Q2 2022 Bentley Systems Inc Earnings Call

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.

The webcast will be available for replay on the Bentley systems Investor Relations website at investors Dot Dot com.

After the presentation, we will conclude with Q&A with that let me introduce the CEO of Bentley systems, Greg badly.

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 tone of our business.

As we announced today.

I am pleased to say that 22, 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 are intrinsic natural hedge improved by the inclusion of sequent substantially protects our operating margins.

22, Q2 was characterized by substantial alleviation of the particular disruption, which did affect us in 'twenty to Q1, the regional geopolitical drama.

22, Q2 brings about a conclusion to our business in Russia.

This also concludes the uncertainty about 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 'twenty to Q1.

Although there should still be concerned about bilateral trade <unk> investment impediments from the Chinese and or U S governments.

Although northern Europe , 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 Cummins will follow me as usual to breakdown our business performance and notable by region and byproduct domain.

Chief Financial Officer, Van or Andre will cover all of our metrics, but I hear focus on what we and I think most of you regard as our key performance indicator net.

Net of absorbing the remaining 5% of IRR lost in 'twenty to Q2 due to a Russia exit.

Constant currency <unk> growth was 11, 5% plus two 5% from power line systems year over year.

Platform acquisition sequence was included a year ago.

I spoke last quarter about and we'll 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 sequent for environmental opportunities and apparel line systems for grid opportunities are flourishing at the convergence of the major global priorities for infrastructure investment digital advancement and climate and energy resilience and our <unk>.

Adding to our momentum for the balance of this year, all considered and despite prevailing macroeconomic worries. Our current view of 2020 to business performance has not materially changed from our annual financial outlook, which as I explained last quarter, we do not undertake to revise quarterly merely to incur.

Right inevitable FX fluctuations.

Actually year over year <unk> growth.

Reflects the detrimental impacts of Russia, and some denominator math at Werner will explain.

Net revenue retention for the trailing year also in constant currency hasnt, yet been so impacted by Russia and rebounded to 109% in 'twenty to Q2.

The evident lagging relationship between <unk> and NR.

Will be disrupted by Russia, where any and all subscription revenue is now by definition nonrecurring not an IRR, but the revenue impact is spread out.

<unk> is otherwise higher than an IRR by virtue of our new business and new logos, which in 2022 Q2 continued to contribute 3% and AOR growth, thanks, largely to Virtualized city.

Which I described as one of our incremental initiatives for the 2000 Twenty's.

Virtuosity encouraging AOR growth continued seasonal ice dance here with indeed, the majority of its new business generated like last quarter from over 600 further new names mainly in SMB.

The other major initiative for the 2000 Twenty's or user success organization has focus to start with on the enterprise majority of our business and is generating very worthwhile returns.

Here, we continue to expand at a deliberate pace the proportion of the accounts under our <unk> hundred 65 program.

We started with 365 upgrades generally with our largest accounts and are working our way down with a greater number of accounts upgrading to <unk> hundred 65 each quarter.

<unk> growth, which occurs at the time of such upgrades.

Which are priced generally cover our enterprise services cost is a small fraction of our overall <unk> hundred 65 <unk> growth.

Especially with the EPC firms within <unk> hundred 65, finally, expanding consumption in 2022 accretion in <unk> hundred 65 accounts fostered by our myriad of enterprise success services delivered by engineering experts for new going digital workflows.

Is being achieved at a gratifying multiple of the accretion rate in all other accounts.

<unk> hundred 65 accretion now makes up the substantial majority of the <unk> AOR growth.

Now we've consistently been reporting on tone of business by infrastructure sector.

Since the pandemic began we have focused on application usage comparisons to pre 2020.

So is that the signal of underlying directions wouldn't be swamped by the noise of pandemic volatility from quarter to quarter.

But now that 2022 has been substantially post pandemic.

I think it's appropriate in my color commentary to hence forth resumed distinguishing the tone of business across sectors in terms of our ongoing productivity and generating new business productivity within each relative to their current proportion of our IRR shown here at the same time, we have.

Refine the sector definitions, primarily to usefully separate resources and industrial given now and industrial sector in its own right discrete manufacturing plants have been newly reclassified there from commercial facilities.

This sector commercial facilities is the smallest for us.

<unk> and their current relative productivity of new business generation.

