Q2 2026 Bentley Systems Inc Earnings Call

August 6, 2026

Speaker #1: Executive Chair Greg Bentley, Chief Executive Officer Nicholas Cummins, and Chief Financial Officer Werner Andre. This webcast includes forward-looking statements made as of August 6, 2026, regarding the future results of operations and financial position, business strategy and plans, and objectives for future operations of BENTLEY SYSTEMS Incorporated.

Speaker #1: All such statements made in or contained during this webcast, other than the statements of historical fact, are forward-looking statements. This webcast will be available on BENTLEY SYSTEMS Investor Relations website at investors.bentley.com on August 6, 2026.

Speaker #1: After our presentation, we will conclude with Q&A. With that, let me introduce Executive Chair of BENTLEY SYSTEMS, Greg Bentley.

Speaker #2: Welcome, and thanks, as always, to each of you for your interest and attention. BENTLEY SYSTEMS positively exemplary operating results for 26 Q2, and the year as we see it, accord with our expectations to sustain foreseeably our dependable double-digit growth record.

Speaker #2: Early in 2025, I quantified that our outlook range for last year would serve to at least double over the 5 years following our 2020 IPO the key financial metrics of ARR, revenues, profitability, and SBC-burdened free cash flow, and it can be confirmed that we met those thresholds.

Speaker #2: In now updating this and looking forward, a significant factor in my confidence is the boundless regeneration of demand within our infrastructure engineering end markets, with high economic returns globally and across sectors on investments in resilience, capacity, and self-sufficiency.

Speaker #2: Within these priorities, relative proportions fluctuate, presently most benefiting our offerings for integrated grid and for subsurface resources, but infrastructure engineering consumption has tended overall to remain predictably consistent, perhaps due to the constancy of engineering resource constraints.

Speaker #2: To finally alleviate this engineering capacity bottleneck, and thus further realize infrastructure investment's potential through AI enablement, is everyone's appropriate priority as the resulting benefits from improved infrastructure engineering throughput and quality will be broadly shared across project delivery firms and infrastructure owner-operators and all of us as their constituents.

Speaker #2: BENTLEY SYSTEMS will especially benefit as our successive and multifaceted hybrid AI innovations continue for years to come on stream. I expect the established attended consumption of our software to continue growing, as every day for every engineer will become increasingly valuable at the helm of ever more specialized AI leveraging applications.

Speaker #2: But this business model will in due course be supplemented and potentially multiplied by monetizing agentic API consumption of our modeling and simulation software, primarily to optimize designs at machine speed, accelerating the proprietary AI strategies of infrastructure engineering firms.

Speaker #2: And our emerging asset analytics offerings, monetized through asset consumption subscriptions per asset, are breaking through to finally leverage digital twins and operations and maintenance for infrastructure owner-operators.

Speaker #2: Adding to my confidence in looking forward, these incremental AI-led consumption opportunities are uniquely accessible to BENTLEY SYSTEMS by virtue of our established positioning as the major comprehensive infrastructure engineering software provider across both the leading infrastructure project delivery and owner-operator enterprises, we have earned our standing as trusted digital quartermaster for each of these major infrastructure engineering organizations, over decades of proactively embracing and incorporating potentially disruptive technologies and business models so that no one ever needs to start over in order to stay ahead of the innovation curve.

Speaker #2: In my now long experience, the winning strategy for every technology opportunity is hybrid, integrating in this case AI advances within accretive overall continuity. Facilitating progressive enterprise AI adoption is the invigorating current priority for our thousand success force engineers embedded in E365 accounts.

Speaker #2: Last quarter I talked about AI's auspicious economic leverage for engineering firms, whose work pre-AI has been constrained by the limiting supply of infrastructure engineers.

Speaker #2: In my now long experience, the winning strategy for every technology opportunity is hybrid, integrating in this case AI advances within a creative overall continuity.

Speaker #2: Underscoring our incumbency advantage in helping these firms to leverage their engineers with AI agentic assistance to perform more work and particularly to optimize designs, 470 of the 610 engineering news record global top design firms (ex-China) are BSY accounts, averaging ARR of nearly $1 million.

Speaker #2: Facilitating progressive enterprise AI adoption is the invigorating current priority for our thousand success force engineers embedded in E365 accounts. Last quarter I talked about AI's auspicious economic leverage for engineering firms, whose work pre-AI has been constrained by the limiting supply of infrastructure engineers.

Speaker #2: I will now similarly quantify our comparable point of departure for the leading infrastructure owner-operators. For decades, the authoritative global ranking of the largest owner-operator organizations measured by their fixed tangible asset value net of depreciation has been the annual BENTLEY Infrastructure 500 top owners rankings, the upcoming 2026 BI 500 will be published on BENTLEY.com.

