Q1 2025 Bentley Systems Inc Earnings Call
Speaker Change: Good morning and thank you for joining Bentley Systems Q1 2025 results. I'm Eric Boyer, Bentley's Investor Relations Officer.
Speaker Change: On the webcast today, we have Bentley Systems Executive Chair Greg Bentley, Chief Executive Officer Nicholas Cummins, and Chief Financial Officer Werner Andre. This webcast includes four-looking statements made as of May 7th, 2025, regarding the future results of operations in financial position, business strategy and plans, objectives for future operations of Bentley Systems Incorporated. All such statements made in or contained during this webcast, other than statements of historical facts, or forward-looking statements. This webcast will be available
Speaker Change: for Replay on Bentley Systems Invest relations website at investors.bentley.com on May 7th, 2025. After a presentation, we will conclude with Q&A. And with that, let me introduce the Executive Chair of Bentley Systems Greg Bentley.
Speaker Change: Good morning, and as always, thanks for your interest in BSY.
Speaker Change: Of course, CEO Nicholas and CFO Werner will report in detail Bentley Systems excellent operating in financial results for the first quarter of 2025.
Speaker Change: But given the heightened uncertainties in global markets since we last spoke just two months ago, at which time I reviewed PSY's financial compounding over our almost five years since going public,
Speaker Change: This time, I will highlight our corresponding and intentional progress in the attributes that make our model resilient against macro vulnerabilities and cyclicality.
Speaker Change: To this end, we have improved our business mix along the dimensions of infrastructure sectors, infrastructure life cycle, our commercial models, account scale and geography.
Speaker Change: We contract this by comparing over the period the charts within our introductory debt for investors which quantify the distribution of our business footprint.
Speaker Change: Now, our allocation within infrastructure sectors is so distinctively significant that we start our description with this breakdown of our ARR by end market.
Scaled an area within each of these pie charts.
Speaker Change: Here is how our ARR growth has developed from its comparable distribution at the beginning of 2020.
Among Infrastructure Sectors,
Speaker Change: Commercial Facilities and Industrial are by far most subject to both demand and interest rate
Speaker Change: For us, these sectors combined proportion of total ARR is now less than 1.6.
Speaker Change: and our overall business resilience has been proactively enhanced by our 2021 and 2022 platform acquisitions.
Speaker Change: growing fastest for us, and in the most promising infrastructure sectors.
Speaker Change: First, led by sequence leadership in subsurface environmental modeling, the resources sector, and geoprofessional disciplines.
Speaker Change: which were only a single digit proportion pre-IPO, now comprise almost a quarter of our ARR.
Speaker Change: New applications for civil infrastructure are serving to help offset capital market sensitivity delaying investment in new minds.
Speaker Change: Boast especially, long-term fundamental shortages of self-sufficient supply for metals and minerals are spurring government priorities to expedite permitting for such essential capital projects.
Next.
Speaker Change: Our Powerline Systems Platform Acquisition has made BSY indispensable for physical investment in the world's electrical transmission and distribution grid.
Speaker Change: The Infrastructure Sector poised to benefit even more, and I thank even sooner from permitting reform.
Speaker Change: The new imperative for data center buildout is just adding to the many years of backlog of new capacity required to maintain and improve the power grid's reliability and security.
Speaker Change: The world has recently seen the catastrophic impact of failure in overstressed grids. [inaudible]
Our own longest term opportunity relates to infrastructure lifecycle phases.
Speaker Change: Deliberately advancing toward the digital twin future as our business mix gains an ever more resilient balance in sustaining asset performance.
Speaker Change: Since IPO, our steadily growing life cycle information management offerings have coalesced within the Bentley Infrastructure Cloud, now powered at a platform level by I-Twin and Cesium.
Speaker Change: AI will forever now be compounding within each of our accounts the reuse value of their own accumulated data across project-wise, synchro, and S.A.Y.
and a compelling use case for digital twins.
Speaker Change: is to leverage our leading simulation software portfolio now having grown to about a quarter of our ARR, for continuous reuse over an infrastructure assets operating life cycle, to quality assure as operated performance and resilience and to maintain fitness for evolving purposes. [inaudible]
Speaker Change: Enhancing such opportunities for diversification on the part of VSY between project and asset life cycles.
Speaker Change: and reflecting our years of prioritizing investments in capabilities for operations and maintenance since 2009.
Speaker Change: Our ARR directly from infrastructure owner operators has now reached parity with our ARR from their Project Supply Chain of Engineering and Construction Contractors.
Speaker Change: with infrastructure operations always essential and thus evergreen, compared to more discretionary project decisions, this has all succeeded in purposely reducing our cyclical exposure.
Speaker Change: Our resilience has similarly been enhanced by commercial model driven improvements in the quality of our revenue mix.
Speaker Change: Since pre-IPO, our recurring revenues have now reached a high-water mark of 92% of total.
Speaker Change: We continue to sell perpetual licenses now primarily to SMD and China, but its proportion of total revenues is down to low single digits.
Speaker Change: Likewise, contributing to the visibility of recurring revenue, the proportion of elective select maintenance coverage for perpetual licenses has decreased by more than half.
Speaker Change: Professionals services have always been the most volatile among our revenue captions.
Speaker Change: especially as we've now bundled the recurring success professional services instead within E365.
Speaker Change: and with revenues from our cohesive digital integrators, implementation services for IBM's maximum, having rather precipitously declined.
Speaker Change: as a proportion of revenues, professional services, which at best generate low margins, are back down below our pre-IPO level.
Speaker Change: and in preference to such dependencies on the vagaries of third-party enterprise asset management environments,
Speaker Change: Our new AI-driven asset analytics initiatives can provide instant-on entry points for digital twins in operations and maintenance and by way of ARR.
Speaker Change: Enterprise subscriptions, our ever-growing mainstay, are now almost exclusively through our E365 program.