With some renewable energy and environmental accounts and products, having been likewise reclassified to the newly distinct resource sector public works and utilities, New business continues its enduring relative resilience for reasons that I emphasized last quarter.

With sequent now consolidated in our year over year comparisons.

Its major focus on mining and the subsurface environment makes it worthwhile.

To distinguish between respectively resources and industrial infrastructure sectors.

With quite different tone of business dynamics for one versus the other for instance at present. Besides mining resources includes oil and gas upstream activities offshore structures pipelines and renewables, including geothermal as well as wind and solar it is gratifying to show here is that.

With <unk> inclusion and corresponding to consensus <unk> priorities.

Our resources sector is setting the pace in terms of our relative new business productivity.

The industrial infrastructure sector captures all process plants, including most oil and gas downstream assets.

And here, we can report that last quarter's incipient upward inflection in new business continues <unk>.

Including for EPC, which are benefiting from the Capex response to urgent new priorities for energy security and self sufficiency in major economies.

To be clear despite the right directional momentum the industrial infrastructure sectors usage is still far from pre 2020 levels.

But it is now the case that finally, the tone of business is positive sequentially across all infrastructure sectors.

And in at least all sectors other than commercial facilities. The protected nature of project cycles confer a relative confidence and continued resilience for the foreseeable future.

Speaking of business confidence this survey last quarter by Dodge Engineering News record showed civil engineering firms reporting unprecedented so far as I know.

<unk> backlog.

But this quarter's update.

Now civil engineering firms consider their current backlog to be 135% of what they consider ideal.

Reinforces our observations at the S y <unk>.

Engineering firms are certainly of necessity, placing greater priority ongoing digital.

In the face of engineering hiring constraints.

Compounded by retirements that are expected if anything to intensify.

However, we are glad theres a source for more insights into the influence on infrastructure engineering decision makers with potentially threatening macro conditions that seemed to hover in prospect now.

Last month's report from a quarterly survey by the American Council of Engineering companies, which you can access directly at the link here and.

And though not specific to only at civil firm members and while also U S. Centric provides data that is quite on point for that purpose.

The surveys so entitled Tabulation of current economic survey versus last quarter. Indeed shows that perhaps as in the rest of the world The engineering firms confidence about the U S economy.

Which wasn't particularly high to start with has declined compared to the previous two quarters.

But their enthusiasm about their engineering and design services industry, which was and is at levels of sentiment comparatively much higher.

And I suspect higher than almost ever.

<unk> has been encouragingly sustained over that same period.

And responding about their own firms.

They express even greater confidence.

Now in full disclosure when asked about their sentiment as to projected conditions a year from now.

Their enthusiasm is more subdued but still strong.

Note that the surveys scale provides for negative numbers forbearance sentiment.

As seen here for the overall economy, but not seen here for their industry, let alone for the respondents owned firms.

I think it is especially meaningful that the great majority of respondents those to the right of the vertical line.

Expect there, presumably already outsized backlogs to increase measurably over the same coming year.

Moreover, here, providing a fully informed response to a question we are often asked.

During this same coming here in the U S. The great majority of firms expect a relatively imminent increase in projects related to the infrastructure investment and jobs Act.

And while our survey shows that engineering firms are more concerned about inflation than in previous quarters.

The larger firms have almost all protected themselves with escalation clauses in their long term contracts and this is especially prevalent in civil infrastructure engineering contracting.

For I suppose all of these reasons, bringing this together across infrastructure sector was the most positive sentiment seems to generally correspond to <unk> civil engineering firm footprint.

And resources.

And public works and utilities.

And in industrial.

With commercial facilities as expected, reflecting less enthusiastic sentiment.

Indeed in presenting in assessing <unk> business. It is certainly relevant to consider the sentiment of these engineering firms in this case in the U S. In aggregate their usage of our software corresponds rather closely to this familiar breakdown of our <unk> by end market infrastructure sector.

Literally most infrastructure engineering work is done by the owner operators supply chains that is these contracting firms with us together account for the slight majority of our IRR.

Recall that as of the beginning of this year.

Just the engineering news record top design firms contributed this substantial portion of our overall run rate than historical growth.

It would be interesting to know whether as investors and analyst you may be familiar with these top design firms globally that are also publicly traded and which together constitute most of our largest accounts.