Speaker #2: Underscoring our incumbency advantage in helping these firms to leverage their engineers with AI agentic assistance to perform more work, and particularly to optimize designs, 470 of the 610 Engineering News-Record global Top Design Firms (ex-China) are BSY accounts, averaging ARR of nearly $1 million.

Speaker #2: The most recent 2025 BI 500, it no longer includes Russia, own and manage about 21 trillion dollars of net infrastructure assets. Not quite half of those top owners' assets are in the public works/utilities infrastructure sector, followed by industrial and then resources sectors, which together comprise most of the balance.

Speaker #2: The upcoming 2026 BI 500 will be published on Bentley.com. The most recent 2025 BI 500, which no longer includes Russia, covers owners and managers of about $21 trillion of net infrastructure assets.

Speaker #2: In net asset proportions, the top owners are located about half in the Americas, followed by EMEA and Asia Pacific. In particular, the 43 top owners in China account for just under 10% of these assets, and because it's with Chinese state owners that we encounter unique geopolitical obstacles currently, to quantify BSY penetration the following charts are ex-China.

Speaker #2: Not quite half of those top owners' assets are in the public works/utilities infrastructure sector, followed by industrial and then resources sectors, which together comprise most of the balance.

Speaker #2: Over three-quarters of the ex-China top owners managing well over 80% of such infrastructure assets are BSY accounts. Excluding top owners in the commercial/facilities sector where we are less focused, 90% of ex-China top owners' infrastructure assets are managed by BSY accounts.

Speaker #2: 153 ex-China top owners holding the majority of these accounts net infrastructure assets have already adopted BENTLEY Infrastructure Cloud with most using project-wise, they are thus accumulating engineering data for delivered projects which will make AI-enabled digital twins more valuable.

Speaker #2: In quantifying BSY spending by these top owners, I use current year run rate, which beyond ARR includes our relatively minor amounts of license sales, professional services, and other subscriptions to fully capture the offerings which are exclusive to owner-operators of Cohesive and Fort Masside Analytics.

Speaker #2: 153 ex-China top owners holding the majority of these accounts' net infrastructure assets have already adopted Bentley Infrastructure Cloud, with most using ProjectWise. They are thus accumulating engineering data for delivered projects, which will make AI-enabled digital twins more valuable.

Speaker #2: These 346 top owner accounts spend annually over $330 million in run rate with us, averaging about $1 million per year for those not in the commercial/facilities sector, and collectively representing about 20% of our overall business.

Speaker #2: Accordingly, annual BSY expenditures currently average $21 per million dollars of the 15.5 trillion dollars of net infrastructure assets owned by ex-China top owners who are BSY accounts.

Speaker #2: In introducing and fully developing infrastructure AI, it is a tremendous and literally unique advantage for BENTLEY SYSTEMS to be in the pole position with virtually all of the infrastructure engineering organizations with the most to gain, in both project delivery and operations and maintenance.

Speaker #2: Accordingly, annual BSY expenditures currently average $21 per million dollars of the 15.5 trillion dollars of net infrastructure assets owned by these 346 ex-China top owners who are BSY accounts.

Speaker #2: For every top design firm and top owner account, infrastructure engineering and hence BENTLEY SYSTEMS are mission-critical factors of their production. It is certain that in each case, their current expenditure levels on software and proportion to their respective engineering labor costs and asset values will be multiplied by orders of magnitude as AI is inexorably and advantageously integrated to improve infrastructure capacity, quality, and economics.

Speaker #2: In introducing and fully developing infrastructure AI, it is a tremendous and literally unique advantage for Bentley SYSTEMS to be in the pole position with virtually all of the infrastructure engineering organizations with the most to gain, in both project delivery and operations and maintenance.

Speaker #2: For every top design firm and top owner account, infrastructure engineering and hence Bentley SYSTEMS are mission-critical factors of their production. It is certain that in each case, their current expenditure levels on software and proportion to their respective engineering labor costs and asset values will be multiplied by orders of magnitude as AI is inexorably and advantageously integrated to improve infrastructure capacity, quality, and economics.

Speaker #2: In sum, I believe this enterprise account springboard will continue foreseeably to improve BENTLEY SYSTEMS' own economics and growth prospects. So at this point in time, when investable sectors seem ever more subject to comparisons from first principles let's update our own point of departure.

Speaker #2: Free cash flow as a valuation benchmark has the advantage of meaningful commonality across investment sectors. However, its uniquely salient for software in particular given the opacity of 606 subscription accounting other than for BSY, with our consumption-dominated revenues being recognized primarily radically to the virtual exclusion of multi-year noise.

Speaker #2: In sum, I believe this enterprise account springboard will continue foreseeably to improve Bentley SYSTEMS' own economics and growth prospects. So at this point in time, when investable sectors seem ever more subject to comparisons from first principles let's update our own point of departure.

Speaker #2: Here is shown the past five years of BSY's free cash flows aggregated within trailing four quarters ending in each Q2 for comparison to the latest for 26 Q2.

