Q3 2025 Bentley Systems Inc Earnings Call
You have joined the meeting as an attendee and will be muted throughout the meeting.
Good morning and thank you for joining Bentley systems. Q3 2025 results. I'm Eric. Ber Bentley's investor relations officer on the webcast. Today we have Bentley systems executive chair, Greg Bentley, chief executive officer, Nicholas Cummins and Chief Financial Officer of Gunner. Andre this webcast includes forward-looking statements made as of November 5th, 2025 regarding the future results of operations, and financial positions, business strategy, and plans, and objectives for future operations of Bentley Systems Incorporated. All such statements made in or contained during this webcast, other than statements, of historical fact, or forward-looking statements, this webcast will be available for replay on Bentley systems. Investor relations website at investors bentley.com on November 5th. 2025 after a presentation, we will conclude with Q&A with that. Let me introduce the executive chair of Bentley systems. Greg Bentley good morning as the case may be, and thanks for your interest and attention.
so pleased to say that all quantitative metrics for 25, Q are quite in, accord with our expected progress and Outlook range for the year,
But this quarter, Nicholas will highlight the significant product announcements and developments presented and observed at our Year and Infrastructure 2025 conference last month.
which I think also merits your first-hand review at the links here.
Now, I always look forward to discovering through submissions for the annual going digital Awards, the unanticipated ways, by which our users are ever creatively applying software and cloud services.
This year, I was pleasantly surprised by the plurality of those citing contributions from AI.
So, upon observing this AI forward propensity at the level of projects and users. I reviewed with interest. This year's aec advisor survey of engineering firms participating in their annual CEO conference.
You may recall that I previously reviewed 2 earlier such conferences where Bentley systems helped with gauging progress and appetites and going digital.
The surveyed firms together perform, most of the contracted infrastructure, engineering outside, Asia with the distribution of their revenues by sector weighted, like ours, in favor of Public Works, utilities and resources.
And within General Building corresponding to what we classify as the commercial facility sector the survey highlights a dramatic and interesting transition.
Aec firms are now literally engineering the infrastructure for AI.
As spending for construction of data centers, such as the project, by digital construction, leader DPR which served as the example throughout our year and infrastructure keynote, presentations ramps to soon. Overtake spending on office spaces.
Aec advisor shows that digital investment has an internal priority is also succeeding for engineering firms.
For the last 5 years, they in aggregate have achieved continually increased profit margins at the same time as also higher growth in organic net revenues.
The latter, perhaps limited by capacity. Constraints, as separately, reported backlogs reached record levels.
Underscoring Market robustness, this organic Revenue. Growth is still increasing including through 2025 estimates, and net of both annual US inflation in red and in blue US GDP growth.
Aec advisors concludes that this growth in aggregate profit margin must be attributable to improvements in direct labor productivity as the total revenue, percentage of other costs to support functions as risen continuously by almost 20%.
This is despite real estate costs having declined since pre-pandemic by 25%. Presumably owing to Virtual and hybrid working enabled by our project wise and other cloud services Technologies.
And most significantly for us. These firms overall technology spending as a percentage of Revenue will have increased by 40% over the 6 years through 2025.
Combined with their organic Revenue growth, their technology spending in dollar terms increased from 2019. Through 2024 at a compounded annual growth rate of 13%.
Revenues as I have reviewed in recent quarters over our 5 years, as a public company.
I believe that we have thus effectively enabled aec firms to keep up with accelerating demand despite now chronic engineering resource constraints.
By constantly improving their labor productivity through going digital.
To understand changes now underway in the makeup and magnitude of aec Technology spending this year. We again help aec advisors with a supplemental AI survey yielding sufficiently representative responses.
In the interest of validating the prevalence of the commendable self-help AI initiatives, that relatively surprised us within this year's going digital Awards, submissions.
We focused survey questions on AI that these aec firms are already implementing, not just testing to support their businesses.
Excluding, for this immediate purpose, more widespread AI implementations for generic business purposes, such as Finance, HR, and Legal.
About a quarter of responses report, AI already being implemented around the periphery of applications such as ours, to support the infrastructure, engineering oriented functions of design, automation construction planning, or monitoring and or asset performance and maintenance.
Asked in what respects competitiveness would be Advanced through faster. AI adoption these firms. Expect Superior project delivery and quality operational efficiency and clients experience, and satisfaction, but they have the greatest regard for ai's potential. Enablement of innovation and new services.
To get to these benefits, the median reported level of AI implementation spending today, ranging from 6 to 53, is 19 basis points of gross revenue.
That's on the order of 5% of the overall technology spending rate. We just reviewed and as a frame of reference, this already somewhat exceeds. What such firms on average are spending on all of Bentleys systems offerings.
Most significantly for us.
These firms anticipate increasing their annual AI implementation spending over the next 3 years to a median ranging from 35 to 164 of 71 basis points.
A multiple of almost 4 from today.
If all other technology spending would just continue to grow at the same rate as over the last 5 years, this projected AI increment would cause total technology spending as a percentage of Revenue to grow about 50% faster than at present.
But we know the resulting AI impact will be such that rather than so extrapolate. We need to factor in the probable. AI accelerated changes in infrastructure engineering business models as Innovation and new services are enabled.
This was the subject of dialogue, with a diversity of thoughtful Marketplace, participants including public, and private sector infrastructure owners as we helped lead a separate survey and convened, an in-person discussion in September in London that culminated in this white paper, the impact of artificial intelligence on the built environment.
The majority of the 140 senior opinion leaders, surveyed expect the impact of AI on current business models, either to augur a major disruption. And so, are already taking steps to adapt or to impact to a significant extent?
Interpreting the qualitative feedback as well, the knowledgeable white paper authors Venture that AI will finally catalyze. The long-awaited Tipping Point and Engineering business model. Mix from hours related Revenue, towards value price data enabled, services and performance slash outcome Contracting.