Perhaps surprisingly until now we have not had a senior leader focused on engineering firms to make the case for <unk> affinity with them and vice versa, given our comprehensive portfolio and our ability and intention to fully address their challenges and opportunities.

We have had the perfect candidate clear up Koski joined <unk> as our Chief Information Officer, six plus years ago, having spent her career previously rising to the CIO role at a top engineering firm.

Since then she has incrementally serve beyond her day job as our external CIO champion a liaison to her former peers as engineering firms Cio's and important constituency of decision makers for us.

I am pleased to announce that clear will now make this for full time mission expanding our industry solutions group.

Which until now has been dedicated only to owner operators in our end markets to lead our offerings and advocacy for engineering firms globally.

I've asked <unk> to supplement the engineering firm and facts and figures. We just reviewed with her informed firsthand assessment of their tone of business nickel.

Nicholas will then follow with his operations review of notable regions and products in the quarter.

Clear.

Thanks, Greg.

It's an exciting time to be involved in infrastructure and an even better time to be engaged with our engineering accounts.

Started out in technology and quickly migrated to engineering.

Over time I rose to <unk>, what is now one of the top engineering firms in the world.

Passionate about helping the industry as a whole the dance, which is one of the reasons why I'm. So thrilled to be Pan 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 <unk>.

Ropes to inspect bridges and dams when one can use a drought.

In parallel the AUC industry has crossed an important tipping point, which will enable them to advance their going digital ambitions even faster.

Most firms traditionally builds 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 fixed fee opportunities, which provide direct incentives to accelerate going digital and there's more good news as the data graph presents shows.

Backlog is up depending on the survey being used it is anywhere from 10 to 15 months on average.

Well first of traditionally ground through recruiting more engineers, that's now with diminishing returns. So Ceos are necessarily putting a high priority ongoing digital to take advantage of increasing their work without increasing their workforce.

The pandemic forced to engineering firms to accelerate going digital they have no choice, but to facilitate virtualized their talent often through our project wise offerings. This group all firms that they can compete for infrastructure engineering projects anywhere in the world and recruit everywhere.

Not only do engineering firms want to use the most efficient and effective ways to design procure and construct but they also want to transform their traditional offerings why simply delivered design for an asset when you can deliver a digital twin of it as well wanted to just follow up all the engineering information needed to attack.

We construct and operate that asset.

And why not extend that even further by offering to manage the operation and maintenance of the digital twin ensuring it remains evergreen.

Lots of opportunities are opening up for our engineering accounts firms are competing to create new offerings, which include full asset lifecycle management, providing consulting services, which deliver data insights and analytics corrective actions and recommendations and so on.

Engineering is progressing we shifting from a design driven focus with data driven focus and the possibilities are endless.

52% of the 292 entries in our growing digital awards last year and 74% of the winners were submitted by engineering firms. We have received even more and more amazing entries for the year and infrastructure 2022, we will be inviting you to join in person in London on November 14.

<unk> I'm sorry.

Over to meeting you there.

I would now like to turn this over to Nicholas Cummins, Our Chief operating officer to discuss his perspectives on the quarter.

Thank you Claire.

Let me provide additional color commentary from an operational perspective.

Starting with regions in every region, whereas <unk> macro conditions for infrastructure engineering are favorable and theyre good tailwind.

India, Southeast Asia, and Middle East stand 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 to contribution of our former colleagues who have a thriving business there.

Of course, following the decision we moved to my known business in the region.

All other regions performed in line with expectations pipelines are strong across the business and continue to grow.

Searching firms are 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 have more efficiency improve their workflows, enabling them to do more with less.

Now I'd 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.

Photogrammetry or lidar chicken withdrawals or Uavs.

One of the industry's leading products that accomplishes this coal complex capture it.

It has the potential to transform inspections on safety reviews beyond traditional methods.

Established virtual or even autonomous inspections gather a much more detailed information, which can be processed using machine learning techniques and present data in an intuitive manner.

The Great example of this in action is the Diablo Dam project undertaken by HDR for Seattle City like to get a more thorough understanding of the aging dams current conditions.

We're seeing more and more use of complex captures by firms in public works and utilities and more and more interest from software and technology providers to incorporate our capabilities into their offerings.