Speaker #2: Free cash flow as a valuation benchmark has the advantage of meaningful commonality across investment sectors. However, it's uniquely salient for software in particular given the opacity of 606 subscription accounting, other than for BSY, with our consumption-dominated revenues being recognized primarily ratably, to the virtual exclusion of multi-year noise.

Speaker #2: Over this period, these annual cash flows compounded at an average rate of 14.7% annually to reach $498 million, over the last 12 months. For mature software companies, another rightful valuation consideration is stock-based compensation given its prevalence and typical magnitude.

Speaker #2: Here is shown the past five years of BSY's free cash flows, aggregated within trailing four quarters ending in each Q2, for comparison to the latest for '26 Q2.

Speaker #2: I don't consider that cash flow should be counted as free to the extent that it needs to be expended for stock repurchases to offset resulting dilution.

Speaker #2: Shown here as accordingly offsetting free cash flow is BSY's operating that is not acquisition-related, stock-based compensation for these periods. The remainder is BSY's truly free cash flow as burdened by operating SPC.

Speaker #2: So burdened free cash flow reached $426 million over the last 12 months, having expanded over this period at a CAGR of 16.7%. Our consistent low double-digit annual growth rate in ARR compounded by our established annual improvement of about 100 basis points in AOI-less operating SPC margin served indeed to double over the last four years this valuation metric, which to me seems most economically appropriate to us shareholders.

Speaker #2: I don't consider that cash flow should be counted as free to the extent that it needs to be expended for stock repurchases to offset resulting dilution.

Speaker #2: Shown here as accordingly offsetting free cash flow is BSY's operating that is not acquisition related, stock-based compensation for these periods. The remainder is BSY's truly free cash flow as burdened by operating SPC.

Speaker #2: So burdened free cash flow reached $426 million over the last 12 months, having expanded over this period at a CAGR of 16.7%. Our consistent low double-digit annual growth rate in ARR compounded by our established annual improvement of about $100 basis points in AOI-less operating SPC margin served indeed to double over the last four years this valuation metric, which to me seems most economically appropriate to us shareholders.

Speaker #2: And consistent with BENTLEY SYSTEMS' conscientious stewardship of stock-based compensation, over most of our public history we have tended to allocate free cash flow to stock repurchasing in approximate keeping with annual requirements to offset SPC dilution.

Speaker #2: Here are the quarterly expenditure amounts for all repurchases including de facto repurchases associated with net distributions through this period up until 25 Q3. Even though BSY has had a discretionary share repurchasing authorization throughout, there hasn't been a very significant opportunistic that is inverse correlation between our share price and overall repurchase expenditures.

Speaker #2: And consistent with Bentley SYSTEMS' conscientious stewardship of stock-based compensation, over most of our public history we have tended to allocate free cash flow to stock repurchasing in approximate keeping with annual requirements to offset SPC dilution.

Speaker #2: What changed since late last year is by then we had resolutely worked down the debt leverage we incurred to finance the platform acquisitions of Cequent and Paraline Systems in 2021 and 2022 to a tolerably optimum range of about 2x.

Speaker #2: This has enabled us since then to allocate more capital to discretionary stock repurchases without impinging either on ongoing cash flow funding for programmatic acquisitions nor on balance sheet preparedness for potential larger scaled platform acquisitions.

Speaker #2: What changed since late last year is by then we had resolutely worked down the debt leverage we incurred to finance the platform acquisitions of Cequent and Powerline SYSTEMS in 2021 and 2022 to a tolerably optimum range of about 2X.

Speaker #2: What eventuated during 26 Q2 was a stock price which, at our marginal financing cost, enabled repurchasing to be accretive just on financial fundamentals to a significant and reasonable basis for valuation.

Speaker #2: We variously repurchased 3.1 million shares during 26 Q2 and subject to remaining within an optimal leverage range I expect us to continue to responsibly act upon any such opportunities going forward.

Speaker #2: Indeed, the net result of this SPC and corresponding repurchasing discipline over this period has been to avoid share dilution. Shaded here at top is the portion of our fully diluted shares attributable to our convertible debt.

Speaker #2: We variously repurchased $3.1 million shares during 26 Q2 and subject to remaining within an optimal leverage range I expect us to continue to responsibly act upon any such opportunities going forward.

Speaker #2: In fact, the redemption of our 2026 maturing convertible debt during 26 Q1 reduced our fully diluted share count by about 3% as will presumably recur in 27 Q3 with the maturity of our remaining convertible debt.

Speaker #2: So reflecting a compounded average growth rate of negative 1% through this period, at the end of 26 Q2 our fully diluted share count was down to 319 million shares.

Speaker #2: In fact, the redemption of our 2026 maturing convertible debt during 26 Q1 reduced our fully diluted share count by about 3%, as will presumably recur in 27 Q3 with the maturity of our remaining convertible debt.