To be sure the emerging opportunities accordingly, anticipated around automation, analytics and digital twins bode. Well for Bentley systems forward-looking initiatives.
But to the extent that our accounts would become incentive and through AI increasingly able to more so minimize their currently generally billable engineering hours and days because they would instead be variously fixed and value and outcome pricing.
What could be anticipated about the consumption of software and cloud services? Underlying our own business model?
I could describe what we currently measure as consumption attended by a user.
Open applications and per quarter for project wise and most term licenses.
As our AI-native generation of applications progressively rolls out, the commercial norm for our attended consumption charging is likely to become a hybrid combination of these factors and search charges based on computing intensity.
With our AI accelerating, the pace of engineering productivity growth.
attended consumption, should generate commensurately, higher value and higher hybrid, monetization per relatively, slowing time, Andor frequency of attended usage,
At year in infrastructure, Nicholas previewed the commercialization of an already evident source of incremental consumption.
With our application engines, accessed through APIs to provide essential engineering context for simulations and analytics programmatically, invoked by our accounts and users' AI agents.
By virtue of our ingrained platform orientation. We are very enthusiastic about working with our Enterprise accounts to prioritize development of many further, such apis and to arrive at reasonable monetization. For the burgeoning value that API consumption will generate
Among potential, AI enabled business model Innovations, the sighted, AI survey, show me that engineering, firms and owners, share our asset analytics aspiration for digital twins, created and curated through AI to become the foundation for infrastructure inspections, operations, and maintenance.
Bentley Systems is investing resolutely to lead this charge internally and through our ongoing prioritization of capital allocation for pertinent strategic acquisitions.
With critical mass for escape velocity Gathering. I believe the resulting asset consumption will become for us another Mainstay of subscription Revenue growth.
Not only within owner operators, but also as their digital integrators with Co innovating engineering firms.
My expectation for the Confluence of our maturing incumbent consumption model and these new and incipient consumption streams is influenced by the way that these surveys and how our Enterprise subscription renewals show that infrastructure engineering executives are assessing against the backdrop of their engineering resource constraints, their current combination of record margins.
Organic real GDP plus growth and backlogs and their auspicious opportunities in the infrastructure, AI transformed future.
In the short and medium-term, the prevailing sustainment of our e365 renewals including, for multiple out years at negotiated annual floor and ceiling escalations consistently. Averaging about 10%
Reflects shared confidence.
Of Enterprise accounts and of Bentley systems.
In the continued healthy overall, gradient of a changing mix, evolving to everyone's benefit of attended API and asset consumption.
And now to review, as usual, our robust markets and execution, including notably strong SNB and new logo growth.
And to highlight our year and infrastructure announcements and feedback.
Over to Nicholas. Thank you.
Thank you, great.
a few weeks ago, infrastructure leaders from around the world gathered in Amsterdam for annual year infrastructure conference
To showcase excellence in infrastructure, delivery, and performance through digital innovation.
I'm sad. I'm celebrating a 750th anniversary. Is a City built on land. Reclaimed from the sea through generations of engineering ingenuity.
It was a fitting stage for why I and the Goring digital award.
That same Spirit of innovation, took Center Stage.
Where I was also an opportunity to share progress on last year's key announcements, such as integrating cesium, and Google Geo data across our portfolio.
But today, I will focus my remarks on infrastructure. AI the theme introduced by Greg.
The backdrop Remains the Same.
Whether to address climate concerns, ensure energy, Supply, or more, broadly, support economic and population growth.
Our world.
Unprecedented, demand for better more resilient infrastructure.
Yet lacks engineering capacity to deliver it.
Engineers more productive by empowering them with better tools, smarter work flows and more connected data.
At Why? I am the going digital Awards finalist once again, showcasing how business software helps them achieve meaningful productivity gains, often in the range of 15% to 25% or more.
These gains, what impressive?
Most advanced projects and don't reflect the industry as a whole.
Scaling them across all projects will help. Narrow the gap between Global demand and current capacity.
But closing it requires a step change in productivity.
That step change is just beginning to take shape.
And its AI.
The AC advisor survey referenced by Greg throws large engineering firms. Making substantial investments in AI for design automation.
For those building their own AI agents then they can support them in several critical ways.
First, we help them tap into past project designs.
Every infrastructure asset is unique, but new designs shouldn't start from a blank screen.
Historically, designed data has been trapped in different file formats and proprietary systems.
Spend the infrastructure Cloud powered by it. Twins data is ingested from a wide range of file formats and map to our infrastructure schemas so that it can be queried analyze and reuse including by AI.
In this context, we now connect a new Financial layer to benefit us to Cloud.
Connect delivers a connected data environment for project and asset information, improving collaboration across the entire infrastructure life cycle.
From there.
Product wise for design and construction, workflows and asset wise for operations and maintenance.
Connect will be generally available in December.
Next we help firms to create their own AI agents by providing engineering contexts, ensuring their AI recommendations or grounded in Sound Engineering logic and physical principles.
Hundai. Engineering a going digital Award winner in 2023 demonstrated this by using your sad. Simulation application to
Integrity of AI generated designs.
This year, I highlighted 4 similar examples in my Keynotes all drawn from an even larger number of going to Total award summations that Illustrated, how badly applications provide injuring context to AI.
Infrastructure engineering is a creative profession.
But 1, where Precision is non-negotiable and consequences are real.
The same way that infrastructure organizations have trusted for Broad and deep.
Patience to empower, their individual Engineers, they are turning to our applications to provide the same Precision to their AI agents.
Now, as our applications were not designed to interact with AI agents. We also announced the infrastructure AI co-innovation initiative inviting our users to partner with us to explore how our applications need to evolve both technically and commercially as Greg mentioned to better support these AI use cases.
And why I we also highlighted the AI capabilities. We are delivering to the broader engineering community, starting with our next Generation applications powered by AI.