Bringing the focus back to Q2, our pipe and sacs were also strong performers.

The drivers of the recovery in oil and gas and the prioritization of energy security, particularly in Europe .

Increased funding is enabling all of the operators to address some of their maintenance backlog, which to have previously deferred.

And we're seeing some engineering services firms win some big contracts for both brownfield and Greenfield oil and gas projects.

The second part of the story is about renewables, we saw increased consumption relating to offshore wind par, notably in China.

And we're also seeing a renewed interest in extending the life of nuclear infrastructure.

We have two of only a few products worldwide that are certified for nuclear that are audited and a special program and adhere to international standards.

Another strong performer in Q2 was planned site, our digital twin solution for process industries, they've locked in Corfu with Siemens and.

Advances in the capacities of planned site are driving adoption and increased consumption, particularly in oil and gas.

Now it is possible to visualize and group a significantly large number of models combining the subsurface the subsea and the top site. So that operators can do multiple assets. Indeed, the entirety of an old field in a single view.

The final thing I want to highlight today is the standardization by the Texas Department of Transportation on our bridge design product open bridge across its extensive supply chain.

Texas duty manages the largest highway system in the U S with more than 80000 miles of highway or more than three times the circumstance of the Earth.

Rather than only using traditional two D plan sets in construction, Texas beauty is moving towards using three D models created through Openreach.

Bentley is proud to partner with Texas duty to advanced infrastructure for the state of Texas.

I've highlighted a few products, but I believe strongly that our formula for growth is innovation timing adoption.

And what is driving adoption and therefore growth is our commitment to our users to delivered successful outcomes.

And I would like to recognize the essential role that our user success organization is playing in our growth.

Back to you Greg.

Thank you Nicholas.

Our particular corporate developments for 'twenty to 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 closer focus we get involved in related endeavors that depend on our applications.

Case in point.

Is our data is ending business Street critics. It was spawned.

By our cube mobility modeling logic.

<unk> was then acquired with cube by the S y.

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 learner Andre. Thanks.

Thank you, Greg I'll provide a little more detail on the street and that X transaction first and then give a brief update on other PSY investments activities, including a couple of recent programmatic acquisitions.

As for our transaction with Paralytics it's.

As Greg mentioned late last month, we closed on the merger of our street with mobility data business with Paralytics, We originally acquired <unk> as.

As part of our acquisition of <unk> in 2019, which primarily brought us the cube open modeling and simulation solution used to analyze the effects of new projects and policies on certain transportation networks.

Today, our solutions for mobility modeling and simulation include not just <unk>, but also our <unk> software solutions for advanced traffic and vehicle simulation.

Well as Legion.

<unk> hundred pedestrians emulation 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 data set.

And the more robust that data set the more credible and useful artisan relations.

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 a streetlight data.

A key reason for our St <unk> and its merger retire legs is enhanced data and improved modeling logic of cube, which is applied to complete and improve the quality of the St segment traffic data.

From a financial perspective, we believe the transaction unlocks unrealized street with its value in the form of our ongoing equity interest in <unk>.

And we will be net revenue additive to Bentley systems via the more robust data to resource frontier of index and included and monetize with the Bentley systems modeling and simulation solutions I just mentioned.

Youll recall, our joint ventures corporate venture capital fund was formed to stimulate and encourage entrepreneurial wisdom and developing digital twin applications, including those leveraging our <unk> platform.

Since our last presented this slide we've added three new investments to our portfolio of growth stage businesses.

And the opportunity pipeline of early stage companies working towards infrastructure digital twins continues to grow.

As for the more mature operating businesses are great opportunities continue to pick up momentum and as Greg mentioned power line systems. In spite of continued to perform well and exceed our initial expectations for both growth and revenue and margin performance.

Last week, we announced the cohesive had acquired maximal com, which is based in Brazil, and add talent to our team improved service delivery cost efficiency and establishes an entry point for future cohesive growth in South America.

As we've shared cohesive theres, a digital integrator business, providing digital strategy Advisory services integration services systems deployment services.

And operating support to help our clients achieve their business outcomes significantly enabled by emerging digital twin technologies.

<unk> is now the combination over the last two years of six acquisitions together with various existing professional services businesses supporting infrastructure owners.

This unprecedented integration has been challenging including talent attrition and other distractions to maintain a consistent pipeline and efficient service delivery.

