the utilities folks are expecting this new this new work to come.
Well across the world and the commitments that are of course, not not limit it to.
2.
The road and rail, but but especially in the energy grid of communications networks and water all of these environmental resilience opportunities where its civil engineers have to do the work and are eager and able to do the book.
Got it. Thank you thank you Greg.
Well now go to go Mondo from member.
Yeah.
Sal we don't hear you.
Okay.
Okay.
Yes.
Okay.
That's the carrying let's come back to to go.
Yeah, So let's go to Joe Rubin from Baird.
Right.
Okay, great. Thank you everyone.
I want I wanted to discuss the bet you're advocacy here in the U S around smarter infrastructure investments, particularly as we contemplate a stimulus measures.
What has been the feedback from stakeholders and government customers as you've been communicating this idea and then if the advocacy does result in the action how.
Would you expect that the manifest for Bentley systems in terms of maybe particular areas of the business or products that could potentially fill that void.
Relative to the practices standards that are being pursued right now.
Channel with the the feedback generally is that there is enthusiasm about going digital especially for.
Construction and project digital twins for new capacity of infrastructure, but our point is that's great. However, most of our infrastructure in the future 99 per se if the infrastructure, we have now and digital twins or even more immediately applicable with drone inspection.
And.
But the more.
You can find the existing modeling data for digital twins and use it to maintain fitness for purpose and and now connected up make it living with Iot inputs too.
Third.
Catastrophes and continued safety.
That is the new thought.
But what we advocate of in federal legislation is to provide incentives to the.
Faith and I'll use the example of transit agencies.
Especially and we think there is some receptivity to that but it's tough to get above the noise.
For everyone lobbying for their particular new capacity project.
The what you can there is still kind of matter of less in terms of the quality of life and energy transition.
And safety Vanward digital training for our existing infrastructure thats, rather an urgent.
Need.
I will translate for US is to help the engineering firms get in the business of providing the digital twins for the assets they've created on behalf of the well.
Of the owner operators, but we're pretty hopeful that that metros in transit will be.
And next entry point on that however.
Okay. Okay, that's great and then.
Just on sequence. So my understanding of the sequence is growing at twice the rates out of this kind of core Bentley systems.
But now you of this dynamic where there is certainly the acquisition opportunities you already executed I got that you're incorporating the Bentley geotechnical product. So I would imagine there is a cross sales synergies that can be achieved.
Hi.
What can sequence grow by you know the pets to.
2 times is better now before some of these things gained traction I guess, what would be the targeted rate of growth.
Well I'm going to ask.
Nicolas to comment, but my observations are everything below ground is going from 2 day to 3 day and you can only do that with the Geosciences portfolio.
And leapfrog.
So that's the 1 time, but continuing.
The momentum mining is a great business as important that is as it is now for the world electrification and then we have the opportunity for these synergies in.
Infrastructure and environmental so I think our expectations should be hi, Nicholas you and the team of in delivering on that expectation.
So just so just real quick Nicholas.
Uh huh.
Joe the.
The expectations for sequence of acceleration there in the they are in the revised guidance.
But certainly the mix is going to talk with some enthusiasm here about where we can go the bis.
Yes.
Well they are yeah fantastic growth opportunities with the sequent now part of the Bentley group.
The Bentley from any of the the first 1 ended the first priority actually which sequence of Bentley now is to accelerate the growth in cereal.
Right, we have actually a number of joint customers is already joint current users.
But there's a lot of potential for cross selling there.
So that is actually our number 1 priority.
And then the other way around actually we don't have that many sequent accounts, who use Bentley products in mining so mining actually could be of growth opportunity for the Bentley products as well.
Energy in general.
We don't have a lot of crossover here at all actually between sequence and the and bank day, but we see that as the I could vary.
Gross opportunity when it comes to.
Renewable energy when it comes from <unk> energy when it comes to the energy transition.
Great. Thank you very much.
Well next go to Jay <unk> from Griffin, Thank you and good morning.
Sure, Greg and Nicholas first a couple of questions around the recent project wise and synchro conferences.
