Q4 2024 Bentley Systems Inc Earnings Call
And plans and objectives for future operations with battery systems incorporated all such statements made in ore contained during this webcast other than statements of historical fact are forward looking statements. This webcast will be available for replay on Bentley systems Investor Relations website at <unk> Dot Dot Com on February 26, 2025.
Speaker Change: After our presentation, we will conclude with Q&A and with that let me introduce the executive chair of Bentley system, Greg badly.
Speaker Change: Good morning, and once again, thanks to each of you for your interest in NPS will.
Following the CEO Nicholas <unk> CEO.
We'll report on that.
Satisfactory conclusion to 2024, and R&R characteristic rate consistent financial outlook for 2025.
Speaker Change: I am purpose today as well.
We read here last year and as a public company is more sell to benchmark our longer term cumulative progress against the priorities.
To that end.
Speaker Change: Here's how we present in the opening slide of our introductory investor relations deck.
Differentiating <unk>, two which we with our investors and we think that's fair.
Speaker Change: We believe the year of 2024 and substantially advanced our track record of achieving these objectives.
Speaker Change: Following a long planned CEO succession that took effect in mid year.
Speaker Change: <unk> will describe further organizational changes to more directly orchestrate product innovation within our overall strategy.
To reinforce our hallmark advantage of cyclically focused leadership.
Paul Flyer: Paul Flyer engineered.
Speaker Change: And during 2021 subscriptions increased to 90% of total revenues.
Durably sustaining greater than ever visibility quality and consistency.
Supporting our ongoing programmatic acquisition priorities and asset analytics.
Speaker Change: Our landmark strategic acquisition in 2020, Florida CCM has greatly brought entire platform ecosystem of geospatial digital twins elements.
Speaker Change: 25, <unk> increase in adjusted operating income inclusive of stock based compensation surmounted are established commitment of 100 basis points of margin improvement.
Speaker Change: And 2020 floor, a greater preponderance than ever of revenues recognized and paid annually in advance we directly and efficiently convert adjusted operating income inclusive of stock based compensation into free cash flow net stock based compensation.
Speaker Change: Notwithstanding the majority of our AUR being consumption base.
Speaker Change: In recent years, especially in 2024.
Speaker Change: Increase the sustainability and visibility of double digit AOR growth through a greater prevalence for accounts and our principal commercial program decreased 65 of multiyear floors and ceilings, which graduate.
Speaker Change: And our rate on average consistent with our overall and all are now and taking that 110%.
Speaker Change: For the full year organic AOR growth ex China was comparable to and compounding.
Speaker Change: And consecutively from current year 2023.
Speaker Change: Such content would be a powerful investment virtue indeed to the extent it achieved reliably over a classic long term so.
Speaker Change: Benchmark <unk> performance to date as a public company against the priorities of stockholders.
Paul Flyer: With their per share orientation, such a priority would be to manage share count to avoid compounding dilution.
Speaker Change: This shows the progression in share selling buying directly from <unk>.
Speaker Change: Despite having divested shares at an average annual rate of about 1% of shares outstanding we continue to hold the economic majority.
Speaker Change: A major factor in share stainless by we estimate revenues is that distributions from our home.
Speaker Change: These deferred compensation plan has been triggered by retire.
Speaker Change: Requiring that all of the shares to be sold to cover ordinary income taxation thankfully by now boast such shares have already been restricted.
Speaker Change: Shown here are the remaining shares in each year's average fully diluted count other than those associated with our convertible notes.
Speaker Change: Finally added here is the accounting share count associated with our convertible notes shown every year for which they've been outstanding in order to capture the full expansion of the company's capitalization.
Speaker Change: Our non convertible debt that has been minimal at both the beginning and end of this period. So I think it's fair to use the compounded annual growth rate of two 8% and this total share count as a proxy for brookdale, our capitalization and reducing this via our dividend yield of about 5% with <unk>.
Speaker Change: An appropriate baseline for per share CAGR comparison.
Speaker Change: Two financial performance metrics, starting with our reported revenues.
Speaker Change: For better comparability, here's the same breadth of history, but at constant currency.
Speaker Change: Having compounded at an annual growth rate of 14, 5%.
Speaker Change: While for tracking business performance, we have excluded growth from Onboarding, our platform acquisitions, we need not do that here because the foregoing share growth sufficiently accounted for the capitalization increases to finance.
Speaker Change: The platform acquisitions.
Speaker Change: Professional services revenues highlighted here accumulated with a cohesive acquisitions.
Speaker Change: The proponent of the long term strategic rationale for maximum digital integration, but as Dean time. This revenue source adds volatility and subtract from profitability. So we're better off to moderate rather than to maximize yield.
Speaker Change: License revenue highlighted here depends on the vicissitudes of China.
Speaker Change: And also perhaps snd budget flush.
Speaker Change: Thus it is notable that constant currency subscription.
Speaker Change: Which we thus regard as our key revenue metrics have grown to constitute 90% of our tool.
Speaker Change: Having compounded at an annual growth rate of 16, 3%.
Speaker Change: And to double subscription revenues over the five years from 2020, I'm curious what would be required for 2025.
Speaker Change: Subscription revenue is of course literally let buying on our key performance metrics and Carl here.
Speaker Change: Here at each year and at constant 2020 for a bunch of exchange rates.
Speaker Change: Okay.
Speaker Change: And within rich highlighted here is the breakout of AUR are cumulatively on boarded with our platform acquisitions of sequence in a power line systems.
Speaker Change: This overall AOR and constant currency has compounded at an annual growth rate of 16, 3% interest rate you gave the same as for constant currency subscription.
Speaker Change: Highlighted here is what turns out to have been ever less significant.
Speaker Change: Our onboarding annually, the darker top slice and cumulatively with programmatic.
Speaker Change: Yeah.