All are now coming together, including a well defined cohesive branding and I encourage you to learn more about what we do a cohesive.

Just about a year ago, we completed the acquisitions of <unk> metrics and this debate of vision to establish a foothold with infrastructure Iot.

We've now just announced that we also closed on the acquisition of Australia based Eagle Idaho. In addition to extending our Iot reach to ANZ.

It's additive and very well complements our existing infrastructure Iot technology stack.

<unk> also brings strong talent and expertise to our team, which we absolutely need and want for our infrastructure Iot business growing at about a 30% clip.

<unk> is also a particularly relevant in prominent solution for environmental compliance further bolstering our ESG priorities.

As I explained during and operating results call earlier this year, we still operate our Iot business as part of our <unk> investments acceleration portfolio.

Our reasons for doing this or to accelerating and indoctrinate, both the technology and the commercials into our business on a number of dimensions.

First you heard Greg and Claire speak about engineering firms and their importance as we grow our product portfolio a priority for us was to introduce infrastructure Iot offerings to them the.

The engineering firms seeking to deliver the value of infrastructure Iot insights for the benefit of their own clients, we've done that including institutionalizing it into our business and commercial models as I mentioned, it's growing at a respectable pace.

Next we will establish the structured Iot platform layer to accommodate this operating technology within digital twins, we're a platform company.

And the goal is to embed this structure and capability thoughtfully as part of the <unk> platform. We call. This the sensor data service to the ice cream platform and development is well underway.

Further infrastructure Iot offerings, we are advancing.

As we incubate this within our exploration team or the development of plug and play asset specific monitoring solutions that are fit for purpose for owners of specific asset types.

Such applications include bridges dams mines and grids.

As we've explained a comprehensive infrastructure digital twin will bring together the television.

And critically the Ot with the OTT, arriving via increasingly pervasive infrastructure Iot technologies.

Iot solutions are being positioned as the industry standard for infrastructure Iot and the value it brings to digital twins.

On a final note last quarter, we highlighted a new project life focused joint venture in China, We continue to work on necessary product modifications and the go to market planning.

It is unlikely this venture generates material revenue in 2022.

More ventures are being considered and negotiated and we hope to have further announcements on that later this year and now over to Werner for more details on our operating results.

Thank you David.

Our second quarter was strong and we are <unk>.

Very pleased with the performance and resilience of our business across products and regions.

Total revenues for the second quarter of 268 million and grew 12% over the prior year.

6% on a constant currency basis.

For the first half of 2022 total revenues grew 22%.

97% on a constant currency basis.

On a constant currency basis, our Q2 revenues were 29% in Americas.

21% in EMEA and 28% in APAC.

Most of the growth comes from subscriptions, representing 87% of our revenues and growing by approximately 31% on a constant currency basis.

This quarter supported by our business performance across products and regions and our platform acquisition of Seaton and polymer systems, including meaningful post acquisition goal.

The growth of our <unk> hundred 65 program and consumption growth in our <unk> hundred 65 accounts.

As well as the continuous growth momentum of our virtual lottery subscriptions, a solid contribution to our business performance.

The recent strengthening of the U S dollar and the south of the 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 U S dollar strengthening on our annual financial outlook.

Current exchange rates prevail for the remainder of the year.

Our full year GAAP revenues will be negatively impacted by approximately $25 million.

Relative to the revenues based on exchange rates in effect.

We determined 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 our natural hedge and hence the impact so our profitability is minimized and talk about that anymore.

Moving onto recurring revenue performance.

Our last 12 months' recurring revenues increased by 25% and now representing 88% of total revenues.

Our platform acquisition of <unk> power systems, and the post acquisition growth contributed about 60 percentage points of this improvement.

Our account retention rate remains at 98%.

And our constant currency recurring revenue net retention rate, which is a key measure of our success in growing recurring revenues with our existing accounts.

Rebounded to 109%.

As we expected in line with higher growth.

Growth rates over the past four quarters.

And our accounts being SBC as ever.

Our constant currency growth rate is 14% year over year.

Which is a combination of 11, 5% from business performance.

And two 5% from the Onboarding of Pls in Q1.

For the first time.

Our goal from the Onboarding of <unk> June 2021.

Is enough in the year over year growth.