Speaker #2: And we thank you for being among or interested in becoming or informing those of us who are the holders of those shares. And now over to Nicholas and then Werner to cover this quarter's developments.

Speaker #2: Thank you.

Speaker #2: So reflecting a compounded average growth rate of negative 1% through this period, at the end of 26 Q2 our fully diluted share count was down to $319 million shares.

Speaker #1: Thank you, Greg. We had another strong quarter executing consistently against a backdrop that keeps working in our favor. The world needs more infrastructure and resources, and it needs them faster than they can be delivered.

Speaker #2: And we thank you for being among, or interested in becoming, or informing those of us who are the holders of those shares. And now, over to Nicholas, and then Werner, to cover this quarter's developments.

Speaker #1: Everywhere we look, across accounts large and small, the constraint is the same. There are not enough engineers. Which is why engineering productivity, making every engineer both more efficient and more effective, is at the core of our AI strategy.

Speaker #2: Thank you.

Speaker #1: Thank you, Gregory. We had another strong quarter executing consistently against a backdrop that keeps working in our favor. The world needs more infrastructure and resources, and it needs them faster than they can be delivered.

Speaker #1: Let me pick up the AI thread from last quarter. At the end of 2025, we launched our infrastructure AI initiative, and last quarter a reported that leading engineering firms and owner-operators were asking us to instrument our applications to power their own AI-driven workflows.

Speaker #1: Everywhere we look, across accounts large and small, the constraint is the same: there are not enough engineers. Which is why engineering productivity, making every engineer both more efficient and more effective, is at the core of our AI strategy.

Speaker #1: I also shared that we had released our first MCP server for STAD. This quarter I want to show you how far we have come, and why we are confident in the approach.

Speaker #1: Let me pick up the AI thread from last quarter. At the end of 2025, we launched our infrastructure AI initiative, and last quarter I reported that leading engineering firms and owner-operators were asking us to instrument our applications to power their own AI-driven workflows.

Speaker #1: Our conviction is that when it comes to mission-critical infrastructure engineering, our applications and today's AI models are far more powerful together than apart. Because each does something the other cannot.

Speaker #1: Our applications are deterministic, they perform the engineering itself, the modeling, the analysis, and the simulation, and that work is trusted because it has been proven over decades embedded in workflows across infrastructure value chains.

Speaker #1: I also shared that we had released our first MCP server for STAD. This quarter, I want to show you how far we have come, and why we are confident in the approach.

Speaker #1: AI models are different in nature. They are probabilistic. What they contribute is natural language processing, high-level reasoning, and the ability to break a problem down and generate the instructions that our applications then execute with engineering precision.

Speaker #1: Our applications are deterministic. They perform the engineering itself. The modeling, the analysis, and the simulation. And that work is trusted because it has been proven over decades embedded in workflows across infrastructure value chains.

Speaker #1: The MCP server is the interface between the two. Turning the AI's instruction into real validated work inside the application. One point I want to stress, we are deliberately open.

Speaker #1: This is not a walled garden. Our accounts can pair our applications with whichever assistant and whichever model they have standardized on. Whether Bentley Copilot, Anthropic Claude, Google Gemini, or OpenAI ChatGPT.

Speaker #1: What they contribute is natural language processing, high-level reasoning, and the ability to break a problem down and generate the instructions that our applications then execute with engineering precision.

Speaker #1: Our aim is to be the trusted engineering layer beneath all of them. Whichever AI model happens to lead at a given time. Now to the progress.

Speaker #1: The MCP server is the interface between the two. Turning the AI's instruction into real validated work inside the application. One point I want to stress we are deliberately open.

Speaker #1: Last quarter we had released a first MCP server for STAD. Since then, we have released five more across Bentley Open applications with more to come.

Speaker #1: This is AI models are different in not a walled garden. Our accounts can pair our applications with whichever assistant and whichever model they have standardized on.

Speaker #1: The response from our accounts has been very positive, once a grasp what is possible. This is still early and a great deal of our work today is education on two fronts.

Speaker #1: Whether Bentley Copilot, Anthropic Claude, Google Gemini, or OpenAI ChatGPT. Our aim is to be the trusted engineering layer beneath all of them. Whichever AI model happens to lead at a given time.

Speaker #1: First, we are helping users cut through the considerable noise around AI, and we have made this a priority with several campaigns underway to show what is generally achievable now.

Speaker #1: Now to the progress. Last quarter we had released a first MCP server for STAD. Since then, we have released five more across Bentley Open applications with more to come.

Speaker #1: Second, we're staying close to our accounts as they adopt. And here our application engineers and solution architects are proving invaluable, serving in effect as four deployed engineers helping our accounts evaluate and integrate these new capabilities into their workflows.

Speaker #1: The response from our accounts has been very positive, once a grasp what is possible. This is still early, and a great deal of our work today is education on two fronts.