Speaker Change: There were compensated for embedding our success experts and quarterly blueprints to consistently improve our rates of accretion in each account.
Speaker Change: We can also quantify how we have steered the ARR makeup within E365 to mitigate the intrinsic theoretical volatility of its daily consumption charging for our engineering applications.
Speaker Change: In fact, almost all of E365 ARR is now subject to negotiated annual floor as and usually and symmetrically ceilings on consumption charges.
Speaker Change: actually serving to increase the visibility and linearity of our overall HRR growth.
and most significantly for resilience. [inaudible]
Speaker Change: Increasingly, we and accounts covering now the majority of E365 ARR have mutually agreed to extend these force and feelings over multiple years, graduating upwards at each annual renewal.
Speaker Change: These pre-negotiated annual increments have tended to converge around our current high water
Speaker Change: underscoring that these accounts are equally confident in the sustained resilience of their own businesses, and in the priority they place on going digital to surmount chronic engineering resource capacity constraint.
with our direct sales model.
At 94% this past quarter. [inaudible]
Speaker Change: I believe our distribution of revenues by account scale is the hallmark of our qualifications and aspirations as the infrastructure engineering software company.
Speaker Change: With growth since 2019, the number of accounts within each size tier has at least almost doubled, with now over 180 accounts at over 1 million dollars in ARR.
Speaker Change: Over 500 accounts with ARR between $250K and $1,000,000, and over 900 accounts with ARR between $100K and $250K.
Speaker Change: serving this enterprise account portfolio more deeply and efficiently is the foundation of our distinctive resilience.
Speaker Change: and a priority since going public has been our opportunity to also reach SMB prospects who need the same engineering applications primarily through our digital go-to-market investments.
Speaker Change: So it's gratifying to also quantify our corresponding cumulative success in new logos as we've increased the number of accounts with ARR under 100K to just over 39,500.
Speaker Change: And finally, a significant contributor to our stability and predictability is geographic diversification.
We have long been fully scaled across the world.
Speaker Change: and while regional growth rates and for that matter exchange rates are always in flux,
Speaker Change: Our plurality proportion of revenues from the US has actually not changed since pre-IPO amid better balance elsewhere throughout the Americas.
Speaker Change: During this period, our business in Russia has of course been zeroed out and importantly, our exposure to China has been only about two and a half percent of revenues.
with much more than compensating relative growth elsewhere in Asia Pacific. Thank you.
Speaker Change: So, with all of these structural improvements in resilience, I conclude that while we are presumably not impervious to disruptions,
Speaker Change: We have accomplished much to make significant disruptions less likely and then less impactful.
Speaker Change: I think we're benefiting already and for reporting on 2025, over to Nicholas and then Berner. Thank you.
Thank you, Greg.
Speaker Change: We started the year of strong, delivering air growth, profitability and free cash flow in line with our Q1 expectations.
Speaker Change: A results position as well in regard to a financial outlook for the year, consistent with a long-term framework of low-double-digit AR growth
Speaker Change: 100 basis points of margin expansion and strong cashflow generation.
Speaker Change: We remain confident in our ability to continue to deliver solid results despite global macro uncertainties given the continued solid demand environment, the backlogs of our accounts, and our resilient business model that Greg highlighted.
Speaker Change: The most recent ACC survey release in March showed a very positive outlook from US
Speaker Change: Our accounts remain cautiously optimistic, following the terror announcements, as countries continue to prioritize infrastructure funding some even more than before.
The fundamentals of our demand environment remain the same.
a critical need for better and more resilient infrastructure.
Speaker Change: A continued shortage of engineers, with a number of unfilled positions consistently around 9%.
Speaker Change: and, as a consequence, backlogged extending further out, as reported in the same ACCC surly.
Speaker Change: All of these factors point to a strong demand backdrop for software to help improve the productivity of existing engineers.
focusing now on Q1 highlights.
Speaker Change: Eric Gross was 12% over a year and 12.5% excluding the impact of China.
Speaker Change: Soling growth in the quarter was supported by our net revenue retention, remaining at 110%.
Speaker Change: Our E365 program continues to be a growth driver in particular from renewals.
Speaker Change: And we again added 300 basis points of error growth from new logos, mainly SMD
Speaker Change: In fact, we added more than 600 new logos through online store for the 13th straight quarter.
Speaker Change: Retention remains high within the segment. We expect renewals to be further supported as we expand our auto-renewal process to more countries and continue to automate meaningful touch points during the subscription.
Speaker Change: Artoon of Business by Infrastructure, Sector, and Q1 remain consistent with previous quarters.
Speaker Change: Public Works Utilities was once again the main growth driver, as governments around the world continue to fund infrastructure at robust levels.
while commercial facilities remain flat.
Speaker Change: Growth in resources remains solid, despite continued softness in new mine investments, while growth in industrial remain modest.
Speaker Change: Over the coming years, these sectors are likely to benefit from increased investment, in particular in the US, with the administration's drives to increase manufacturing capacity, energy production and mining.
Speaker Change: Speaking of mining, during the quarter, we introduce Sequent Evil, a powerful cloud-based platform designed to unlock the full potential of geoscience data
Speaker Change: The launch of evil comes at an opportune time, as the mining industry needs to find new ways to work faster and more efficiently to meet the global demand for minerals.
Speaker Change: Evil provides a strong foundation for integrated workflows by bringing together geoscience data from both sequence and third-party applications into a single accessible source.
Speaker Change: It allows teams to generate insights from past projects and collaborate more effectively by working with the most up-to-date data.
Speaker Change: Looking now at Q1 Performance by Region, trends remain largely consistent with previous quarters.
Ruth was solid across America with Latin America standing out. [inaudible]
Speaker Change: The market outlook in the US remains bright, with IJ continuing for at least another 18 months, while the administration has also announced priorities favourable to continue the infrastructure investment, including the overhaul of the permitting process.