Speaker Change: Our ALR in China highlighted here has declined substantially and structurally in recent years. So we can measure that excluding China, but not Russia, and excluding all onboarding <unk> platform and programmatic acquisitions.
Speaker Change: We have compounded AUR lower in constant currency at an annual growth rate.
Speaker Change: 13, 6%.
Speaker Change: And back to overall <unk>.
Speaker Change: Here is the level of <unk> at the end of 2025 that would complete dosing over the five years from 2012.
Speaker Change: To measure the compounding growth profit and our free cash flow.
Speaker Change: We're obliged to do without constant currency accounting.
Speaker Change: <unk> adjusted operating income as reported.
Speaker Change: However for each of 2020 in 2021 and setting appropriate baselines for a subsequent regular margin improvement. We also reported adjustments corresponding to unexpected windfall expense savings primarily in travel and events that are highlighted here.
Speaker Change: And for all purposes, we measure operating margin after the cost of stock based compensation highlighted here as our shareholders recognize if economic fungibility with cash compensation.
Speaker Change: And this resulting primary profitability measures adjusted operating income with stock based compensation and with the pandemic adjustments for the early years, our compounded annual growth rate has been 24%.
Speaker Change: And you've already announced required for our profitability in 2025 to have double over these five years from 2020, highlighting the range implied by including the pandemic adjustment or not.
Speaker Change: Converting this profitability relatively transparently here is free cash flow as reported.
Speaker Change: It highlighted are the same pay that make adjustments, but for cash flow purposes tax affected at a blended 21% tax rate.
Speaker Change: But we don't consider cash flow to be truly free until after netting out the amount needed for stock repurchasing to offset what would otherwise be sharing dilution from stock based compensation highlighted here.
Speaker Change: Our resulting free cash flow generation net stock based compensation and bad debt adjustments has compounded at an annual growth rate of <unk>.
Speaker Change: Eight five personal.
Speaker Change: And here are the amounts required for such free cash flow net of STC and 2025, just dull over these five years from 2020.
Speaker Change: Again, highlighting your range imply by including the pandemic adjustment or no.
Speaker Change: Finally, hi.
Speaker Change: Highlighted here either proportions of annual free cash flow net of SPC.
Speaker Change: Allocated to dividends.
Speaker Change: And we will shortly see with boundaries presentation of our 2025 financial outlook range.
Speaker Change: To which these benchmarks key financial metrics and in their CAGR over our four plus public years to date can be expected to reach a classic compounding fresh level of doubling over five years.
Speaker Change: Most importantly, I regard that our company's aspiration and expectation should be to sustain at least this benchmark compounding for each succeeding five years indefinitely.
Speaker Change: And for our management team is bringing this about now over to Nicholas and then back to review 20 for Q4 and to provide D. S wise consistent outlook range for 2025.
Speaker Change: Thank you Greg.
Speaker Change: I wanted to start by expressing my gratitude to our colleagues for delivering another strong quarter and year.
Speaker Change: In terms of our growth profitability and free cash flow, we had a strong finish to 2024.
Speaker Change: The global demand environment remains robust across most sectors and geographies.
Speaker Change: And our users continue to be optimistic about end market conditions.
Speaker Change: We also announced a new chief operating officer, and organizational changes to accelerate innovation, which I will touch on later.
Speaker Change: We entered the year well in line with our users priorities and well positioned to continue strong financial performance in 2025 and beyond.
Speaker Change: Our 2025 outlook is consistent with a longer term framework of low double digit AOR growth 100 basis points of margin expansion and strong cash flow generation.
Speaker Change: Focusing now on Q4 highlights.
Speaker Change: Our growth was 12% year over year, and 12, 5%, excluding the impact of China.
Speaker Change: Taking into consideration the impact of on boarded programmatic acquisitions and rounding the results were very comparable to the year ago period.
Speaker Change: Turning next to our commercial models.
Speaker Change: Each received five program continues to drive strong growth in particular from renewals with higher floors supported by consumption growth and still a sizable amount from conversions.
Speaker Change: Across our commercial models or application makes accretion remained strong, but moderated by about 100 basis points.
Speaker Change: Net revenue retention rebounded to our high watermark of 110%.
Speaker Change: For several reasons, we no longer find application makes the accretion to be a useful measure of growth within existing accounts.
Speaker Change: One of those reasons is because it misses growth from offerings that are not user base, which we anticipate seeing more off such as badly as separate entities.
Speaker Change: We therefore intend to introduce a new indicators that better reflects overall consumption growth.
Speaker Change: We believe we have a long runway of growth within our accounts as they continue to adopt more sophisticated products and complementary products.
Speaker Change: In Q4, we also added 300 basis points of growth from new logos, mainly SMB.
Speaker Change: This includes adding more than 600, new logo square online store for the 12th straight quarter.
Speaker Change: <unk> growth from new logos in the quarter would have been even higher if not for an unprecedented large proportion of SME prospects.
Speaker Change: Instead chosen perpetual licenses over subscriptions in the quarter.
Speaker Change: Our performance by infrastructure sector in Q4 was consistent with previous quarters.
Speaker Change: Public workshop Gtt's finished the year with strong momentum fueled by robust infrastructure spending by governments around the world.
Speaker Change: Despite continued softness in new mine investments resources growth remained solid while industrial and commercial facilities maintain modest growth.
Speaker Change: Looking at our performance by region EMEA at a standout quarter with strength across most of Europe as well as the middle East.
Speaker Change: America has delivered strong growth with consistent trends within North America, and Latin America.
Speaker Change: Despite uncertainties about federal spending in the U S. Under the New administration, the broader infrastructure engineering community expect the investments in infrastructure to continue as though interchanged mix funding is likely to shift to more traditional power sources from alternatives into more road work instead of high speed rail.
Speaker Change: It has also been announced that this administration will be investing significantly in AI, which means increasing data center and power transmission build outs.