Open site. Plus announced that last year's ye for site engineering is now in limited availability.
We also introduced 2, additional Next, Generation applications in Early Access this quarter.
Substation Plus for collaborative substation design and Synchro Plus for 4D, construction modeling with Aiden. Insights.
Feature bandicoots or AI assistance purpose, build for infrastructure engineering.
We are also enhancing existing application with AI bringing bendy compilot and AI power drawings production to open roads and open rail.
And we unveiled new search capabilities in Bend, infrastructure Cloud, powered by AI, as demonstrated on stage with product wise.
1 last point, we talked about how engineering firms or leveraging, our software to ensure that the recommendations from their AI agents or trustworthy.
A related topic is trust from the engineering firms in the data that we use to train our AI capabilities.
Accuracy, as the top concern of engineering firms, with respect to AI.
And this is across all firm sizes.
Add wire. I we reaffirm our
Stewardship, first outline 2 years ago.
Respect for intellectual property is foundational to Bentley's approach.
Users control their data, always.
They decide if and how it is used for AI training.
To uphold this principle. We implemented strict governance.
Only data explicitly licensed or explicitly contributed by accounts for the benefits of the broader. Bending user community.
Users can also fine-tune Bend AI models with their own data for their exclusive use.
And to ensure transparency, we introduced the data agreement registry in ordering systems that shows exactly how data was used to train Bend AI models.
When others are vague on this critical topics.
We lead with clarity.
Overall, we were pleased with this year's year infrastructure. Receiving great feedback about our comprehensive and principled approach to infrastructure.
And I encourage you to check out our sessions and going to Total Awards winners at yi.com. Moving on to our results. For the quarter, we delivered a solid quarter, in line with our expectations
Our year-to-date results position as well to finish, within our Outlook wages for the full year.
Low double-digit our growth.
Approximately 100 basis points of margin expansion.
And robust free cash flow consistent with our long-term Financial framework.
Q3 ARR increased 10.5% year-over-year or 11.
when including the impact of China,
growth was underpinned by net revenue, retention rate of 109%.
E365 performance remained sorted and we added 300 basis points of our growth from new logos again primarily within the SMB segment.
for the 15th consecutive quarter, we added at least 600 new, SME logos through our online store with retention in this segment, remaining High
Turning to our.
Sector resources was once again, our fastest growing sector in the quarter.
We continue to see soft signals of improvement in mining exploration.
Public Works, utilities delivered. Another solid quarter consistent with first half performance.
And driven by sustained Global infrastructure investment.
Power line systems remain a standout performer, benefiting from Global demand for great resilience and increase power generation.
Growth in industrial sector remain models.
For facilities was flat.
Looking at our geographies at a high level asia-pacific, had a strong quarter followed by the Americas and emea.
Growth in America was solid led by North America.
In the US, our accounts continue to benefit from a favorable micro backdrop, despite ongoing uncertainty, the less. So from tariffs and policy shifts, and the recent Federal shutdown.
To date. We have seen many more disruptions from the shutdown.
Looking ahead. They are Khan.
Full scale promoting reform for energy infrastructure and critical minerals in the US could happen in the coming quarters.
Both are partite systems and sequent. Businesses are very well positioned to benefit from these developments.
In the Nea, the Middle East. Continue to lead the region with another very strong quarter, followed by Europe and the UK.
Long-term opportunities are supported by robust investment in transport water and energy, particularly in areas such as dual use infrastructure.
Centric expansion and nuclear.
There's also movement in Europe and permitting reform. The European commission published guidance to help member states accelerate permitting and deployments of renewable energy and great infrastructure as part of its broader efforts to lower energy costs and strengthen Supply security.
In Asia, Pacific overall performance was strong with India and Southeast Asia standing out.
Robust investment in India is expected to continue. Supporting a 2047 vision for long-term growth and development.
Growth in ANZ remains softer, due to the slowdown in transportation spending in Australia.
Driven by infrastructure projects tied to the 2032 Brisbane Olympics.
China's performance was consistent with our expectations, given the economic and geopolitical headwinds.
and represents only about 2% of total are
and with that burner over to you.
Thank you, Nicholas.
Solid third quarter and the well positioned with respect to our financial Outlook range for the full year.
Total revenues for the third quarter were 376 million up, 12% year-over-year on a reported basis and 11% on a constant currency basis.
Year to date total revenue score, 11% and 10% on the reported and constant currency basis respectively.
Our main stay subscription revenues grow 14% year-over-year for the quarter and reported, and 12% in constant currency.
And for year to date subscription revenues go to 12%. On the reported end constant currency basis.
Subscription, revenues represent 92% of total revenues up to percentage points from the same quarter last year, reflecting improvements in the overall quality of our revenues visibility growth, consistency and margin contribution.
Our e365 and SMB initiatives continue to be solid contributors.
Perpetual license revenues for the quarter where 11 million essentially, flat compared to the prior year. Perpetual license sales make up only 3% of total revenues and will remain small relative to our recurring revenues.
Our Professional Services revenues declined 2% for the quarter in reported terms and 3% in constant currency, and now represent 5% of total revenues.
We currently expected our Professional Services, revenues will remain at current levels for the remainder of the Year. Hence, this would be for the full year about 5 million less than we had originally planned.
It is still the case that the largest portion of these non-recurring Services relate to IBM, maximum implementation and upgrade work.
our last 12 months, recurring revenues, which includes subscriptions, and a small amount of recurring services,
Increased by 13% year-over-year.
In reported, and in constant currency.
And represent 92% of our last 12 months' total revenues.
1 percentage points year-over-year.
In the account retention rate remained at 99%.
And our constant currency net retention rate, rounded down to 109%.
Lead in magnitude by aggregation within our consumption based e365 commercial model.
The ended Q3 with ARR of 1,405, million at quarter and spot rates.