Speaker Change: States also continue to amplify the federal funding with their own infrastructure budgets, in particular for transportation. With a value of state and local government contract awards in Q1, up 34% year-over-year.
Speaker Change: Also in the US, the American Society of Civil Engineers recently released the 2025 edition of its infrastructure report card.
Speaker Change: Produced every four years to report card grades the state of US infrastructure.
Speaker Change: This is therefore the first report since the inflection in the Physical Spaning started with IJ.
Speaker Change: The overall grade improves a half step from 2021, from C- to C.
Speaker Change: Dar modest, the progress shows a positive impact of such investments and serves as encouragement for more.
Speaker Change: ASC estimates that nine trillion dollars more are required to reach a state of good repair across all 18 infrastructure categories noted in the report.
Speaker Change: Moving to EMEA, the region also had solid growth with the Middle East standing out again and continued in the pharmaceutical investment in Europe , including the UK.
Speaker Change: There were a number of major announcements such as the EU's Rearmure Plan, which aims to mobilize close to 800 billion euros for defense-related spending, including the upgrade of dual-use transport infrastructure.
Speaker Change: Germany also announced a special fund of 500 billion euros for investments in infrastructure, including to help the country achieve climate neutrality by 2045.
Speaker Change: In Asia Pacific, India was once again the main growth driver with the strong performance of our structural engineering applications, including pianists.
Speaker Change: China, which represents less than 2.5% of total AR, performed as we expected, given the ongoing economic and geopolitical headwinds.
Speaker Change: Finally, I would like to highlight a recent analysis we made at the Google Cloud Next Conference. The addition of Google's review imagery and vertex AI to our asset analytics offering for the road network.
Speaker Change: The combination of crowdsource data, street view imagery, and AI can create improved planning and operations from standard roadway maintenance to disaster recovery.
Speaker Change: such as obtaining precise insights into the states of infrastructure before and after disasters to help plan and accelerate reconstruction efforts.
Speaker Change: As a concrete and meaningful use case, through the partnership with Google, we are working with the county of Los Angeles to support their recovery efforts from the Eaton Fires.
Werner Andre: Before I turn it over to Werner, I would like to call the attention to two reports we just published.
Speaker Change: or 2024 Impact Report highlights our leadership in sustainability and focus on ethical practices.
Speaker Change: As I noted in the forward to the impact report, while infrastructure is essential to a quality of life, it also has significant impacts on the natural environment.
Speaker Change: That is why we focus on empowering our users to design, build and operate more sustainable and resilient infrastructure.
Speaker Change: It is also why we work to improve our own sustainability, foster current and future infrastructure professionals, engage in our local communities and more.
Speaker Change: Our 2024 Infrastructure Yearbook celebrates the outstanding accomplishment of our users. The Yearbook highlights over 260 remarkable projects, nominated for the 2024 Golden Digital Awards and Infrastructure
Speaker Change: Each project reflects a vision and talent of infrastructure professionals who leverage all software to improve product delivery and asset performance.
Speaker Change: I encourage everyone to check out these documents. They are both available to download from our website.
Speaker Change: If you want to order a physical copy of the yearbook, simply ask Eric and we'll be happy to ship one to you.
And with that, I will hand off to Werner.
Thank you Nicholas.
Werner Andre: Indeed, we have started the year of strong in every respect, which puts us in a good position in regards to our financial outlook range for the year.
Werner Andre: Total revenues for the first quarter were 371 million, up 10% over here only reported, and 11% on a constant currency basis.
Werner Andre: Strong subscription and licenses revenues in the first quarter are partly offset by lower services revenues
Werner Andre: Subscription revenues cruel 11% here of a year for the water in reported and 13% in constant currency.
Werner Andre: Subscription revenues now represent 92% of total revenues, up 1% the point from the same period last year, improving the overall quality of our total revenues in terms of growth consistency, predictability and margin contribution.
Our SMB and E365 initiatives continue to be solid contributors.
Werner Andre: perpetual license revenues for the quarter called 13% over here and reported, and 15% in constant currency.
Werner Andre: Our less control level and less predictable professional services revenues declined 18% for the water in reported and 16% in constant currency and now represent 5% of total revenues down 1% each point from the same period last year.
Werner Andre: As previously mentioned, the largest portion of our non-recurring services relate to IBM Maximum Implementation and Upgrade Rob.
Werner Andre: Our last 12 months recurring revenues, which includes subscriptions and a small amount of recurring services, increased by 13% year-a-year in reported and 14% in constant currency.
Werner Andre: And we present 92% of our total revenues, our 2% points.
year-over-year.
Werner Andre: Our last 12 months constant currency account retention rate remained at 99%, and our constant currency net retention rate remained at 110%, led by aggression within our consumption-based E365 commercial model.
Werner Andre: We ended Q1 with ARR of $1,319,000,000 at quarter-end spot rates.
Werner Andre: On a constant crazy basis, our trailing 12 months air our growth rate was 12% year-a-year and consistent with our expectations.
Werner Andre: Excluding China, our ARRO freight was 12.5% year-over-year. [inaudible]
Werner Andre: On a quarterly sequential basis, our constant currency ARR growth rate was 2.1%, slightly below Alex, one if working once a sequential growth rate of 2.2%
Werner Andre: With regards to seasonality, we continue to expect our quarterly sequential AR growth to be back up loaded similar to 2024 in line with our contract renewal seasonality.
Werner Andre: Our gap operating income was 115 million for the first quarter.
Werner Andre: I've previously explained the impact on our gap operating results from the third compensation plan liability revelations and acquisition expenses.
Werner Andre: Moving on to a trusted operating income, less stock-based compensation expense, or AOI less SBC, our primary profitability and margin performance measure.
Werner Andre: AOLS SPC was $126 million for the quarter-up 12% year-over-year with a margin of 34.1% up 80 basis points.