Speaker #1: Finally, on the commercial model, as discussed last quarter, our next steps were to instrument more applications and to validate the commercial model for this new usage pattern.

Speaker #1: First, we are helping users cut through the considerable noise around AI, and we have made this a priority with several campaigns underway to show what is generally achievable now.

Speaker #1: The first is well underway. On the second, our priority remains in order, adoption, exploration, and validation. With monetization to follow. And we continue to be transparent with our accounts about that sequence.

Speaker #1: Second, we're staying close to our accounts as they adopt. And here, our application engineers and solution architects are proving invaluable—serving, in effect, as forward-deployed engineers, helping our accounts evaluate and integrate these new capabilities into their workflows.

Speaker #1: Earning adoption and trust first is precisely what will let us capture our fair share of the value that will be created as our applications are used at machine speed with AI.

Speaker #1: Finally, on the commercial model, as discussed last quarter, our next steps were to instrument more applications and to validate the commercial model for this new usage pattern.

Speaker #1: Now turning to our business highlights. Our year-over-year AR growth for Q2 accelerated to 12%. Our net revenue retention rate remained high at 109%, consistent with previous quarters, and end of scoring the stability and growth within our existing accounts.

Speaker #1: Earning adoption and trust first is precisely what will let us capture our fair share of the value that will be created as our applications are used at machine speed with AI.

Speaker #1: Our enterprise 365 commercial program continues to drive steady growth. We were particularly pleased with our renewals in the quarter. As Q2 is typically our second largest quarter for renewals, this strong performance gives us confidence for the rest of the year.

Speaker #1: New logos contributed again 300 basis points of AR growth, primarily within the SMB segment. Through virtuoso, our flagship commercial program for SMB accounts, we again added over 600 new logos in Q2.

Speaker #1: The underlying SMB market sentiment remains positive, with accounts reporting healthy project backlogs extending well into 2027. Accounts are increasingly viewing Bentley technology as part of their business backbone, rather than point solutions for specific projects.

Speaker #1: New logos contributed again 300 basis points of AR growth, primarily within the SMB segment. Through Virtuoso, our flagship commercial program for SMB accounts, we again added over 600 new logos in Q2.

Speaker #1: Which validates our cross-selling and upselling efforts. Turning to our performance by infrastructure sector. Resources were our fastest growing sector in total, driven by mining once again.

Speaker #1: With strengths across geographic regions. The fundamental drivers for this demand are macroeconomic and long-term. Countries around the world are increasingly prioritizing self-sufficiency given ongoing geopolitical tensions and supply chain the global push for electrification, including to power AI data centers, also depends on securing critical minerals.

Speaker #1: Turning to our performance by infrastructure sector. Resources were our fastest growing sector in total, driven by mining, once again. With strengths across geographic regions.

Speaker #1: Our largest sector public works and utilities delivered another strong quarter. Driven by sustained infrastructure investment worldwide. Within public works and utilities, power line systems or PLS continues to be the primary driver of growth in our electric grid business, benefiting from strong global demand for grid transmission, capacity expansion, and resiliency.

Speaker #1: The fundamental drivers for this demand are macroeconomic and long-term. Countries around the world are increasingly prioritizing self-sufficiency given ongoing geopolitical tensions and supply chain disruptions.

Speaker #1: In addition, the global push for electrification, including to power AI data centers, also depend on securing critical minerals. Our largest sector public works and utilities delivered another strong quarter.

Speaker #1: I will take a deeper dive into PLS and our broader electric grid portfolio shortly. Growth in industrial sector continued to be solid, while commercial facilities remain relatively flat.

Speaker #1: Driven by sustained infrastructure investment worldwide. Within public works and utilities, power line systems, or PLS, continue to be the primary driver of growth in our electric grid business, benefiting from strong global demand for grid transmission, capacity expansion, and resiliency.

Speaker #1: Turning to our tone of business by geographic region. In the Americas, our largest region, the US continued to deliver strong growth. The underlying fundamentals of our accounts remain very strong, characterized by double-digit backlogs and a bullish outlook on their long-term growth, driven primarily by transportation, water, power, and data centers.

Speaker #1: Public funding at the federal and state levels remains robust, supplemented by a healthy influx of private capital funding. Latin America delivered another very strong quarter, led by mining and an increased focus on transportation in the region.

Speaker #1: EMEA delivered a solid quarter as the overall region remains well invested. The quarter benefited from strong renewals at a number of large accounts. Large ongoing national infrastructure programs are driving demand in the UK.

Speaker #1: Public funding at the federal and state levels remains robust, supplemented by a healthy influx of private capital funding. Latin America delivered another very strong quarter led by mining and an increased focus on transportation in the region.

Speaker #1: Fundamentals in Europe are also strong. In Germany, while the 500 billion euro infrastructure fund is in place, actual deployment has been slow as early funds are backfilling existing deficits delaying the impact on new projects.