On a constant currency basis, our year-over-year, our growth rate was 10.5%.
Consistent with our seasonality expectations for the year.
Which included the favorable impacts from the onboarding of our cesium acquisition in 24q 3, dropping off this quarter?
Excluding China, our year-over-year constant currency error. Growth rate was 11%,
With China being 2% of our total are.
On a quarterly sequential basis, our constant currency. Our growth rate was 2.2%
Below our 24 Q, sequential growth rate of 3.2%.
Impacted by the timing of programmatic Acquisitions and asset analytics deals.
With regards to seasonality, we expect 25 Q4 to have higher year-over-year. Our growth compared to 25 Q3.
Due to the timing of potential Acquisitions and anticipated, asset analytics deals.
Our gaap, operating income was 84 million for the third quarter and 284 million year to date.
Moving on to adjusted operating income. Less stock, based compensation expense our primary profitability, and margin performance measure.
Adjusted operating income less SPC. Expense was 104 million for the quarter up 16% year-over-year with a margin of 27.7% up 100 basis points.
Year to date, adjusted operating income, less SPC, expense was 335 million up to 13% with a margin of 30.2% up 6. The basis points,
Our margin performance for Q3 and year to date has been strong. And we remain confident about delivering our full year adjusted operating income less SPC Target margin of approximately 28.5%
Representing an annual margin Improvement of 100 basis points.
As a reminder, our Opex seasonality is always more heavily weighted towards the second half with our annual races occurring as of April each year.
And our larger Promotional and event related costs. Also concentrated in the second half of the year and particularly Q4
Further. Our Opex seasonality in 2024 was impacted from head cost. Run rate savings from our 23 Q4, strategic realignment.
which benefited the first half of 2024 and shifted, some of our run rate and discretionary investments into the second half of 2024 and particularly Q4 2024,
We therefore expect more than 100 basis points of margin improvement for the fourth quarter of 2025 when compared to 2024.
our free cash flow was 111 million for the quarter and 384 million year to date.
This is generally consistent with our expectation, based on our seasonality of Collections and expenditures as well as the timing of cash, tax payments, which are more concentrated in the fourth quarter.
We are on target to meet our full year. Free cash flow Outlook of 430 to 470 million.
With regards to Capital, allocation along with providing sufficiently for our growth initiatives year to date, we deployed free cash flow as follows.
135 million fully paying down our senior debt.
93 million, in effective, share repurchases to offset the illusion, from stock based compensation.
10 million in convertible. Senior note, we purchases.
And 64 million on dividends.
With our senior that being fully paid down our net debt leverage, including all of our 2026 and 2027 convertible notes as debt.
Was 2.2 times adjusted today.
down from 2.9 times, at the end of 2024,
our strong balance sheet and projected free, cash flow generation will sufficiently fund our dividends
Share repurchases.
And growth initiatives, including potential, programmatic acquisitions.
Our 5 year, senior secured credit agreement, dated from October 2024 provides a current undrawn 1.3 billion revolving credit facility.
This provides sufficient flexibility to address the January 2026 maturity of 678 million in outstanding convertible debt. While keeping our cash interest thereafter at about the same magnitude as in the recent past.
Interest rates on our debt are protected for very low coupons on our convertible notes.
And very favorable terms of our 200 million interest rates were expiring in 2013.
And finally, with only one quarter remaining, our performance for the first nine months gives us confidence in our ability to achieve our annual financial targets.
I already provided incremental color on our fourth quarter, expectations for our
Adjusted operating income by stock based compensation margin and free cash flow.
With regards to Total revenues 2025 to date, reflects the continued shift in mix from Professional Services revenues to subscription revenues.
Overall quality of revenues and margin contribution.
With regards to foreign exchange rates for the third quarter, the US dollar has weakened relative to the exchange rates assumed in our 2025 annual Financial Outlook resulting in approximately 10 million of incremental revenues from currency.
and a total favorable impact for the first 9 months of approximately 18 million
Based on reason rates that the US dollar has weakened relative to our Outlook rates. If end of October exchange rates would Prevail throughout the remainder of the Year, our fourth quarter Gap revenues would be positively impacted by approximately 8 million.
Relative to the exchange rates assumed in our 2025 Financial Outlook.
And with that, we are ready for Q&A.
Over to Eric to moderate.
Thank you.
That thanks burner. Before we begin. I just wanted to remind everyone to limit yourselves as to 1 question, so we can get to everybody today.
First question will come from J. Joe Brewing from Robert Ward?
Hi.
Great. Hi. Hi everyone. Um,
Maybe can you go into a bit more detail on the opportunity for better ARR growth in for Q? Um, that's a big renewal period but also as a analytics opportunities and just on the the point about renewals. So, um, to the point Greg, you were making at the starts, uh, how benley applications are called a few years from now, could look a lot different than how they currently are utilized. How does that get encapsulated with an Enterprise customer? That is willing to engage with you over a multi-year timeframe and are you uh appropriately? Monetizing the full potential with kind of the ceiling floor structure. You have been using around these consumption Arrangements.
well, I'll say to your last question Joe that um,
We only monetize the actual consumption. It just happens to be bounded by a floor and ceiling potentially. Um, and we are not yet, monetizing API consumption for instance, um, even though some of it is occurring, um,
What What In in the course of a renewal with an Enterprise account for e365?
They tend to prefer to get visibility into their spending in the out years as well. And it continues to be the case that we wind up on average negotiating that each year of that.
uh, renewal, uh
The floor and ceiling escalate by about 10% and I think they're aware because you see the these Enterprise accounts are the ones responding to the survey about spending on AI and expectations about AI. They know that their mix of consumption and modes of consumption will change over that period of time. But they are comfortable with, uh, expecting to spend the low double digit amount more with us. And no doubt with others each year and we're satisfied to uh,
Uh, we likewise know there's going to be volatility in the components of the mix, but when you put it all together in an Enterprise Agreement, um, you've heard my take on that, which is to be confident that while the mix will change, the magnitude will, uh, reflect the increasing value, especially from AI.