Speaker Change: We also expect permitting reform to be a top priority for this administration and Congress, which will accelerate new powertrains mission corridors as well as new mine exploration benefiting our powertrain systems and sequent businesses.
Speaker Change: <unk> systems is well positioned regardless of the type of infrastructure that is being funded due to the breadth of our software portfolio.
Speaker Change: Asia Pacific was once again led by India, and Southeast Asia and sentiment remains very strong for 2025.
Speaker Change: China's performance continued to face the same headwinds so.
Speaker Change: Soft economic conditions and continued shifting preferences by state owned enterprise accounts for local software and at best perpetual licenses.
Speaker Change: Because of these ongoing headwinds, we anticipate a decline of <unk> in China. This year.
Speaker Change: Note that China now represents less than two 5% of our total ALR.
Speaker Change: Turning to products, we made great progress across our product portfolio in 2024.
Speaker Change: As discussed previously a good infrastructure of 2024, we introduced open site plus the first of a new generation of data centric and AI powered infrastructure engineering applications, and we strengthen our platform with the acquisition of <unk>, adding market, leading <unk> geospatial capabilities and an active developer community.
Speaker Change: T too badly.
Speaker Change: We were also pleased with the performance of Bally I sit there and then it takes which we introduced in 2020 for our portfolio of products used to create digital twins of infrastructure assets and analyze the recommendations with AI.
Speaker Change: It was a year of learning for us and our users as we both look to maximize the potential of this emerging growth area.
Speaker Change: For instance, while our initial focus was on I said operations, we uncovered additional opportunities in construction with initial subscriptions tied to the duration of projects.
Speaker Change: Over time, we expect asset than it takes to become a large opportunity for us.
Speaker Change: Our product strategy is aligned with industry needs you may recall that we discussed the <unk> advisor state of the industry survey two years ago.
Speaker Change: I would like to share some highlights of their most recent survey as it aligns well with our product investments to date and going forward.
Speaker Change: Each quarter on these calls we discussed the widening engineering resources capacity gap, there simply aren't enough engineers to meet the demand for better and more resilient infrastructure.
Speaker Change: This challenge is reflected in the survey results when asked about their top objectives today, the CEO cited workforce productivity as a top priority.
Speaker Change: Firms need digital solutions that increase workforce productivity, which we're well positioned to provide.
While we have a shortage of engineers and infrastructure, we don't have a shortage of data so many assets generate gigabytes of data everyday.
Speaker Change: From sensors on a bridge utility network or any other system.
Speaker Change: We have spoken many times about how only a small fraction of this data is ever analyzed and reuse.
Speaker Change: The vast majority of introspective projects starts with a blank screen.
Speaker Change: When asked which technologies are most important to date she was focused on data management.
Speaker Change: It shows that engine firms are recognizing the importance of better organizing managing and leveraging their data to improve the productivity of their organizations and individual engineers.
Speaker Change: All of this provides opportunities for building infrastructure cloud and in particular <unk> part by ice cream, which helps to extract data from any engineering file whether badly or third party and organize that data to make it credible and reusable.
Speaker Change: This focus on better data management is also driven by artificial intelligence.
Speaker Change: Firms recognize the opportunity that AI presents we help them make the most of their data, including we using data through generative AI to vastly improved workforce productivity.
Speaker Change: They are investing accordingly, the top two areas of investments, our digital transformation and combining datasets for machine learning.
Speaker Change: We had anticipated so put it into many years ago as we started to invest in AI with an initial focus on asset performance and now expanding to product delivery. For example, with the introduction of open site plus in Q4, which I mentioned previously.
Speaker Change: Going forward NGL firms expect to focus more on meeting clients' digital requirements with many also looking towards new services and business models.
Speaker Change: And they also see increasing value in digital twins in the operations phase out of lifecycle.
Speaker Change: Both of these points underscore the opportunity for Bentley asset and analytics as we previously discussed.
Speaker Change: Engineering firms can leverage badly hit and then it takes to offer services for a set of operations and maintenance.
Speaker Change: Across the board from our engineering angio proficient on applications to better infrastructure cloud to our AI powered digital twin solutions, including Bentley assets in it takes.
Speaker Change: <unk> is well positioned as the partner of choice for infrastructure engineering firms as well as owner operators, our product investments being in line with current and emerging industry needs.
Speaker Change: AI is transforming every industry and ours is no exception, we intend to continue to lead the way for infrastructure AI, which is why we announced key organizational changes at the start of the year.
James: We are excited to welcome James <unk>, our Chief operating officer, James join US from Google, where he served as general manager for <unk> and artificial intelligence at Google Cloud.
James: Prior to Google James spent 12 years at HCP, including CEO for ACP, everybody feel glass and as CEO and Jim for sales for ACP Greater China.
James: James is responsible for strengthening our cross functional alignment across planning and execution driving operational excellence and overseeing China, Japan and portfolio development in creating growth initiatives, such as badly as N and ethics.
James: Other organizational change that we announced was the consolidation of product development under Chief Technology officers really have moved to better align product execution with technology strategy and accelerate innovation.
James: We believe this move puts us in a stronger position to capture the many growth opportunities that we have opened up with infrastructure AI.
James: From patent assets and ethics to the next generation of when they opened applications.
James: And with that I will turn it over to Werner to detail, our Q4 financial results and outlook for 2025.
Werner: Thank you Nicholas we are pleased with our finish to a solid year of financial performance.
Werner: Total revenues for the fourth quarter $350 million up 13% year over year on a reported and constant currency basis and for the full year total revenues were $1.363 billion up 10% on a reported and constant currency basis.
Werner: Strong subscription revenues in the fourth quarter and full year were partly offset by lower service revenues due to reduced maximal related work within our digital integrated cohesive.