Werner Andre: Our matching performance for Q1 has been strong, particularly when considering that the comparative period is a high benchmark, benefiting then from run retrievings from the strategic realignment program which we initiated in 23Q4.
For more information, visit www.FEMA.gov
Albert's 25th Q1 Matching, benefited from our strong total revenues performance.
All a mixed shift towards higher margin subscription revenues.
Werner Andre: and from certain discretionary op-expand, being slightly more backup loaded in 2025, when compare to 2024.
Werner Andre: This will put us in a good position to deliver on our 100 basis points full-year margin improvement target.
Werner Andre: As a reminder, we concentrate our annual raises for colleagues to occur as of April 1st of each year, and since approximately 80% of our cost structure is headcount and related support cost, annual raises have a significant impact on our operating expenses in Q2, Q3 and Q4 relative to Q1.
Werner Andre: Our larger promotional and event related costs are also concentrated in the second half of the year.
© The Uncanny Countertops All rights reserved. Uncanny, Inc.
Werner Andre: Our free cash flow was 216 million for the quarter, our 15 million was 7% and in line with our expectation for the first quarter.
Werner Andre: Based on the expected seasonality of collections and expenditures, we expect to generate in the range of 60% of our full year free cash flow during the first half of 2025.
Werner Andre: We have previously discussed the cashflow efficiency of our operating model.
Werner Andre: In that regard, I want to highlight that we started to record our cloud services subscription deposits on the face of our balance sheet.
Werner Andre: Historically, we recorded our CSS deposits as part of our cruels and other current liabilities. Thank you.
Werner Andre: Our CSS deposits primarily relate to our E365 commercial offering and are funded by our accounts predominantly at the annual conference renewal based on their estimated next 12 months consumption.
These deposits are subsequently applied to quarterly consumption invoices.
Werner Andre: The working capital impact of CSS deposits is similar to the third revenues and reflect collections in advance of expected future consumption revenues.
Werner Andre: CGSS deposits were $448 million as of March 31st, 2025, and increased by $78 million from March 31st, 2024.
Werner Andre: with regards to our Q1 capital allocation, along with providing sufficiently for organic growth.
with applied free cashflowers follows.
135 million fully paying down our senior debt.
10 Million Convertible Senior Notes Repurchases
Werner Andre: 39 million effective sherry purchases to offset dilution from stock-based compensation and 21 million on dividends.
Werner Andre: With our senior debt being fully paid down, our net debt leverage, including our 2026 and 2027 convertible notes as debt, was 2.4 times in just a little bit down.
down from 2.9 times at the end of 2024.
Werner Andre: Our strong balance sheet and projected free casual generation will sufficiently find our dividend.
Werner Andre: Sherry Producers, and Grove Initiatives, including programmatic acquisitions, as we continue our deleveraging trajectory.
Werner Andre: Our five-year senior secured credit agreement, which we entered into in October 2024, provides a currently armed 1.3 billion revolving credit facility.
Werner Andre: Combined with our strong balance sheet and anticipated future free cash flow generation, it offers ample flexibility to address the January 2026 maturity of 678 million in outstanding convertible debt.
Werner Andre: while keeping our cash interest thereafter at about the same magnitude as in recent past.
Werner Andre: Interest rates are not like that, they're protected for very low fixed coupons and our convertible notes and very favorable terms of our 200 million interest rates were expiring in 2030.
Werner Andre: And finally, we remain comfortable with our 2025 financial outlet range that we provided just over two months ago and I will cue for a call.
with regards to foreign exchange rates. [inaudible]
Werner Andre: For the first quarter, the US dollar is weak and slightly relative to the exchange rates assumed in our 2025 annual financial outlook, resulting in approximately 1 million incremental revenue from currency.
Werner Andre: Based on the most recent raids, where the US dollar has further weakened relative to our outlook rates.
Werner Andre: If end of April exchange rates would prevail throughout the remainder of the year, our cue tool to cue for gap revenues will be positively impacted by approximately 20 million.
Werner Andre: Relative to the exchange rates assumed in our 2025 financial outlook.
Eric Boyer: And with that, we are ready for Q&A. Over to Eric. Thank you.
Eric Boyer: Thanks, Werner. Before we begin, I just wanted to remind everyone to please ask only one question so we can get to everybody today.
Hi, great. Hi everyone, thanks for the time today.
Eric Boyer: There's obviously been a lot of focus on what's happening in the US and your commentary sounds by positive. Maybe a few topics that would be helpful to address.
Speaker Change: Person, the states are responsible for much of the regular way of infrastructure activity in the country, which you say your business also uses that way as opposed to federal.
Speaker Change: and then when it comes to the federal exposure, obviously the I.I.J.A. is a part of that.
Speaker Change: Are you seeing priorities under the current administration change? So maybe the headline numbers are unchanged, but underneath the surface is it changing?
Speaker Change: And is it actually changing in ways that could be positive for Bentley? I'm thinking about how you have such high exposure to roads and
I'm going to jump in, sitting here in the U.S.
to the first question I think there it is. [inaudible]
Lightly...
More dependents on... [inaudible]
Federal funding in our next given the...
Speaker Change: Highway Funds, or Federal Funds, mashed by the States, and as Nicholas described, amplified by the States, but the greater portion is a Federal portion somewhat.
Speaker Change: The Next Within IJA has changed, will change, but it's in keeping with the headline you read about slightly different priorities.
Speaker Change: by the Trump administration in regard to high-speed rail and renewable energy and so forth.
But another change is this administration has. [inaudible]
Speaker Change: Less tolerance for discretionary grant programs and we'll end up making more of it by formula for the discretion to return to the states if you like.
and over to you, Nicholas.
Nicholas Cummins: Yeah, true. I think you described the right way, the highlight number is expected to remain the same. It's the mix that is going to change. And as you said, the mix might be actually in our favor as it changes. Maybe more investments towards roles versus rail. And we're traditionally very strong with roads.