Nicholas. I was asked to Fork the fourth quarter. Yeah, indeed it is a a strong renewal quarter and our expectations are important with that.
Right. Well, but first of all, Q3, uh, our growth was exactly what we were expecting. And what we're expecting for Q4 is our growth year over year to be stronger than Q3. Um,
A part of that is the renewals as you as you as you mentioned and then how much better it would be than Q3 will depend on potentially m&a or um or some of the big asset analytics opportunities that we push.
But it would be better than Q3 in any case because of the magnitude of renewals that occur in each for fourth quarter. So they're all
Layers that give us confidence and fourth quarter, and of course, therefore in the outlook for the year.
from Jason Selena from KeyBank
Great, thanks. Um,
You know, I wanted to ask about the government shutdown. I recognize that in your prepared remarks, you said it's had, you know, a minimal impact. Can you just elaborate on what you were seeing or not seeing, and why it's been so limited?
Yeah, 2 days, we have seen indeed a minimal impact. Um, first of all, um, our direct revenue from the US federal government is less than 1%.
And indirectly, uh, for the projects that were already awarded IHA funding while the funding continued to flow, uh, during the shutdown. And that's very much, uh, because of the way IJ was structured. Yeah. Um, now, uh,
Depending on how long uh this shutdown is going to is going to go.
Uh, you know, it it could be that very much at the margin when we get to renewals with some accounts and you may recall that renewals are based not just on past performance how much they've been consumed in the past year but also how much they're expecting to consume in the next year. It could be that the at the, at the margin. The um, consumption expectations going forward, maybe impacted. Yeah. But this is super early to say. Yeah. Okay,
And we really depend on all of the shutdown builds. Yeah. And hopefully, it ends soon. So, yeah. We'll see other things, you know, kind of indirectly or could or gummed up also, uh,
And we hopefully not for much longer things. Like the permitting reform we keep expecting, and you know, some other functions of the federal government that that don't have to do with, with using software but changing policies. And so forth that are also on hold, uh, we we we'd like to see the shutdown in sooner rather than later and we think that's the general expectation now.
Thanks, Jason. The next question comes from Matt Hedberg from RBC.
Great. Thanks for taking my question, guys. Um, you know, a lot of the the bigger frontal model model, Builders are are noting that access to power is the biggest bottleneck for compute capacity today and I guess Nicholas, you know, you noted both PLS and sequent, uh, you know, is set to benefit from this longer term, which is sort of in line with our, our view. Um, it's also nice to see. I think, you know, although permitting reform takes time Greg, you said it's sort of like, there's it just takes time. It sounds like a Mia permitting reform is accelerating a bit. I guess, my question is realizing these projects take time and permitting reform takes, uh, takes time as well. Um, are you starting to see any sort of early benefits from early, you know, sort of like discussion with, with customers around this activity, and how should we think about sort of, like, medium to long-term this, uh, desire for more power to positively impact, uh, our growth
Well, first, you know, um, uh, despite permitting reform still to come both PLS and sequent, remain, uh, a strong growth engines for the company, right? So both businesses are still growing faster than the and the company, uh, we have seen now in, um, um,
Uh, in the US, for example, some acceleration on some mining projects.
Uh, through the it's called the fast 41 process.
Uh, 4, um, minerals that are strategic importance to the US economy like lithium or or copper.
Yeah. Um, there is a, a similar bill that was passed in Canada. So so we think this is, I mean, this is happening. Basically, for mining there's already uh, a lot of movement in order to accelerate that permitting or accelerate. Uh yeah. So certain projects. Um but for the for the electric grid, uh this is still to come, but we've seen some very encouraging signs uh in the past few months in the US, you know. Uh, I think there's a clear realization here that uh, you know, we we we we we we must expand the electric grids and there's a lot of effort, a lot of activities going into strengthening the existing grid, making it more robust, but we actually need to expand it in order to cook with the higher demand that that that that is for electricity and a lot of that coming from a data centers, by the way. Yeah. Uh, so you can see it as a, as a
For us.
Thanks Matt. Uh, the next question comes from Dillon, Becker from William Blair.
Hey guys, it's Faison for Dylan. I just wanted to double click onto your AI, um, Innovation roadmap and how you're working with your customer base to build that out, maybe how that played into Cloud connect and really what you're focusing on and how you're prioritizing the different opportunities.
Well, first of all, um, what was remarkable when we looked at the submissions, for the this year's going to the total Awards uh, was seeing how much, uh, our users are investing in AI themselves and it was a big part. Also, of the, uh, of the update that that Greg provided with the 80 advisor survey, and we can see how much is invested in in, in AI. Um, and as always, uh, we using the going to award submissions has, uh, a bit, our own survey of what's going on with the most advanced, uh, infrastructure organizations out there in leveraging, uh, uh, digital, uh, to drive the productivity. Um, and it points to
Our core applications, um, engineering applications playing a, uh, a, a new role going forward, not just here to entire infrastructure engineers in Engineers, but actually, to start to interact with AI agents. And we think this is a fantastic growth opportunity. Now, uh, we've seen the net acceleration of use cases where our own applications are being used in conjunction with AI that is being developed by our users. If we just look at and reflect on the past on the past couple of years. Um and we've announced a co-innovation initiative in order to engage with our users to partner with them to discuss. How can we evolve or engine applications technically and also how can we evolve the commercial model around this application? So that we can support, uh, the
Those, uh, those uh, workflows going forward, better support those workflows going forward. We we're usually excited about that, right? But even there is, um, uh, the, a lot of Investments on our side, for the for our own AI capabilities that we're delivering to, uh, our users. Um, here we make sure that, um, you know, first of all,
all of our organization, all of our, uh, user-facing teams, have a deep empathy, a deep understanding of the needs of the users, the accounts that we serve
We understand where potential opportunities to drive more productivity through AI for example. Um, and then we involve representative users along the way in helping us prioritize, which you use cases, are we going to go after first with AI? We involve them during the development of those capabilities, we evolve them with beta software where we call Early Access, we involve them, of course, during limited availability to make sure that the product can scale to the broader market and so on and so forth. So we have constant touch points all the way from the very beginning of the exploration by Congress. Can we solve with AI to making sure that the software can scale? We have involvement all, all the way with representative users,
Thanks Pete. Uh, next question comes from Personnel from Oppenheimer.