But rather an R&D year over year comparative basis.

This higher denominator now reduces our indicated would trade on our business performance by approximately 1% when compared.

Pay up to Q1.

Our growth rate has also been impacted by about 1% as a result of exiting Russia.

As we announced in Q1, and our Q1 remarks, we rolled down half of our AI, Russia. During Q1 based on an expected reduction in business recurrence at that time, and we have now written down the second half of 1% in.

<unk>.

Our GAAP operating income was $55 7 million folks wanted to Q2.

Wanted to <unk> 5 billion from last year.

Our GAAP results for the quarter and year to date reflect charges for acquisition related costs related to Pls in 2022.

<unk> in 2021.

Incremental amortization from intangibles and incremental non cash stock based compensation, partially offset by mark to market valuation gains from the revaluation of our compensation plan liabilities.

On the right, our adjusted EBITDA metric normalizes such accounting.

Our second quarter adjusted EBITDA grew by 25%.

And our year to date chocolate EBITDA of 184 million is an improvement of 20, 21%.

Our year to date adjusted EBITDA margin of 33, 9%.

And we are fully on track to deliver on our 33% adjusted EBITDA margin target for 2022.

And Brian our charter EBITDA in absolute terms is of course impacted by currency movements.

<unk> impact on our margin targets is significantly mitigated gift from our natural hedge.

Which has now become more effective.

Motion of <unk> based <unk>.

Those invoices are primarily denominated in U S dollars.

I'd also like to comment on our income tax rate, which appears as negative 9% for the second Walker.

As in the first quarter, our tax rate benefited from significant discrete meaningful tax benefits, primarily associated with the timing of distributions from relative to our compensation plan.

For the full year, we continue to expect an income tax rate closer to 15%.

Moving on to liquidity.

Our first half 2000, and trying to get operating cash flows of $169 million remained strong representing a cash conversion ratio from adjusted EBITDA of 92%.

Even after the payment of acquisition related expenses of $13 million.

Our last 12 months operating cash flow $308 million represents a cash conversion ratio from last 12 months' adjusted EBITDA, 86%.

After the payment of acquisition related expenses of $18 million.

During the first half of 2017, we spent approximately $41 million of defect the share repurchases associated with stock based compensation and to offset the dilution from such company.

Asia.

As we discussed in our Q1 remarks.

Significantly reduced such defects the share repurchases starting in the second quarter.

And we've since announced this stock repurchase program, which enables us to consider market conditions and flexibly re prioritizing densification of our cash generation.

<unk> the cash savings from this reached a growth equity distributions.

That's between programmatic acquisitions de levering and stock repurchases to offset ongoing dilution from equity compensation.

During Q2, we repurchased $30 million of our stock under this program.

With regards to capital allocation, our net senior leverage was one four times.

At the end of June .

Down from one six times as of the end of December 2021, which I presented during our year end 2021 operating results call on a pro forma basis to reflect the financing of our acquisition of Pls.

When including our 2026 and 2027th vertical motor stack.

Our net debt leverage was four eight times.

At the end of June .

As our remarks during last quarter by interest rates continue to rise across.

Approximately 75% above that is protected from changes in interest rates.

For EDA heightened favorable coupon interest of our convertible notes.

Or our $200 million interest rate swap.

EMEA conclude by recalling that Greg started off by referring to two toolkits west straightforward.

Indeed.

We see all of our end market sectors for the first time in the 2000 twenty's being characterized.

Were actually positive tons of new business.

And similarly.

Across global regions.

Russia, having effectively disappeared.

Our quota carriers everywhere report infrastructure engineering activity and prospects.

It's relatively full capacity.

At the same time.

Our own business performance execution.

Demonstrating the return on our investment in.

In <unk> hundred 65 success.

SMB penetration.

And in <unk>.

An AAR Corp inspections.

Our strange from a combination of with CMS and execution.

It makes us confident.

Even in this year of seemingly increasing macro uncertainty at large.

Continuing to reliably compound predicted.

And predictable operating results.

Thank you Ed to answer your questions.

Yeah.

Thank you.

The reminder, please on mute your micro bonus or on your camera when called upon and limit yourself to one question one follow up in the interest of time I'll.

We'll start with Matt Hedberg at RBC.

Hey, guys can you hear me okay.

Great.

Thank you.