Nicholas Cummins: You know what is actually interesting here is the focus on efficiency indeed on cutting the red tape and this is very well received by our users by our accounts.
Nicholas Cummins: Yeah, they appreciate that. And then all the push for permitting reform to make permitting even much faster, which should contribute to an increase in infrastructure work related to the expansion of the electric grid or even potentially mining.
Speaker Change: Eric Boyer, Unknown Executive, Eric Boyer, Gregory Bentley, Eric Boyer, Gregory Bentley,
Thank you.
You know, think about some of the macro. [inaudible]
Speaker Change: sort of tied tides that we're hearing about, and I think sort of that overview was helpful.
I'm curious.
Speaker Change: I'm going to ask Nicholas to comment on closer to the market, short-term, Peepet.
Speaker Change: Yeah, Matt, as great noted, commercial facilities and industrial are traditionally very sensitive to variations of demand and interest rates.
Speaker Change: and we think that this is what has happened, especially for commercial facilities in the remaining years.
I think in industrial there is a more positive sentiment.
Speaker Change: Especially in the U.S., given the big push for the new administration to bring back manufacturing in the U.S., which should lead to more and more activities, but that's the sense which I can commence, you know. And all of the above energy strategies are going to help.
Industrial, as well, but projects need to get underway.
Thank you.
The next question comes from Jason Celino from Keyback.
Jason Salino: Great, thank you for taking my question this morning. You know, the Concentrancy ARR growth in the quarter was really impressive. You know, third quarter row of 12% growth.
Would you like to take that turn? [inaudible]
We are happy to lose our...
Jason Salino: So I think I would focus on a first of all like the quarter, which was like a 2.1% quarter quarter a quarter a quarter, which
Jason Salino: It lines very much slightly lower than the 2.2% that we had like a year ago and Q1.
Jason Salino: 24 dropping off and being replaced with Q-125, our year-over-year role-free to remain relatively.
Jason Salino: This was exactly as we did expected for Q1 and as you mentioned it early.
Jason Salino: Only 20% of our renewal opportunity is in Q1, but it puts us in a good position relative to our financial outlook range.
Jason Salino: But I think this is a good opportunity to just reiterate like the expectation of seasonality for us.
Jason Salino: So we do we do expect that our quarterly segmentual year our growth allocation is will be more in line with our quarterly contract renewal season as it averages.
Jason Salino: with Q1 and Q3 at the lower and Q2 higher and Q4 in the highest.
Jason Salino: And then, with regards to year-to-year, here are both the expect Q3 to be our seasonal low this year. Heal to the timing of potential acquisition and asset and analytics deals, which we are particularly strong in 24 Q2 and 24 Q3.
Jason Salino: and these deals they expect to be closer to year end in 2020, 25, and then the impact from this season acquisition will be dropping off in 25, Q3.
Jason Salino: So that's kind of the framework I think about seasonality as we go for the year.
Perfect, thank you, Werner.
Speaker Change: Thanks, Jason, and the next question comes from Cindy Panigrahi from Mezuhau.
Thank you. Thank you for taking my question.
Switching bit to the product side.
Speaker Change: It's been like three quarters of cesium acquisition and also recently you announced Google partnership with Google, wondering how is that progressing and what kind of opportunity you see and last it and only take side and what kind of traction you are getting from customers.
Speaker Change: On CZM, first of all, so we are progressing very well in adopting CZM technology across the portfolio when relevant, whenever we need 3D geospatial visualization.
Speaker Change: And with respect to Google, same thing, we're making good progress in adopting Google data, so 2D data, Google Maps, basically, as an alternative to Bing Maps.
Speaker Change: And with Google, as we just announced this quarter, we are going one step further in leveraging their technology and their data when it comes to a set analytics.
Speaker Change: And the first product to benefit from that is our product for the road network called Blinsey, where we are leveraging Google's review data for a set inventories and also to do comparison of before and after.
Speaker Change: and we're using also a vertex AI for stronger aesthetics, right? So the way we expect this to contribute is [inaudible]
Speaker Change: A larger reach, we can go up to more geographies now where the Google Street View data is readily available that allows us to do a set of inventories without relying on
Speaker Change: and the provisioning of data by dash cam providers, for example.
Speaker Change: We expect more use cases. We know actually we're going to cover more use cases, but we also expect to a higher win rate simply because we have a stronger solution. Thanks for the integration with Google. And I'll just say we still just had the beginning of a relationship with Google. There's much more we're working on. There's much more that is coming.
Speaker Change: Great, thank you. And as to roadways and blanksy during the quarter, we announced to new deals with DOTs that are among many that are in the works, but most to come later near we think.
Great, thanks you very.
Thanks next question. I'll come from Taylor McGuinness from UBS.
Taylor McGinnis: Yeah, hi. Thanks so much for taking my question and congrats on the quarter.
Speaker Change: We got back to mid-April. I think the White House put up some guidelines for permitting reform and it seems like in the next 90 days or so there's going to be more action taken. So could you just maybe comment on the timeline or when you think that could start to serve as a tailwind to your business? And I know in the past you mentioned this being a tailwind specifically to SQL and power line systems. So anyway to quantify those businesses today and what that could mean potentially in the back half or into next year. Thanks.
Speaker Change: Well, I might jump in because I did mention that I think the, you know, the preventing reform is...
Speaker Change: It's necessary, but even when you have permitting reform, you still need to get a permit, and there's a latency there. It's just recognized as being urgent and needing to be addressed, and while...
Speaker Change: New Mining is important and will benefit power line systems and especially the grid capacity.
Expansions,
Speaker Change: and what I was referencing courses, what happened in...
Iberica, that it's catastrophic to have overstressed grids.
Speaker Change: Fail, some progress has been made toward that, but you might remember that I have said about our power line systems.
Speaker Change: Acquisition that I believe when we talk about our business in general.