Hi, good morning. Thank you so much for the question.
Um, so I wanted to ask you about Labor availability, uh, not just here in the US but globally in the construction and infrastructure trades, um, obviously AI can't actually build infrastructure. So, I'm wondering if you're starting to see that meaningfully impact any of your engineering from customers, you know, what sort of impact, these labor challenges are having maybe on Project delivery time, budgets. And then add on this piece of willingness to invest in technology to, to help with some of those productivity challenges. Thank you, Kris Kristen, I think the biggest picture is
That everyone has long expected.
The Engineering Services firm, so that's half of our business and they work for the other half of our business. The owner operators, everyone has expected the way they work to change from a time and materials billing hours to
paying for value and and being therefore having a a platform to incent and reward. For instance, these AI Investments. The biggest picture I think is that the ongoing engineering resource constraints are are
Influencing that now happening in favor of AI Investments, and expectations and changes in the commercial model. And, you know, the opportunity for us is to be
But and accelerating that because everyone has expected it to occur and it's been slow. Uh, I think that finally is being catalyzed now and that's the biggest impact.
Thank you.
Thanks Kristen. The next question comes from Alexi. Google app from JP Morgan.
Thank you Eric. Hello everyone. Hi Greg. Um, I wanted to ask you, uh, to maybe give us a brief update of, um, how the partnership with Google is going. Have there been any incremental customer conversations on the back of this partnership and, uh,
What does that mean for your asset analytics opportunity?
1 of the updates we gave at why I was how we are uh integrating Google Geo data across our portfolio.
Uh, it starts with um or engineering applications microstation the new version of micro microstation, don't need to see them uh for 3 days. But through cm is actually um uh uh integrating uh uh 3D photo realistic tasks from from Google. And um, I mentioned the launch of Ben infrastructure, Cloud connect, uh, the user experience of benefit to cloud is also part by season and also powered by 3D photographic tiles of of Google. Um, so that's um, integration is going very well. Uh,
And we're expanding video across our our full full portfolio and we're quite excited also about the opportunity with Google when it comes to asset Analytics.
Um, Google uh, is uh, a source of data that can be analyzed in order to better understand the current conditions of of infrastructure assets and and their their full context and you may recall that we've announced a couple of months ago, uh a deeper partnership with Google from that standpoint, where we'll be processing, Google Street View, imagery to understand. Basically, the inventory of assets out there and be able to do a before and after comparison uh on what's going on with this infrastructure asset. When we compare it with uh dash cam data that we're processing through our own Road management solution, right? And that's just 1 example of so many other use cases that we're discussing with Google where we can uh uh Empower deeper analytics about existing assets.
Thanks. Uh, next question comes from Clark Jeffries from Piper Sandler.
Hello. Um thank you for taking the question. Um you know I wanted to ask um just a little a little bit of a follow-up to the discussion around the appetite of AI spend with your customers seems like a lot of this is survey work and and sort of perspective on where they'll go. But I wanted to ask today,
Are you seeing proactive rfps from these customers around AI capabilities or is it too early? Um, and and sort of do you imagine there being a discrete sales, approach around AI functionality, or do you feel like this will be very organic within your kind of existing sales motion?
Also, on the, on the former it is still too early for, um, uh, the market to ask specifically, for AI capabilities, for specific use cases. It's, it's still too, uh, too early. However indirectly, uh, we do see, uh, infrastructure organization, insisting that, um, you know, the, the, the, the, the, the, the, the, the, uh, that it is as easy as possible for them to access data that is being created or managed through software coming from providers, uh, so that they can use it for their own, uh, AI purposes. Yeah. Um, and, uh, and by the way, so this is much more indirect. Yeah. But they are aware that software providers are developing AI capabilities and we see them clearer and clearer about. We want to make sure that when you do this as a software provider, you don't use our data without explicit permission, right? Uh, this is very top of mind right now. Um,
Um, you know, if if you, if you look back and and and what we basically announce in terms of our own are capabilities, sometimes it's a next generation of an existing application like open site, plus is the next generation of open substation, plus the next generation of substation, the same way that, you know, we we've we've, we've gone to a C position, opens the original open site solution of the oel substitution solution. Then we're going to continue to do the same. Even if the new 1 is part by AI, then we're also interesting. A lot of new, a capabilities are a lot AI capabilities to existing applications. So same thing there's no need in order to do to do a different, go to market. I said that I take this different here. We've been always very clear that we want to go both direct and indirect, right? So I said, you know, we, we we are going after the own operators and the and the firm that serve them in order to position those capabilities. But we, definitely welcome other organizations to take our capabilities and offer them as part of their own offering for, um, assets, uh, uh, assets.
that monitoring assets that maintenance Asset Management.
Perfect, thank you.
Uh, thanks, Clark. Next question comes from Jay bleacher from Griffin, uh securities.