Werner: Subscription revenues now represent 90% of total revenues up more than two percentage points from 2023, improving the overall quality of our total revenues in terms of growth consistency predictability and margin contribution.
Werner: Subscription revenues grew 16% year over year for the quarter and 13% for the full year in reported and constant currency.
Werner: The growth rate for the full year of course tends to more closely align with our year over year constant currency growth.
Werner: Our SMB and <unk> hundred 65 initiatives continue to be solid contributors with <unk> hundred 65, now representing 42% of 2020 for subscription revenues up from 38% in 2023 and 32% in 2022.
Werner: Perpetual license revenues for the quarter grew 11% year over year and reported and 12% in constant currency.
Werner: And for the full year were flat in reported and constant currency.
Werner: Our service revenues declined 21% for the quarter and 18% for the year and reported and constant currency.
Werner: Our last 12 months' recurring revenues, which include subscriptions and a small amount of recurring services increased by 13% year over year in reported and constant currency.
Werner: And to represent 91% of our.
Total revenues up two percentage points year over year.
Werner: Our last 12 months constant currency account retention rate remained at 99% and our constant currency recurring revenue net retention rates rebounded to 110%.
Werner: Led by accretion, but in our consumption based <unk> hundred 65 commercial model.
Werner: We ended Q4 with EUR.
Werner: 1.283 billion at quarter end spot rates.
Werner: On a constant currency basis, our trailing 12 months growth rate was 12% year over year and three 2% on a sequential quarterly basis, consistent <unk> expectation for a seasonally biggest contract renewal quarter.
Werner: Excluding China, our growth rate was 12, 5% year over year.
Werner: Our GAAP operating income was $61 million for the fourth quarter and $302 million for the year.
Werner: As previously explained the impact on our debt operating results from deferred compensation plan liability revaluations and acquisition expenses two other items that were recognized in our financial statements in 2023 will need to be considered for profitability comparison purposes.
Werner: 23, Q4, we initiated a strategic realignment program our first since 2020.
Werner: We incurred a realignment charge of 13 million, mainly for severance, causing the first half of 2024 to appear relatively profitable.
Werner: Org to reinvest associated run rate savings into priority areas, such as AI and product development and marketing.
Werner: We were fully reinvested by the beginning of the third quarter of 2024.
Werner: And secondly, <unk> 23, Q4, but in our income tax line below operating income we recognized a net discrete income tax benefit of 171 million relating to an internal legal entity restructuring of our sequent IP ownership.
Werner: Moving on to adjusted operating income with stock based compensation expense, our primary profitability and margin performance measure.
Werner: Adjusted Oi, if SBC expense was $75 million for the quarter flat year over year with a margin of 21, 5%.
Werner: The margin decline of 250 basis points is primarily a result of our opex seasonality impacted by the timing of the full reinvestment of our run rate savings from the realignment.
Werner: Combined with our fourth quarter being seasonally our highest opex quarter due to larger promotional and event related activities and cost.
Werner: For the full year, our adjusted Oi. This SBC expense was $372 million up $47 million or 15%.
Werner: The margin of 27, 5% up 110 basis points year over year in line with our expectations and outlook for the year.
Werner: Our operating cash flow was $82 million for the quarter and $435 million for the year up $18 million or 4%.
Werner: Remember that our fiscal year 'twenty three cash flow from operation was particularly high increasing 52% over 2022 due to a significant collection delay from 'twenty to Q4 into 2000 and <unk> one.
Werner: Benefiting from strong collections at the end of the year, our 'twenty for conversion of adjusted EBITDA to cash flow from operations was above our expectations at 94%.
Werner: Starting for 2025, rather than guiding to such a conversion rate, we will provide an outlook range for free cash flow.
Werner: With regards to our 2024, our capital allocation.
Werner: Along with providing sufficiently for growth initiatives redeployed free cash flow as follows.
Werner: <unk> hundred $30 million of acquisitions 147 million paying down bank debt $77 million effective share repurchases to offset dilution from stock based compensation.
Werner: $72 million in dividends.
Werner: At the end of Q4, our net senior debt leverage was 0.2 times adjusted EBITDA, including our 2026 and 2027 convertible notes as debt. Our net debt leverage was two nine times down from three five times at the end of 2023.
Werner: Our five year senior secured credit agreement entered into in October 2024 provides a one 3 billion revolving credit facility and an incremental $500 million accordion feature and sufficient flexibility to address that January 2026 maturity of $690 million of.
Convertible debt.
Werner: Our existing debt is protected from higher rising interest rates by virtue of very low fixed coupons on our convertible notes and our $200 million interest rate swap expiring in 2030.
Werner: Our 2025 financial outlook is consistent with our sustained objectives of low double digit growth approximately 100 basis points of annual margin expansion and strong free cash flow conversion.
Werner: It reflects our confidence in continued favorable market conditions and the momentum of our growth initiatives.
Werner: Based on current exchange rates, we anticipate total GAAP revenues in the range of $1 billion and $461 million to $1 billion and $490 million.
Werner: While $1.481 billion to $1.510 billion in constant currency.
Werner: <unk>, an approximate one 5% headwind to revenue growth in constant currency.
Werner: Our outlook range for our mainstay subscription revenues, representing 90% of total revenues is growth between 10, 5% and 12, 5% on a constant currency basis.
Werner: We expect that our less predictable and less control label perpetual license revenues and service revenues.
Werner: Together, representing data, 10% will remain relatively flat on a constant currency basis.
Speaker Change: Going back to Greg Slide.
Speaker Change: Based on our outlook, we will have doubled our constant currency subscription revenues from 2020.
Speaker Change: Our outlook range for constant currency growth is also 10, 5% to 12, 5%.
Speaker Change: When compared to our AAR growth outlook range for 2020 for the low end of our 2025 range is consistent but we are narrowing the top end of our range by 50 basis points, taking a more conservative view on China, where we expect continued attrition.