Speaker Change: We're a subscription business. It goes on a long time. Things can't change very quickly, but I have said that the power line systems business could grow by an integer multiple. Well, it will have done so already by the end of this year in the three years by then that we've owned it, but it really is. [inaudible]
Speaker Change: Physical Transmission Infrastructure, Capacity Expansion, that the world needs in order to...
Speaker Change: Spring loaded, I think, to benefit from the permitting reform. It just can't happen even in one year, let alone one quarter, but it's already made a big difference for us.
Speaker Change: Great. Thank you so much. Yeah, thanks, Taylor. The next questions will come from Jay Vleeschhouwer from Auburn and Robert and Securities.
Speaker Change: Thank you. Good morning. Greg, the charts that you provided earlier, the before and after charts on the number and scope of accounts was quite interesting and very useful.
Jay Bleashour: With that in mind, what is your pipeline assuming about the continuing trends of multi-solution sales, particularly to your largest customers? Or conversely given the current environment, are you seeing any possible signs of deal disaggregation customers perhaps starting with something less than they might otherwise have done?
previously.
in terms of total Bentley consumption.
Jay Bleashour: And in relatedly, what are you thinking about or what are you seeing in terms of the work you're doing for existing infrastructure versus new new infrastructure projects? Are you perhaps becoming increasingly tied to existing work and less so to new or the other way?
Well, my first reaction is that this year plus...
Backlawed.
That most of all are...
Jay Bleashour: Constituates these has is buffering and making a little bit hard to discern what you're what we're interested in just as much as you are in in
Jay Bleashour: on E365 are glad to enter into multi-year escalation graduations because they know they have the backlog they can see the...
Jay Bleashour: Incipient Project, see the return on investment, for instance, in the US, where we've improved our grade on infrastructure with ILNA.
Jay Bleashour: and I want to know the boundaries of what they're going to be spending as they do more digital contribution. They substitute technology for labor.
Jay Bleashour: over time. So you can kind of read in what's happening with the multi-year negotiation puts, as I say, we don't ask for, but we're glad to do it to kind of share the risk with our accounts. But on the very most recent
Speaker Change: Sealings from the Market, Nicholas Pramsh, you can bring us up to date. [inaudible]
Nicholas Cummins: Yeah, Jay, I'll make sure this is clear, right? Our accounts are indeed cautiously optimistic and I will put more emphasis on optimistic than cautiously cautious because they have to given the global economic environment, let's say discourse.
Nicholas Cummins: But when it comes to the fundamental of their business and therefore our business, it's strong. Yeah, there's never been so much demand for better and more resilient infrastructure.
Nicholas Cummins: The public funding is as strong as not even potentially stronger in some region than it was, so all very positive.
Nicholas Cummins: We have great progress in SMD with our bundle of different products by injuring disciplines, structural engineering, for example, of civil engineering which is working quite well.
Nicholas Cummins: And into your second question, whether we are shifting from existing to or sorry, net new or infrastructure to to to existing.
Nicholas Cummins: I would say traditionally, of course, a lot of a business is related to new infrastructure, but we see it as a major growth opportunity for the company.
Nicholas Cummins: to focus also on existing infrastructure. We definitely want to grow our percentage of ARR, which is tied to asset operation and maintenance. It remains very much a growth opportunity for us to go and forward.
Nicholas Cummins: It is Nicholas's hallmark to accomplish that over his ten year to come.
Thank you.
Jay Bleashour: Thanks Jay, next question will come from Kristen Ellen from Oppenheimer.
Kristen Owen: Thank you so much for taking the question. We focused a lot on the macro in the US, so I want to shift the conversation a little bit to what you're seeing with your European customers. You know, whether it's the potential for a meaningful peace fire in Ukraine or maybe some of the more robust defense and infrastructure stimulus packages that you mentioned in your prepared remarks.
Kristen Owen: I'm just wondering what you're hearing from your customers there. If you're seeing any of that optimism translating into backlog, where we might see mix of projects benefiting your portfolio. Thank you.
Speaker Change: Yeah, so our growth in the annual overall was solid, that includes Europe as well, and yes.
Speaker Change: In Europe , we're still seeing the impact of major investments at the European level and then at the country level as well
Speaker Change: At the European level, I think we're not even at 50% of the funding of the next nation EU plan, which was put in place a couple of years ago. We must be at 48%. So there's still more to come. And in addition to this, there's an incredible investments that has been announced related to defense. Thank you very much.
Speaker Change: Effectively for dual use, so making sure that infrastructure is good enough that we can move troops and let's say a military material as fast as possible.
I think in the...
Speaker Change: We are in Europe plan. They've highlighted something like 500 points of infrastructure in Europe that must be upgraded in order to make sure that in case of crisis.
Speaker Change: We can move equipment and people as fast as possible. But those spots are used for both military and civil purposes so we can see a lot of investments coming.
And then just yesterday, the new Chancellor, Christian Mathford was
Fritz Matzöy, was elected in Germany.
Speaker Change: And you may recall that you suggested a massive plan of something like 500 billion euros.
and infrastructure including 100 paid-in euros.
for Clean Energy.
So, this is...
Speaker Change: Yeah, this is just massive. So the way we're going to continue to benefit from that is investments going into transportation, investments going into energy security, investments going into overall resilience.
Speaker Change: With the recent military Mems unraveling between India, and Pakistan could you elaborate on your exposure to those markets. Please.
Speaker Change: Well ongoing too well so.
Speaker Change: Yes.
Speaker Change: I commented that.
Speaker Change: Our.
Speaker Change: R&D for instance is distributed all over the World. We are we are.
Speaker Change: Our global <unk>.
Speaker Change: An example is.
Speaker Change: Pakistan, We had a significant R&D center in Islamabad.
Speaker Change:
Speaker Change: English skills are good universities are good and the availability of talent has always been strong there.
Speaker Change: But it isn't much of a market.
Speaker Change: India in India by contrast, where like other software companies, we have a lot of shared services and.