Uh, thank you, good morning. Um, Nicholas. I'd like to ask about something we talked about at the conference 3 weeks ago. In Amsterdam having to do with your product development, um, specifically, uh, how have you evolved or how do you think you might still need to evolve your product development management or operations in line of all that you mean to do across the portfolio? Uh, do you think that you can or should for example impress, the time between beta and GA something? We talked about a few weeks ago and in light of what, Greg talked about earlier. Um with regard to your new consumption model, the hammock, those new techniques of consumables, possibly tie back into your product development process or or product release timing
Right. Um, when it comes to our own, uh, product development process, uh, we we got an earlier question uh here on how much we involved in users, how much should we involving accounts? Um, and we're very keen to continue to do that and do that even more, right? Uh when um, we release our software, we want to do it in a very iterative fashion. Uh, we don't have necessary, drop down Targets on. You must go from 3. Access beta to limited Verity in that time frame. And you must go from limited to generator. In that time frame, it will really depend on uh, the feedback we're getting.
From representative users, especially when it comes to very new capabilities where sometimes creating new potentially, we're creating new markets. You know, when it comes to satanic, Etc, we want to make sure that we get it right now. Uh, before we just we push too hard, right? So, so it's important for us that we keep, uh, you know, it is very closed feedback loop with representative users and we trade as often as necessary in order to get the software, right? And then ready? Ready, ready to scale? Yeah. Um and um now we we are embracing AI as well to improve our productivity and also the majority of our developers now are working with AI tools every day. Uh, to be more productive, whether it's for coding Assistance, or even generation of some parts of the of of, of the code for mundane mundane functions, right? Um, and we're quite pleased, right? To see that level of embraced by our developers, uh, you know, not necessarily to down really coming from them to use AI capabilities and, and it remains
A very good and energy for how we're seeing AI playing out for infrastructure Engineers. Not AI, replacing infrastructure, Engineers, but AI making infrastructure Engineers more productive, AI being more of a if you that's the name, by the way of our own AI systems.
Jay, I'll say that you and I share a long background going back to when
Our desktop products were a platform for specialized applications developed, including by our accounts. And we had special teams that worked with the accounts to developers within the accounts.
to help support their
particular applications for their own purposes. That's kind of gotten extinct by now individual organizations, don't develop their own particular software for this. But what we saw in the AI surveys and we saw on the going digital award submissions are a lot of investment by the
Will turn out to be the developers in the large Enterprises. And I can see that being a different kind of go to market.
Uh, incremental orthogonal approach for the future.
echoing back to what we've done in the, in the past where where we love our role as a platform provider, especially
Thank you.
Thanks Jay. Uh, next question comes from Taylor mcginness from UBS.
Yeah. Hi thanks so much for for taking my question. Maybe just on the financials. So if I adjust for lapping of the acquisition, it still looks like net new. Our art was down a bit year-over-year in a constant currency basis. So I know that you guys said that that was in line with expectations but maybe you can just unpack the drivers behind that. And as we look into Fork, you I think to get to the upper end, you know, if your guys guidance for agent, implies a big step up in net, new error, I know you mentioned m&a and you know, some of these asset analytics deals, you know, potentially being needle moving there. So, when you think about, you know, the size of, you know, m&a that you guys are contemplating or, you know how big some of these um, asset analytics deals could be, could you just provide a little bit more color there? Thanks.
Well, okay, I know, just just jump in on asset analytics because you've heard me say we have such a big Dependable flywheel, you know, that they're the only thing that's a volatile in. What we do is the asset analytics business because we're looking at Landing 7 and 8, figure deals. Uh, and um, they they it isn't yet, uh, at critical mass. I think you could say that, um, we believe it will become so soon. Um, but on the margin, it does make these differences in which quarter of those deals fall and of course, speaking of frame of reference, our business used to be like that back. When the software business was an upfront, license business, and so forth. But but for for us, it makes this difference on the margin. But the margin is what we're is significant. When we're comparing 1 quarter to another at the at the level of when was 10 10 and a half, 10.9 and so forth. It it
it's it's to do with these asset analytics things.
Yeah, maybe I add like in in uh, for ethanol ethics like Q2 and Q3 last year was particularly strong.
And the opportunities for for bigger deals. Uh more towards the end of the year. Uh in 20125.
And on the M&D side. Uh, so just to to say like we don't need m&a to be within the Outlook range.
uh, for our ER,
There are a number of transactions that we are working on. We expect that we closed at least 1 by the end of the year uh over the last few years, our contribution to ER constant currency. ER growth through M&D was between 40 and 70 basis points.
And we do expect for this year that we are roughly within within that range. Uh, again and our Q3 year-over-year error proof rate that we're showing is purely organic. So there's no benefit from M&D at all. So the 10.5% purely organic and without China, it would be 11% purely organic.
Take care. Uh, next question comes from CD panouri from Zulu.
Uh, thanks for taking my question. Uh, I want to ask you about macro, if you uh, think about last year, there was so much uncertainty election going on interested. Hi, how do you view the macro now on this environment right now, heading to 2026? And were there anything that we should any puts and texts that we should think about 2026?
Overall to remain robust. Now.
I'll say that a difference from a year ago in the world if we step back.
Is this?
Notion unfortunately that each country needs to be self-sufficient and it's uh in its resources um and and requires infrastructure investment in uh if you like even some redundant infrastructure investment uh to do that. Um,
And then the other factor. For instance, the um,
The Coe conference this year. The the theme is on adaptation and adaptation as part of resilience is the work of civil and structural and geotechnical engineers. And it's just understood, we need to get on with that ever more. Um, those are changes that may be resulted from politics, but, but they end up, uh, adding to the demand for the work of infrastructure, engineers. And again, there aren't enough of them, uh, without going digital.
Thanks. Uh next question comes from guy, Hardwick from Barkley's.