Well as in 2024, we believe that asset analytics represents incremental upset opportunity. We have found that a significant portion of use cases during the construction phase of an asset which may not all be accounted for as a.
Speaker Change: <unk>.
Speaker Change: So again based on our outlook, we will have doubled our constant currency from.
Speaker Change: From 2020.
Speaker Change: We expect an adjusted operating income with stock based compensation margin of approximately 28, 5% to deliver on our standing commitment to expand our operating margin by approximately 100 basis points annually.
Speaker Change: And again, our adjusted <unk> stock based compensation will have doubled from 2020 when normalized for 2020, Covid windfalls, and we will be close to doubling without normalizing for such rainfalls.
Speaker Change: Our outlook range for free cash flows is 450 million to $455 million.
Speaker Change: This considers cash interest of approximately Sara net of the payments, we expect to receive from our interest rate swap cash.
Speaker Change: Cash taxes of approximately $75 million and capex of approximately $20 million.
Speaker Change: Based on the expected seasonality of collections and expenditures, we expect that approximately 55% to 60% of our free cash flows will be generated during the first half of 2025.
Speaker Change: Finally in relation to a free cash flow less stock based compensation, we expect to fall short of doubling from 2020 without normalizing for quality unfolds.
Speaker Change: However, we expect to double when normalizing for such Greenfields.
Speaker Change: And in terms of capital allocation, we are announcing another annual increase of one and in our quarterly dividend, which is towards compounding cash flow to be allocated to programmatic acquisitions and debt service.
Speaker Change: To help you with your models, we expect our sequential revenues growth seasonality to be back half loaded similar to 2024.
Speaker Change: Our opex seasonality will be closer aligned with 2023 now that the volatility from our strategic realignment is behind us.
Speaker Change: We expect stock based compensation to decline to approximately 5% of revenues in 2025.
Speaker Change: And then to trend back up towards our long term goal of 6%.
Speaker Change: And I also include here on this slide additional explanations on the interest expense effective tax rate.
Operating depreciation and amortization and outstanding shares.
Speaker Change: And I think we're ready for Q&A.
Eric: Over to Eric to moderate thank you.
Speaker Change: Okay.
Speaker Change: Yeah.
Speaker Change: Thanks, Bernard before we begin I just wanted to remind everyone to please only ask one question. So we can get to everybody Tonight.
Speaker Change: Our first question comes from Matt Hedberg from RBC.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: Oh, there we go.
Speaker Change: Sorry about that guys.
Speaker Change: Thanks for thanks for the question.
Speaker Change: And congrats on another good year, I think Greg you really give us some perspective on the results since the IPO. It was sort of great to see the progression and it seems like we should expect more of that.
Speaker Change: Yes.
Speaker Change: Call you noted a robust demand environment.
Speaker Change: China continues to be a drag and it seems like you addressed that at the high end of your full year <unk> range or 50 bps lower than last year, I guess that said Theres a lot of positivity that you talked about on the call in terms of potential drivers I guess in your <unk>.
Speaker Change: Step back and you think this year you were near the high end of the IRR range of there in 2024, what are the 1% to two things that could propel you to the higher end of the <unk> range as you embark on a new calendar year.
Speaker Change: Nicholas you're applying yourself to that.
Speaker Change: It will be I will be happy to so the overall environment demand environment is robust.
Speaker Change: You know that mining has been.
Speaker Change: A bit slow in the past.
Speaker Change: Good morning, a year year, and a half or so.
Speaker Change: It's a bit of a subdue environment for new mine exploration or enhancements on.
Speaker Change: A major expansions of existing mines.
Speaker Change: If this changes because of for example acceleration of permitting reform in the U S that is leading to new mine explorations this could be an extra tailwind.
Speaker Change: The business is already very very strong when it comes to Pls, who power line system for the transmission grid.
Speaker Change: If permitting reform does accelerates.
Speaker Change: And it leads to an acceleration of the expansion of the electric grid. This could be an additional tailwind.
Speaker Change: So I think this will help now.
Speaker Change: Two drags that we've seen are have been China as discussed many many times.
Speaker Change: And then even though it's a very small percentage of our business. It's a single digit commercial facilities. If this were to improve as well and then of course this will help.
Speaker Change: In general as we started the year.
Speaker Change: Trends are remarkably consistent with what we said every quarter last year.
Speaker Change: So the demand environment is just very similar to what we've been discussing for the past quarters. So anything that has been holding us back in 2024, if that improves then of course this will be extra tailwind.
Thanks, a lot festival.
Speaker Change: Thanks, Matt next question comes from Jason <unk> from Keybanc.
Speaker Change: Great.
Speaker Change: Nice to see you. This morning, I did want to follow up on the.
Speaker Change: Permitting reform.
Speaker Change: So I agree with you that it could be a significant catalyst.
Speaker Change: I know, we're still pretty early but have you seen any.
Speaker Change: Signs that permitting reform has been introduced or how should we think about timing because I imagine.
Speaker Change: The legislation that has to go through and then customer.
Speaker Change: Approve things, but how should we think about that have you seen any many times a day.
Speaker Change: Well, we've seen an executive order, calling for permitting reform, but.
Speaker Change: It's still very early in <unk>, a new U S administration.
Speaker Change: So no no impact yet now.
Speaker Change: It is a bipartisan priority however.
Speaker Change: And.
Speaker Change: I think we can be very hopeful it will be accomplished during the year at least.
Speaker Change: Okay next question that doesn't cause projects to start to flow immediately because there still is a need for.
Permitting but I think it's a matter of finally, when not if and the U S permitting which one.
Speaker Change: Okay.
Jason: Thanks, Jason next question comes from city pedigree from Mizuho.