Speaker Change: And software development, but we are a net exporter to India because of their <unk>.
Speaker Change: Expenditure on infrastructure in there.
Speaker Change: Yes, that's another great country for water, along with road and rail and airport.
Speaker Change: And grid.
Speaker Change: And.
Speaker Change: Nicholas maybe you can bring us up to date on the trends and directions I know you called out.
Speaker Change: India in particular.
Speaker Change: Yes.
Speaker Change: <unk> has been and was again in Q1.
Speaker Change: The main growth driver in Asia Pacific.
Speaker Change: So we continue to benefit from massive investments.
Speaker Change: On the local infrastructure by the Indian governments, but we also have a lot of global firms, who outsource work as chief structural engineering with local talent in India.
Speaker Change: And this benefits us as well.
Speaker Change: And we expect India to continue to be a strong growth driver going forward now.
Speaker Change: Those latest developments are very much.
Speaker Change: I mean, there's been a constant tension between these two countries as you know now.
Speaker Change: So we have to be very careful.
Speaker Change: Integrating integrating what's going on there I don't want to make light of it but let's say.
Speaker Change: I remember asking our.
Speaker Change: Leader are our team leader in Islam of bad when it was on the front pages for riots in insurrection and so forth I said.
Speaker Change: Should we be really worried about this geopolitical exposure in this place where we do critical development and he said look this is ambient around here, we don't even notice it.
Speaker Change: You want to help us.
Speaker Change: Healthy shore, we have 24 hour power.
Speaker Change: And so we're able to help them get them generate in other words that the attitude of the Pakistani.
Speaker Change: People are.
Speaker Change: They they.
Speaker Change: Expect some commotion around them in there.
Speaker Change: Hey, Matt.
Speaker Change: I recognize that it gets.
Speaker Change: <unk>.
Speaker Change: Sure.
Speaker Change: But is the right word it gets.
Speaker Change: Overplayed in the World I Hope that's what.
Speaker Change: The light the character this time, but of course, we don't know yet.
Speaker Change: I appreciate it thank you.
Speaker Change: Yes, I'll just say that.
Speaker Change: Yes, sorry, yes, despite the fact that it's been such a strong growth driver entre So put things in perspective, <unk> is still a single digit.
Speaker Change: Percentage of our <unk> now.
Speaker Change: Around mid single digits, maybe think of it that way.
Speaker Change: Single digits just to be clear.
Speaker Change: Alright, great.
Speaker Change: Great.
Speaker Change: Your next question comes from Blair Abernathy from Rosenblatt Securities.
Blair Abernathy: Thanks, Good morning, everyone.
Speaker Change: Just.
Speaker Change: A question on the product side, if I can.
Speaker Change: It relates to AI. So if you look at the sort of chronic shortage, we've been seeing in the last five years or so and civil engineering related and infrastructure work. How are you guys looking at.
Speaker Change: Helping customers didn't really drive up productivity specifically.
Speaker Change: Specifically using AI.
Speaker Change: Then also just give us an update on how you are using or looking at using this new technology internally to drive at least productivity.
Speaker Change: Yes so.
Speaker Change: <unk>.
Speaker Change: AI is going to be part of the solution for sure too.
Speaker Change: To allow infrastructure organizations to do more with less.
Speaker Change: We simply won't be able to hire enough people to fulfill all the demand for infrastructure.
Speaker Change: There is a big potential for efficiency gain by automating AI. Some very mundane tasks that are just not the best use of the.
Speaker Change: Engineer's time and the first.
Speaker Change: Most of the impact that we're going after and we commented on in previous calls is drawing production depending on all engineers. It can take 30% to 40% of their time interest going from a <unk> model to a to the plan and then it was that.
Speaker Change: Manually and rotating it so they can be used in construction. It is just not a good use of their time right. So this can be automated for site plan. That's what we're doing with our first application. There is leveraging AI plunging application called open site plus and then we are making.
Speaker Change: Making good progress in extending this capability to all other civil engineering disciplines.
Speaker Change: Now we are in a great position to help there because one we actually leveraging our very deep and broad portfolio of engineering applications to train AI agents.
Speaker Change: So we are teaching those AI agents the rules of engineering, they don't have to get them now.
Speaker Change: And then we also in a great position because so many of our accounts are leveraging product wise as part of <unk> infrastructure cloud to store their engine files and as they do this we are leveraging our own digital twin technology to unlock those files understand the data there.
Speaker Change: As Congress files, making it ready to query to reuse and potentially to training if and when our users decide so.
Speaker Change: So one thing that makes us quite distinctive we've made it very clear that we will not use our users data to train AI unless they explicitly asked us to do so so our agents are trained with our own engineering applications there.
Speaker Change: Fine tuned with the data that the users are.
Speaker Change: We're putting into perfect quiet and manufactured to cloud if and when they want source for that user resolving purposes exactly for their own purposes, and then when it comes to our own internal use of AI.
Speaker Change: We are leveraging AI, let's say across functions and of course, where we see the biggest impact is in our own development teams.
Speaker Change: They're very similarly, we.
Speaker Change: We have AI, taking over the <unk> data that adult like Mike commenting now [laughter].
Speaker Change: Alright can help us before.
Speaker Change: Repeat.
Speaker Change: Codes parts.
Speaker Change: Mundane functions all of that AI can can help them save quite a bit of time 10, 15, 20% off of a difficult time can be safely get through AI.
Speaker Change: And we can see potential for even more so we are constantly on the lookout for new technology that is available that can help accelerate the productivity of our own developers.
Speaker Change: Next question. Please yes. Thanks, Larry next question comes from Joshua Tilton from <unk>.
Speaker Change: This is even here for Josh. Thank you guys for taking my question and congrats on a great quarter.
Speaker Change: It's a lot about.
Speaker Change: Funding impact, but maybe just one on the Doe side. So how should we think about the resiliency of the budgets in relation to dose what is the impact of dudgeon budget if any at all.