Hi. Good morning. Uh just a quick 1 for me. Um,
So, last month, they was speculated in the Press of a merger between the number 2 and C firm globally, and the number 4 player globally. I was just wondering, uh, consolidation amongst your larger ENC customers, what are the kind of positive and negative implications potentially for Bentley.
well, some of that has taken place in the past and has not been to any disadvantage, the the
You know, if we in other types of, if you like this design software, it might be R&D functions. That would be Consolidated. The way that our software is used by the engineering and construction firms is in their throughput of production. It is the means of producing their product. It's their Factory floor if you like and, and, uh, combination uh, makes them larger but need no less software. And, uh, we sort of tend to be the
Choice for larger firms. That consolidation, I think is, ultimately benefited us because of the type of technical platform, cooperation, that we're salivating. Now, to do with expanding our apis for AI to have our
Analytics and simulation engines be available for the development to be to be used to provide the engineering precision and context in uh, AI developments. But the larger firms. As Nicholas pointed out are are more investing in its going back to, as I was saying, with J this notion of being technically shoulder-to-shoulder as well as commercial is shoulder to shoulder. I think that benefits from consolidation
Thank you given time constraints. Uh, I'll these calls going for an hour, so I'll I'll leave anything else for follow-ups. Thank you.
Uh thanks. Yeah, the next question. Comes from Koji Makita from BFA.
Hey guys, thanks so much for taking the question um listening to the call on the commentary. You know, lots of commentary on external AI opportunities out there for Bentley. Um but I wanted to ask about an an update on how you guys are internally using AI to drive productivity, gains and sales R&D GNA and longer term. What could the internal use of AI? Mean for margin expansion for Bentley. Thank you.
Yeah. Uh, thanks a lot for the question. Um, I I didn't touch on it when it comes to our own internal, use of AI for product development, but, uh, you're right, we actually expanding or the use of AI across business functions. And we've seen some, uh, quality improvements, uh, in a lead nurturing, for example, uh, uh, or user support team. Um, so we, we
C, AI definitely has a way of making our existing colleagues more productive.
Uh, and therefore, it will help, you know, to increase both the top line and the bottom line. Yeah, that's our expectation going forward.
Thanks, our last question. Comes from Joshua, Tilton from Wolfe research.
Thank you guys for sneaking in. Can you hear me?
Yeah, yes.
Score. And the reason I'm asking is because should we just view this as right down, the Fairway with your expectations and continued confidence into Q4 or do things? Maybe Trend a little bit worse than you were expecting. Uh, even below that low point to kind of guided us to uh, last
Quarter. Well, I think it's the former but Verner um I think it's worth wrapping up with uh a summary of the factors and how that's different for Q4.
Oh, oh, you're on mute.
Cancel would be the, the the, the questions. Sorry. Oh yeah, no problem, I was just
I was just asking, you know, you told us that this was going to be the low point for the year and I think, you know, we're just trying to understand was that low points in line with your expectations. And we're just before as we were, you know, 90 days ago, when you told us, this was going to be the low point, or was this low Point worse than you were expecting? And then we should adjust your expectations for people. Sorry. So I think we are exactly where we expected to be for, for Q3. Uh, it's clear that Q4 is a big quarter for us, like most of the, the renewals are in Q4 or like, not, not most of them, but they're very significant amount of our annual contract renewals on Q4. Um, we see the pipeline is as we expected it in our Outlook and we will focus on strong execution as we did here today.
Uh and then we, as we said, like we have the opportunities within asset analytics and programmatic Acquisitions. That makes us confident. That Q3 will be the lowest point and we are going up to
To from from here. If you will
If if we feel the same as we as we talked like a quarter, go, so we are we are on target if you will. Uh, I don't know whether you caught it Joshua, but but Verner Quantified, the
Year to date contribution, from programmatic Acquisitions in our year-over-year.
Are growth is zero this year and it's it's generally 40 or 70 basis points. And we actually may wind up there because we can we continue to strategically, prioritize asset acquisition, uh opportunities and um,
And it has an acquisition opportunities just to go back to that are the lumpy deals. Uh, and back when lumpy deals were part of our business, which has been a long time ago, we remember that usually our in Q4 and this year doesn't seem different, even though as we got started with asset analytics, uh, last year we had some big deals in Q2 and Q3. Uh, so again it, it is a big reliable flywheel, but it has on the margins uh, these changes and and and I'm grinning because I think those are the right things for us to be doing I said, analytics is the ground floor of a
A huge opportunity to AI enabled. Um, and even though it's going to be a bit of a nuisance, it's it's uh
Uh, it's, uh, volatile nature. Uh, ultimately will spread it all out. As we gain critical mass and escape velocity there as I say and I feel that's coming closer strategically.
Makes sense, very helpful. Maybe just one last one before you kick me off. Uh, you guys had the Year in Infrastructure Conference. A lot coming out of it. We also had Autodesk University like a quarter of those, so announcements across the industry. I guess if there is one announcement that you think is going to be the most needle-moving for the business that investors should be paying attention to, like what would you call out from the Year in Infrastructure components?
I would say, uh, a short term connect.
No, I'm going to yeah.
You heard it guys. Thank you very much. You a new Foundation layer for many infrastructure Cloud. Uh, you know, bringing a lot of capabilities that used to be in the different super systems that we've got together Under the Umbrella of Benedict to Cloud. Um, and basically, where data uh, is being Federated in order to be used for AI purposes.
and I would just say stepping back a a contrast among these announcements you you have
API consumption, you know, I say Ai and put the p in the middle. That's how we want to be a platform vendor to fit that in to our existing Enterprise accounts. And then, of course, a different go to market motion for AI for the, for the SNB firms. But the, the what I think, Nicholas says that the connect is important because it brings this down to the level of every user. So that it's not, so that it's intuitive and immersive and geospatial and, uh, and and and new, um, but the back end of how things are integrated together. We're not, we're not inventing now. We're leveraging now.
Thanks uh that concludes our call today. We thank you for your interest and time in Bentley systems feel uh please feel free to reach out to investor relations with further questions and follow-up and we look forward to updating you on our performance and come quarters.
Thanks a lot. Thanks, cheers. Thank you.