There was some interesting commentary at OKE of those events.
Session of the project Wise conference it was disclosed that.
Approximately 47% of your design users.
ROI project lives with a clear of that should be considered the high attach rates or otherwise.
And at the Synchro conference. It was quite reasonably said that project delivery is adjacent to design delivery the.
The question then is how does the Bentley see.
Overall design or <unk> strategy, which is to say could you talk about your internal investments in the business.
The importance of of or likelihood of accelerating your growth your share Jim <unk> as our credit for the project delivery business.
All of our David Thank you.
Well I'll just remark upon the attach rate with project wise, we think it should be a lot higher.
The the answer and the investment is in project 1 of $3.65.
Project Wise design integration the <unk>.
Workhorse for work sharing is.
The.
It's a great industrial strength, but there are a lot of projects that are smaller that that that are.
Receptive to instant on no administrator.
And of course of our competitive.
Competitive products that are that are new there. So project wide 365 of the Microsoft commercial marketplace.
Virtually all of our inside sales.
E Commerce is succeeding in the introducing project by 365.
So.
That's the answer to the 2.
The data and make as you say project delivery and design delivery.
Inclusive of and comprehensive and the synchro opportunity is to the have what's designed and <unk> become 4 day and construction rather than become 2 day ultimately in construction all of that has to has.
That's the come together, it's why we we group.
And the project delivery and the cloud services together.
I know, we're being quick in an answer to that very good question, which will come back to more of answers over time. The question do you want to add something to that.
The only thing I will say are the.
The focus of Syncrude is very much in cereals. This is where we're looking from a product standpoint towards the synergies between our design products and our project products.
The 2 make sure we can deliver true synergies here for our customers and see the civil infrastructure.
Thanks, David.
Looking back over the last year.
Considering the investments you've made from cohesive and your other internal investments in services capacity could you say to what extent that capacity might have changed we've grown over the last year in other words, how well resource are you for what you anticipate in Europe deployments of engagements.
Pipeline, particularly for project delivery and introduction of new capabilities like Greg mentioned project with <unk>, 6.5 which will also calling out of blueprints, which seems to be a new newish offering.
So just perhaps talking about the connection between the services capacity in the pipe.
Fine.
Okay. Okay.
I think about.
The cohesive of little bit differently than the the implementation work, you're describing for a project wise.
Current asset wise implementation.
I think Thats, where you are youre focuses as are we are we staffed well for our core product implementation work, our re staffed well to deliver on those success of blueprints.
And I would say.
It's always the tradeoff to make sure that we.
We have enough enough resources zone.
On board to deliver what we sell.
But but not so many of that our utilization.
The utilization rates suffer.
It's a constant back and forth that I feel we manage it well.
We talk about the expansion of the <unk> hundred 60 by program.
And frankly, the the rate limiter of there is we want to make sure we can deliver well all of those programs with the success plans of the success of blueprints.
So we're metering frankly, our growth in each of the 65 to make sure that we are well resource to deliver that so I would say the we're in a good spot Jay but it's it's a pretty constant.
Back in force to make sure of the research for yourself.
Thats. The answer is from project why then asset lives to require fewer implementation resources and project was $3.65 for instance requires none.
The.
The cohesive group on the other hand are going to be working on digital twin projects that involve a lot of data quality issues a lot of enterprise.
The enterprise integration issues, such as Maximo, where most of them start.
That's a different direction than the implementation of project lines and asset wise alone and so it's sort of the 2 separate work forces 1 is getting smaller or professional services implementation had more and more of them become instead of success managers and <unk> hundred 65, whereas the digital integrator.
Work force and cohesive is growing but hopefully what it does it learns that business well and sets of many external digital integrators.
<unk> taken up the slack.
It doesn't have the grow beyond what we need to do to learn to do that well.
Thank you everyone.
Alright with that we'll wrap up the call. Thank you everybody.
Sure.
Bye.
Okay.
Yeah.
Yeah.
Okay.
Okay.
Uh huh.