Speaker #1: In the Middle East, despite the ongoing conflict, accounts have returned to work, consumption has rebounded, and deals are progressing again. Asia-Pacific delivered strong growth, with Australia leading the way as performance bounced back strongly followed closely by India.

Speaker #1: China representing only about 2% of AR continues to operate against the same economic and geopolitical headwinds. Across most of the region, rail is a massive long-term opportunity with major projects in Australia, India, the Philippines, and Indonesia.

Speaker #1: Offshore oil and gas is also an investment priority across the region, driven by major field developments in Southeast Asia, and offshore redevelopment in India.

Speaker #1: We are well positioned for this work with our SAX offshore design and analysis engine. Now, I would like to highlight the continued outperformance of our power line systems.

Speaker #1: PLS is the gold standard for the design and analysis of overhead electric power transmission and distribution lines and their structures. It is part of a broader electric grid portfolio, encompassing open utilities, substation plus and SPIDA, that together allows us to address the full spectrum of grid infrastructure, from transmission and distribution to substations.

Speaker #1: Offshore oil and gas is also an investment priority across the region, driven by major field developments in Southeast Asia, and offshore redevelopment in India.

Speaker #1: We are well positioned for this work with our SAX offshore design and analysis engine. Now, I would like to highlight the continued outperformance of our power line systems.

Speaker #1: Looking back four and a half years since the acquisition, PLS has become a vital part of our core business and the foundational pillar of our electric grid offering.

Speaker #1: We have also seen significant growth internationally, leveraging Bentley's established global reach and go-to-market engine. In fact, PLS revenue outside of the US is now as large as the entire PLS business was when we acquired it in 2022.

Speaker #1: Reliable energy delivery is more critical now than ever, as electrification and the rapid expansion of AI data centers place unprecedented stress on the global grid.

Speaker #1: Looking back four and a half years since the acquisition, PLS has become a vital part of our core business and the foundational pillar of our electric grid offering.

Speaker #1: In the US alone, the network requires an estimated 35 gigawatts of additional capacity by 2030. PLS software is instrumental in bridging this power gap.

Speaker #1: We're seeing our users apply PLS at impressive scale to overcome real-world physical and operational challenges. For instance, EXO digitally stress-tested century-old transmission towers spanning the Ohio River.

Speaker #1: Reliable energy delivery is more critical now than ever, as electrification and the rapid expansion of AI data centers place unprecedented stress on the global grid.

Speaker #1: Allowing the utility to engineer targeted stabilization that saved 80 million dollars and avoided up to a decade of permitting delays. And when 120 miles an hour winds destroyed a transmission corridor in Illinois, Toth and associates used PLS CAD to redesign the network digitally accelerating the rebuild to restore power 18 days ahead of schedule.

Speaker #1: In the U.S. alone, the network requires an estimated 35 gigawatts of additional capacity by 2030. PLS software is instrumental in bridging this power gap.

Speaker #1: We're seeing our users apply PLS at impressive scale to overcome real-world physical and operational challenges. For instance, EXO digitally stress-tested Sentry old transmission towers spanning the Ohio River.

Speaker #1: The vibrancy of this ecosystem was on full display during Q2 at our bi-annual PLS user group conference in Madison, Wisconsin, which drew more than 500 attendees from nearly 300 companies including over 90 utilities representing 20 countries.

Speaker #1: Allowing the utility to engineer targeted stabilization that saved 80 million dollars and avoided up to a decade of permitting delays. And when 120 miles an hour winds destroyed a transmission corridor in Illinois, Toth and associates used PLS CAD to redesign the network digitally, accelerating the rebuild to restore power 18 days ahead of schedule.

Speaker #1: Essential theme of the conference was AI, where we announced three new NCP servers for PLS products including PLS Grid. This is an important milestone because it demonstrates how with MCP servers we can empower AI systems to not only interact with engineering applications but also directly with rich engineering data.

Speaker #1: By connecting AI systems to PLS Grid via MCP, users can query vast digital twin repositories in natural language asking questions like find the 100 weaker structures in my entire grid.

Speaker #1: Essential theme of the conference was AI, where we announced three new NCP servers for PLS products, including PLS Grid. This is an important milestone because it demonstrates how, with MCP servers, we can empower AI systems to not only interact with engineering applications, but also directly with rich engineering data, by connecting AI systems to PLS Grid via MCP.

Speaker #1: Or which transmission lines fans will thermally limit the interconnection of the proposed AI data center. Unlocking this engineering data directly is precisely the direction we're taking across a broader Bentley infrastructure cloud.

Speaker #1: Enabling our users to extract actionable intelligence across their project files and asset information at machine speed. With PLS as a critical component of our electrical grid offering, and very much part of our core now, Bentley is uniquely positioned to continue to benefit from the massive investments required to power an electrified future.

Speaker #1: Users can query vast digital twin repositories in natural language, asking questions like, find the 100 weakest structures in my entire grid. Or, which transmission line spans will thermally limit the interconnection of the proposed AI data center?