Speaker Change: Thank you.
city pedigree: I wanted to ask about the macro environment, how do you compare if you look at the data and how it's trending versus last year and then specifically in the U S. Now election is over.
Speaker Change: And administration fulminant firmly in place.
Speaker Change: How would you characterize the change in priorities there versus expectation and also do you see any impact from those initiatives.
Speaker Change: Nicolas to talk about the world at large and maybe I'll come back to the humans.
Speaker Change: Happy to happy to so.
Speaker Change: And look in the in Europe for example, despite the political volatility we've seen in France, and very recent elections in Germany <unk> back in Q4, when it comes to the UK or the second half of last year.
Speaker Change: There is a strong alignment that infrastructure investments are needed now so it is a bipartisan topic as fuel not just in the U S. As Greg is going to explain but but in Europe as well and the new government in the U K is as valuable if not more for investments in infrastructure, we expect the level of investment to be the same if not higher now.
Speaker Change: In Europe, the New European Commission has laid out his priorities of competitiveness and resiliency and security.
Speaker Change: Every single one of these priorities highly related to infrastructure in fact today the European Commission talked about the plan for increasing competitiveness of Europe and it again referred to additional investments in infrastructure. So that's clear so we see infrastructure investments going strong all around the world.
Speaker Change: Why consensus that is needed to support the economy to improve the quality of life in some regions to secure energy.
Speaker Change: To make shrinks has been pretty resilient in front of a climate.
Speaker Change: Climate change so there was a very.
Speaker Change: The secular trends the only country, where we.
Speaker Change: Where we've seen a slowdown as we discussed many times it's China.
Speaker Change: If I go back to the U S of course, we had a purposefully unpredictable administration here now.
Speaker Change: But the engineering organizations in the U S, whose businesses to read the tea leaves R. R.
Speaker Change: Im not concerned.
Speaker Change: My view is it is that they are already at their capacity their resource capacity and do not see any.
Speaker Change: Has ability that there will be.
Speaker Change: Less federally funded infrastructure work, even though its mix will.
Speaker Change: Somewhat change.
Speaker Change: Possibly to our advantage.
Speaker Change: Thank you Thats helpful color.
Speaker Change: Thanks next question comes from Christopher <unk> from Oppenheimer.
Speaker Change: Hi, Good morning, Thank you for the question.
Speaker Change: Nicolas both you and Bernard touched on Nick in your prepared remarks, but the expectations around the asset analytics platform, notably in construction.
Speaker Change: Given what appears to be an acceleration at the labor gap in some of those construction trade how quickly do you see your site management capabilities ramping and how does the monetization model differ from something in construction versus what you've previously outlined for us.
Speaker Change: In both telecom and highlight thank you.
Speaker Change: So when it comes to.
Speaker Change: And then it takes the commercial model whether <unk> are used at the moment of construction are doing operations are the same it's really asset base. The only question is how do we treat that revenue.
Speaker Change: Fifth for construction for example, installing new equipment are the only cell tower.
Speaker Change: And.
Speaker Change: Triple checking that it's well installed after the after the installation.
Speaker Change: Dan it's not a recurring revenue for us as opposed to if it's used for continuous monitoring of the cellular tower than it would be more it will be recurring so that's the difference, but it's still asset base.
Speaker Change: When it comes to towers that is going to be <unk> when it comes to <unk>.
Speaker Change: The road network monitoring and.
Speaker Change: And not not user base.
Speaker Change: And we like both opportunities. The majority is in asset operations, but construction is a nice way to start and once there is a digital twin from construction.
Speaker Change: We stand a good chance of in fact, having it renewed during asset operations, but that's also often a different sale to a different party and we can't take that for granted but all of the all of the opportunities our burgeoning.
Speaker Change: In this and we're learning about the business model potential for this asset based monetization.
Speaker Change: Thank you.
Speaker Change: Thanks, Kristen next question comes from Dawn Becker from William Blair.
Dawn Becker: Hey, guys.
Speaker Change: Appreciate the question.
Speaker Change: Maybe Nicolas for you wanted to you called out can adjacent and Julian coming onboard.
Speaker Change: Wondering if you could kind of highlight or flag.
Speaker Change: The opportunity and kind of what excites you. Most you called out kind of data readiness data management is a key initiative, obviously has the expertise coming from Google on that side of the equation and the streamlining of the product development motion under Julian team, how that can kind of accelerate value and innovation for our customers as well thanks guys.
Speaker Change: Yes, well my excitement is on AI AI TUI is our generations paradigm shift yes.
Speaker Change: It is a profound technological change.
Speaker Change: And it's the reason why we decided to let's say simplifying our product and technology organization in order to be able to upgrade with more GDT more precision and more speed to accelerate innovation. So that's the driver.
Speaker Change: Behind the reorganization of our technology organization under our CTO. So there is strong alignment between current execution with technology strategy, which is very needed at this time of profound changes, but yes.
Speaker Change: <unk> noted it as well.
Speaker Change: James who join US from Google had the responsibility of AI at Google Cloud AI investments, that's a Google cloud is coming with a formidable network.
Speaker Change: And.
Speaker Change: In the in the let's say broader software community when it comes to AI investments and a lot of.
Speaker Change: A lot of knowledge to share with us to help accelerate those investments.
Speaker Change: I might say this is exciting to me because taking hierarchy out of our product organization is meant to hark back to our.
Speaker Change: Routes, if you like with with the Bentley as primarily being <unk>.
Speaker Change: Hands on and early identifying.
Speaker Change: New opportunities there was nothing wrong with how we were organized before but our business has become so steady you've heard me say I'd like to introduce some <unk>.
Speaker Change: Volatility take some risks play some markers and I'm very excited about this new team doing that.
Speaker Change: Great. Thank you guys.
Speaker Change: Thanks, Bill and the next question comes from Jay <unk> from Griffin Securities.
Speaker Change: Thank you and good morning.