Speaker Change: Thank you.
Speaker Change: Well, we haven't heard of any impact from that I have not.
Speaker Change: But I continue to hope that in the process of diminishing returns.
Speaker Change: It won't be long because.
Speaker Change: Infrastructure provisioning being a bipartisan priority of government. If there would be a question of can we get fundamentally more efficient at that and it would be.
Speaker Change: As an opportunity in the U S just to catch up with the rest of the world and the application of.
Speaker Change: Digital trends if you look in the.
Speaker Change: 2020 for infrastructure year book you see.
Speaker Change: Candidly more progress.
Speaker Change: Elsewhere in the world.
Speaker Change:
Speaker Change: Where theyre more open where the world is more open to new workflows in going digital in.
Speaker Change: Digital delivery that that has become a priority in the U S in certain states, but.
Speaker Change: There is much more of that as possible and we hope they will get to that.
Speaker Change: Okay.
Speaker Change: Thanks next question comes from Kash Rangan from Goldman Sachs.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Yeah.
Speaker Change: Cash I think you are muted.
Speaker Change: Alright, well, we'll try again.
Speaker Change: Next question, Michael Funk from Bank of America.
Speaker Change: Okay great. Thanks. Thanks for the question. This is Matt <unk> on for Mike.
Speaker Change: My question is on the asset analytics business could you maybe provide a little bit more color on the progress there and maybe help us frame the upside case for the remainder of 225.
Speaker Change: Well side cases is what we're after with asset analytics. The rest of our business is so predictable you've heard me say I really want us to go after some of this stuff that can can really.
Speaker Change: Take off and maybe Nicolas you can tell us your expectations for that.
Speaker Change: Act with a great pleasure. So after that it takes performed as expected in Q1 now.
Speaker Change: With please see Greg mentioned that we want to Dot's, Florida, and Michigan beauty.
Speaker Change: And we expect more coming because we see so much interest in the U S. And then beyond the U S. I talked about our partnership with Google the stronger integration now between.
Speaker Change: Our <unk> solution together with Google Street view imagery, Anna and vertex AI. This will help for sure and increasing our market potential and our win rate.
Speaker Change: And then when it comes to our Telecom solutions. The open tower IQ, we saw solid growth in Q1.
Speaker Change: With many new towers, who process.
Speaker Change: <unk> definitely exceeding the number of towers that has been.
Speaker Change: Let's say rolling off after construction. So all quite positive. This is a growth opportunity for the company going forward.
Speaker Change: At some points, we do hope to add through acquisition some additional capabilities.
Speaker Change: In order to accelerate our our AUR in this space.
Speaker Change: Okay, great. Thanks.
Speaker Change: The last question I believe comes from Jackson globally for William Blair.
Speaker Change: Great. Thanks, everyone. This is Jackson bogey on for Dawn Becker, maybe staying on the analytics side, the new capabilities with the Google maps imagery I know, we've talked about that a lot could you just talk through how the convergence of data analytics and imaging is kind of driving the next wave of innovation in <unk>.
Speaker Change: <unk> needs and maybe how that ties into your prior push around advanced visualization. Thanks.
Speaker Change: So we like.
Speaker Change: By the way the accounts that we served engineering firms see the operations phase of the infrastructure lifecycle as a very interesting growth opportunity an opportunity to also have some <unk>.
Speaker Change: Recurring recurring business now when it comes to asset operations.
Speaker Change: The let's say standard way of understanding.
Speaker Change: What's the current.
Speaker Change: Patients are off their assets is to send some people to do some inspections.
Speaker Change: Highly inefficient.
Speaker Change: The more discount do automated.
Speaker Change: Better for everyone.
Speaker Change: And involved.
Speaker Change: When it comes to our road network solution the way, we automating aided by processing for example, the Google Street view imagery.
Speaker Change: To understand the full inventory of a road network to understand where the.
Speaker Change: The traffic signs or et cetera, we're able already to process a little bit there conditions, but then we are comparing with some crowd source data primarily coming from dash cam providers actually sort of understand the exact physical condition at this point in time and then we can compare with some.
Speaker Change: With how it looks.
Speaker Change: In the past.
Speaker Change: And this is so much more efficient and if you can imagine I've been sending sending our people because that data when it comes to Google Street view is readily available and then the data is coming from Dash cams.
Speaker Change: It is.
Speaker Change: Also something that can be immediately.
Speaker Change: First in order to understand what's going on with those assets now Nicolas.
Speaker Change: Further inefficiency of sending someone out to inspect it.
Speaker Change: Is.
Speaker Change: Normally while they can inspect they cant update.
Speaker Change: Sure.
Speaker Change: <unk> operated in record of what's there because that's in a Gis system. That's in a different way so that CCM the sort of connect that all together so that the process of continuous survey and can also provide the needed updates and then the AI as you say can compare across time so.
Speaker Change: You have this digital chronology and the digital twin.
Speaker Change: But yes. It is the innovation in graphics.
Speaker Change: Graphics and survey.
Speaker Change: It can lead to an organic an evergreen digital twin drilling operations and maintenance and kind of.
Speaker Change: Bypass.
Speaker Change: Traditional workflows and when I talk about the rest of the world.
Speaker Change: We're aware of the imperatives is get projects done and get maintenance done.
Speaker Change: You would see.
Speaker Change: Additional.
Speaker Change: Two days surveying.
Speaker Change: Being done as a matter of record is that.
Speaker Change: And the three.
Speaker Change: <unk> geospatial approach being the primary.
Speaker Change: Way of both projects and asset performance going forward.
Speaker Change: Yeah.
Speaker Change: Thanks, Jackson that concludes our call today, we thank you for your interest and time and billing systems. Please reach out to Investor relations with further questions a follow up and we look forward to updating you on our performance in coming quarters.
Speaker Change: Thank you.
Speaker Change: Thank you.