Speaker #1: Unlocking this engineering data directly is precisely the direction we're taking across a broader Bentley infrastructure cloud. Enabling our users to extract actionable intelligence across their project files and asset information at machine speed.

Speaker #1: In summary, Q2 was a strong quarter, and we entered the second half of the year with great confidence in our disciplined execution, and market fundamentals.

Speaker #1: And with that, over to you, Werner, for detailed review of our financial results.

Speaker #1: With PLS as a critical component of our electrical grid offering, and very much part of our core now, Bentley is uniquely positioned to continue to benefit from the massive investments required to power an electrified future.

Speaker #2: Thank you, Nicholas. We are pleased with our performance for the first half of the year. Our second quarter results extend the momentum from the first quarter and set us up well for the balance of 2026.

Speaker #1: In summary, Q2 was a strong quarter, and we entered the second half of the year with great confidence in our disciplined execution, and market fundamentals.

Speaker #2: Total revenues for the second quarter were 411 million, growing 12.8% year over year, and 12.2% in constant currency. For the first half of the year, total revenues increased 13.6% or 12.1% in constant currency.

Speaker #1: And with that, over to you, Werner, for detailed review of our financial results.

Speaker #2: Our performance continues to be led by our mainstay subscription revenues, which represented 92% of total revenues during the quarter, subscription revenues increased 13.6% year over year, or 13% in constant currency.

Speaker #2: Total revenues for the second quarter were $411 million, growing 12.8% year over year, and 12.2% in constant currency. For the first half of the year, total revenues increased 13.6%, or 12.1% in constant currency.

Speaker #2: Reflecting continued strengths across both our E365 and SMB initiatives. For the first half of the year, subscription revenues increased 14.1% or 12.6% in constant currency.

Speaker #2: Our performance continues to be led by our mainstay subscription revenues, which represented 92% of total revenues, during the quarter, subscription revenues increased 13.6% year over year, or 13%, in constant currency.

Speaker #2: In our small and less predictable revenue streams, services revenues increased 9.4% or 8.7% in constant currency, driven by continued improvements in maximal related services activities within Cohesive, extending the recovery trend we discussed last quarter.

Speaker #2: Reflecting continued strengths across both our E365 and SMB initiatives. For the first half of the year, subscription revenues increased 14.1%, or 12.6%, in constant currency.

Speaker #2: For the first half of the year, services revenues increased 18.8% or 16.5% in constant currency. Perpetual license revenues for the quarter were approximately 10 million, down roughly half a million year over year, and approximately 19 million for the first half, down about 2 million.

Speaker #2: In our small and less predictable revenue streams, services revenues increased 9.4%, or 8.7%, in constant currency, driven by continued improvements in maximal related services activities within Cohesive, extending the recovery trend we discussed last quarter.

Speaker #2: Perpetual license sales remain a very small part of our business, with approximately 2% of total revenues. As of June 30, our last 12 months recurring revenues were 1 billion 486 million, an increase of 13.5% year over year, or 11.8% in constant currency.

Speaker #2: For the first half of the year, services revenues increased 18.8%, or 16.5%, in constant currency. Perpetual license revenues for the quarter were approximately 10 million, down roughly half a million year over year, and approximately 19 million for the first half, down about 2 million.

Speaker #2: And represented 93% of total revenues. Our last 12 months constant currency account retention rate remained consistent at 99%, and our constant currency net revenue retention rate remained at 109%.

Speaker #2: Consistent with recent quarters. The combination of our high retention rates and new business momentum gives us confidence in the continued durability of our recurring revenue growth.

Speaker #2: Now turning to ARR. We ended the second quarter with ARR of 1 billion 536 million, at quarter-end spot rates. On a constant currency basis, our year over year ARR growth rate was 12%, and our sequential quarterly growth was 2.9%, all organic, and in line with our expectations for the quarter.

Speaker #2: Our last 12 months constant currency account retention rate remained consistent at 99%, and our constant currency net revenue retention rate remained at 109%. Consistent with recent quarters.

Speaker #2: The combination of our high retention rates and new business momentum gives us confidence in the continued durability of our recurring revenue growth. Now, turning to ARR.

Speaker #2: We continue to expect our quarter-over-quarter ARR growth seasonality to be similar to 2025, and thus organic year over year ARR growth rates to be relatively stable during the year.

Speaker #2: We ended the second quarter with ARR of $1.536 billion, at quarter-end spot rates. On a constant currency basis, our year-over-year ARR growth rate was 12%, and our sequential quarterly growth was 2.9%, all organic and in line with our expectations for the quarter.

Speaker #2: Our gap operating income was 89 million for the second quarter, and 215 million for the first half. As I've discussed previously, our gap results can be impacted by deferred compensation plan revaluations, and other acquisition-related items.