Speaker Change: I noted the multiple responsibilities for the new Chief operating officer are there two or three principal objectives are executable.
Speaker Change: For the CFO role that you would like to see for this year and beyond.
Speaker Change: Example, at the <unk>.
Speaker Change: <unk> meeting in Vancouver, a few months ago. You noted that you had integrated your customer success and account teams. We can talk about how that's going or other go to market and objectives of the CLO has thank you.
Speaker Change: Thanks for that question.
Speaker Change: And then just to be clear the scope of the CEO is quite different from the scope I had when I was a CEO COO so the.
Speaker Change: Sales and marketing and success management team Thats all record straight to me, but we did combine indeed account management and succession management under Brock our Chief revenue Officer, and this has helped tremendously and making sure that we have one account plan, we're absolutely clear for each account on whether the growth opportunities for consumption.
Speaker Change: And we execute very seamlessly about it jumped the overall, let's say team here is simplification the same way that we've combined our accountants' success management together on the product side with combined product and technology together. So simplification in order to have more GDT be able to execute with more precision and speed.
Speaker Change: So now when it comes to <unk> as our CFO. So he does have a cross functional role, helping in both planning and execution and making sure that we are coordinated it will be at a high level of what I. Just described it will be for example on the industry solution dimension that we've talked about many times Jade. This now reports to him right. So keeping the industry dimension.
Speaker Change: <unk> planning all the way to go to market.
Speaker Change: But he is also in charge of portfolio development and a big priority. We have is an asset that I think talking about which is also the responsibility of some of our growth initiatives, including our second narrative.
Speaker Change: I might say that.
Speaker Change: Something that comes out from James as he is a.
Speaker Change: Very good.
Speaker Change: He's a proponent of.
Speaker Change: Commercial innovation and commercial models and engineering I use the term engineering, the way in which we monetize and bring them bring out some new learnings from that that I'm enthused about.
Speaker Change: Alright.
Speaker Change: Thanks, Jay next question comes from Mike <unk> from Bank of America.
Speaker Change: Yes, thank you for the questions.
Speaker Change: So Nicholas I think your prepared remarks, you mentioned that.
Speaker Change: The New administration is some shift in infrastructure spending.
Speaker Change: So for example.
Speaker Change: Towards roads and away from other projects.
Speaker Change: Could that shift create a alban air pockets at all in demand from those customers as they also.
Speaker Change: Shifted their focus or priorities may be from one project to another and just the uncertainty created by that potential shift should we expect any kind of air pocket in demand.
Speaker Change: I don't think so for the simple reasons that the engineering firm in the U S is already quite busy and their backlogs are extending one year, if not more out.
Speaker Change: So it's a it's going to be a.
Speaker Change: Shift.
Speaker Change: In terms of product new products potentially coming in yes, but theres a bit of a lag before it hits actually the engineering firms and their and then their use of our software right. Now we are very well positioned to benefit from any infrastructure investments regarded regardless of the infrastructure assets.
Speaker Change: Whether we're talking about more traditional energy productions are renewables, whether we're talking about Roes as opposed to railway.
Speaker Change: Major expensive airports across all facets of assets, we have a very broad.
Speaker Change: <unk> portfolio of products to help.
Speaker Change: Great. Thank you Nicholas Thank you, Greg, Yes, I would just say generally I think the expectation continues to be that the spending is pushed further out for longer.
Speaker Change: Which corresponds to the capacity in any case.
Speaker Change: And there is discussion in Congress and at the federal level in the U S.
Speaker Change: Next.
Speaker Change: Infrastructure.
Speaker Change: Initiatives following the.
Speaker Change: And of course, our our users are.
Speaker Change: Very experienced.
Speaker Change: Readers of these tea leaves and they have great content.
Bob: Thank you Bob.
Speaker Change: Thanks. The next question comes from Alexia <unk> from JP Morgan.
Alexia: Hello, everyone I had a question about the competitive environment.
Alexia: Maybe you could talk about how it has fared.
Speaker Change: 12 months, we've noticed that some of your competitors clearly.
Alexia: But taking some share from you so.
Speaker Change: Maybe comment on that and talk about what you see.
Alexia: Evolving across different markets.
Speaker Change: I think it's.
Speaker Change: Clear that for those competitors, we're very focused on commercial facilities for example, because of the slowdown and they've been trying very hard to get into.
Speaker Change: Infrastructure civil infrastructure in particular.
Speaker Change: You can see our growth, which is very consistent we're not losing share to anyone we've seen some competitors doing some desperate measures for example, dropping their price, but it up and it was quite reassuring to see that our accounts are sticking with us.
Speaker Change: This is not enough of an argument for them to use to use to use competitive products.
Speaker Change: When it comes to infrastructure, there's just no other competitor out there that has that dedicated infrastructure and that breadth and depth of portfolio of products that we have now.
Speaker Change: So the fact that we remained very focus over the past few years is definitely paying dividends.
Speaker Change: No pun intended.
Speaker Change: Thank you.
Speaker Change: Great. Thanks. The next question comes from Joshua Tilton from Wolfe Research.
Joshua Tilton: Hey, guys can you hear me yes.
Joshua Tilton: I kind of a high level, one maybe just backing up a little bit I know a bunch of questions have been asked but.
Joshua Tilton: Maybe just everything you spoke to on the prepared remarks the election, the changes what's going on in China, just it feels like Theres a lot of moving pieces and I guess, if we were to simplify all the moving pieces that you see heading into this year do you believe that the demand environment is more less or the same favorable in 'twenty five and it was in <unk>.
Joshua Tilton: Four and I'm, just I guess I'm, just trying to understand like how we're supposed to interpret all of the different moving pieces as it pertains to no.
Joshua Tilton: Demand in the business environment for you this year.
Joshua Tilton: Well I think the overall picture is that things are are full up there.
Joshua Tilton: The infrastructure engineering community.
Joshua Tilton: It could hardly be any busier elsewhere and that won't change foreseeably, but in China.
Joshua Tilton: I have to say how disappointing China.
Joshua Tilton: Qualitatively.
Joshua Tilton: This is the first year, 2025, and which we do not have an internal plan.
Joshua Tilton: To grow or even maintain our level of business in China.
Joshua Tilton: Every other year, we havent counted on it but we have believed that would be possible because of the good match between our products and the demand in China. We have hoped we could at least sustain at our plan for this year is a plan to continue to lose business in China, it's at the level, where the <unk>.
Joshua Tilton: <unk> enterprise the Ceos have to personally vouch for any use they make of American software. They have to attest that there isn't that domestic alternative it's never been that bad before and in that environment. We can't hang on so that is I think the principal difference that's the half point that.
Joshua Tilton: The top there is not a way that we can see too.
Joshua Tilton: Maintain our business in China during 2025.
Speaker Change: Who knows what might happen geopolitically I, suppose we should be but nothing outside the realm of possibility.
Joshua Tilton: But we don't see any.
Joshua Tilton: Possible.
Joshua Tilton: Way to sustain that in 2025.
Joshua Tilton: Elsewhere in the world.
Joshua Tilton: That's not the picture at all.
Joshua Tilton: Elsewhere in the world. So, it's very consistent and it's very favorable.
Joshua Tilton: So to summarize consistent favorable demand backdrop, we only sexual going on in China.
Joshua Tilton: Super helpful. Maybe just a very quick follow up on the China thing I don't want to make sure I understand that you are correctly in the past the China headwind has been mostly IRR and the choice of perpetual and now going forward, you're saying, it's not just that there is a headwind to total business because they are choosing to look for local alternatives instead of U S based software.
Joshua Tilton: Not all of the business. There is state owned enterprises and there are highlights in Hong Kong in SMB, but the <unk>.
Joshua Tilton: Economy, there and the change in spending.
Joshua Tilton: Also notable we'd be talking about that alone if it werent for the geopolitical issues.
Joshua Tilton: As well so combined this year realistically.
Joshua Tilton: We can't even.
Joshua Tilton: I'll get back to a level in China.
Speaker Change: Thanks, Ed China, you're missing out.
Joshua Tilton: Thank you guys.
It's still 25% of the world's infrastructure engineering, and we still have a good mix between our for our products.
Joshua Tilton: Product sand.
Joshua Tilton: And demand there and we just need to get somehow more creative yet and Thats, where James with on the ground experience in China and different business models.
Joshua Tilton: It's one of his projects to consider.
Joshua Tilton: How we get ours in the long term there.
Joshua Tilton: The next questions will come from Matt Martino from Goldman Sachs. Thanks for squeezing me in here guys. Greg Nicholas you guys made reference to the launch of open site plus and some of the AI powered features there it's clear definitely starting to infuse AI across the product portfolio. So I'm wondering to what extent. These new AI powered features are starting to benefit you.
Joshua Tilton: Recall activity and how you think about the opportunity more holistically to monetize your growing AI portfolio over time. Thank you.
Joshua Tilton: Yes.
Joshua Tilton: Revenue impact is going to be very marginal this year. When it comes to open site plus because the product is in early access and we're planning towards the end of the year right, where we are having are generating traction.
Joshua Tilton: With AI as with assets and analytics, so as AI applied to two two asset operations.
Joshua Tilton: We think the opportunity is big on those fronts AI floor set and I think as I said operations. This is a we talked about it at some point a potential on top.
Joshua Tilton: Of nine digit yeah.
Joshua Tilton: And then when it comes to AI for let's say design, we've just at the beginning of this but we think it has a lot of potential not just to sustain our growth, but in the long term to even potentially accelerated.
Speaker Change: Thanks, guys.
Joshua Tilton: Okay.
Speaker Change: Thanks last question comes from Blair Abernathy from Rosenblatt Securities.
Blair Abernathy: Thanks, guys.
Speaker Change: Nice quarter.
Speaker Change: I just wanted to ask you maybe digging a little bit more on the data center.
Speaker Change: Opportunity as it sits today.
Speaker Change: Is it clearly still a lot of.
Speaker Change: Lending going on here in North America, maybe talk about sort of what youre seeing overseas and what does this.
Speaker Change: This really show up in your numbers is it on the.
Speaker Change: Our commercial side, obviously on the infrastructure side or both just kind of give us a little more color on the data center side.
Speaker Change: Maybe all of the above because data centers are a bit like a mini cities. Besides the bidding building itself.
Speaker Change: There is an entire infrastructure around it now.
Speaker Change: For transportation.
Speaker Change: For electricity for for water.
Speaker Change: So this obviously can become some.
Speaker Change: It grew so quality or by phone, but indirectly as well because theres. So much electricity, which is needed in order to power those data centers. It can lead to extension of the transmission grid, which will be benefiting from from as well.
Speaker Change: We can even held by the way.
Speaker Change: With our sequent software to help understand where <unk> are in order to be able to tap into underground water to help for the cooling of data centers. So we can help all of the above we can also help underground and we can't help across the asset lifecycle, we have software for the design, but also for the construction and then obviously for the.
Speaker Change: Operations of.
Let's say the system of systems in many cities that data centers represented.
Blair Abernathy: But all of that Blair would not appear in commercial facilities, it would appear and <unk>.
Speaker Change: Industrial resources and public.
Speaker Change: Public works and utilities among our sectors.
Speaker Change: Great. Thank you.
Speaker Change: Thanks Blair that concludes our call today and we thank you for your interest and time and Bentley systems. Please reach out to Investor relations with further questions and follow up and we look forward to updating you on our performance in coming quarters. Thanks, a lot. Thank you. Thank you.