Speaker #2: We continue to expect our quarter-over-quarter ARR growth seasonality to be similar to 2025, and thus organic year over year ARR growth rates to be relatively stable during the year.

Speaker #2: Moving to our primary profitability measure, adjusted operating income less operating stock-based compensation. Or AOI less operating SBC. AOI less operating SBC was 116 million for the quarter, with a margin of 28.3%, and 257 million for the first half, with a margin of 30.8%.

Speaker #2: Our GAAP operating income was $89 million for the second quarter and $215 million for the first half. As I've discussed previously, our GAAP results can be impacted by deferred compensation plan revaluations and other acquisition-related items.

Speaker #2: This performance was in line with our expectations, with our first half margin trailing the prior year, as we waited operating investments early in the year compared to 2025.

Speaker #2: Our first half G&A also reflects our new enterprise-wide finance and quote-to-cash platforms, which went live during the second quarter, driving a step-up in cost around go-live, that was contemplated in our outlook.

Speaker #2: This performance was in line with our expectations, with our first half margin trailing the prior year, as we weighted operating investments early in the year compared to 2025.

Speaker #2: Notably, we did not adjust these costs out of our profitability metric. We absorbed them within our margin commitment, underscoring the quality of our first half performance, while positioning us for greater efficiency and scale.

Speaker #2: Our first-half G&A also reflects our new enterprise-wide finance and quote-to-cash platforms, which went live during the second quarter, driving a step-up in cost around go-live that was contemplated in our outlook.

Speaker #2: We remain well positioned to deliver on our annual constant currency margin improvement. Our free cash flow for the quarter was 64 million, and 252 million for the first half.

Speaker #2: This result was in line with our expectations, and reflects two key factors we signaled on our last earnings call. First, our 2025 free cash flow benefited from exceptionally strong collections at year end, which, as anticipated, created a tougher year over year comparison in the first half, most pronounced in the first quarter.

Speaker #2: We remain well positioned to deliver on our annual constant currency margin improvement. Our free cash flow for the quarter was 64 million, and 252 million for the first half.

Speaker #2: Second, our plan to weigh operating expenses more towards the first half this year is reflected in our year over year comparison for both profitability and cash flows.

Speaker #2: This result was in line with our expectations and reflects two key factors we signaled on our last earnings call. First, our 2025 free cash flow benefited from exceptionally strong collections at year-end, which, as anticipated, created a tougher year-over-year comparison in the first half, most pronounced in the first quarter.

Speaker #2: As a result, and consistent with the framework we shared in our outlook, first half free cash flows represented approximately 47% of our full year outlook.

Speaker #2: In line with the 45 to 50% range, we guided for the first half. Looking beyond quarterly timing, on the last 12 months basis, free cash flow of 498 million was up 15%, and we remain on track to meet our full year free cash flow outlook of 500 to 570 million.

Speaker #2: Second, our plan to weigh operating expenses more towards the first half this year is reflected in our year over year comparison for both profitability and cash flows.

Speaker #2: As a result, and consistent with the framework we shared in our outlook, first half free cash flows represented approximately 47% of our full year outlook.

Speaker #2: We continue to execute the disciplined and balanced approach to capital allocation. During the quarter, we closed on a new 550 million term loan A, under the Equalion feature of our credit facility.

Speaker #2: This transaction was completed at the attractive terms, and used to repay outstanding borrowings under our revolver, lowering our interest costs. This provides ample capacity to support our strategic priorities, including addressing our mid-2027 convertible notes maturity, while also funding potential programmatic acquisitions ongoing share repurchases, and dividends.

Speaker #2: During the first half of the year, we reduced net debt by 32 million, and returned capital to shareholders by deploying 155 million for share repurchases, up meaningfully from the prior year, and 42 million for dividends.

Speaker #2: This transaction was completed at a tractive terms, and used to repay outstanding borrowings under our revolver, lowering our interest costs. This provides ample capacity to support our strategic priorities, including addressing our mid-2027 convertible notes maturity, while also funding potential programmatic acquisitions ongoing share repurchases, and dividends.

Speaker #2: Our balance sheet supports significant strategic flexibility, at quarter-end capacity under our credit facility was 1.2 billion, and our 1.9 times adjusted EBITDA, consistent with the prior quarter.

Speaker #2: We continue to actively manage our interest rate exposure. Our safeguards include the low fixed coupon on our remaining convertible notes, and our 200 million interest rate swap expiring in 2030.

Speaker #2: Our balance sheet supports significant strategic flexibility, at quarter-end capacity under our credit facility was 1.2 billion, and our net debt leverage was 1.9 times adjusted EBITDA, consistent with the prior quarter.

Speaker #2: Overall, our performance through the first half of the year compared favorably with our expectations. We delivered consistent growth in revenues, recurring revenues, and ARR, while maintaining disciplined profitability and cash flow generation, to remain comfortably within our full year financial outlook.

Speaker #2: This year, that outlook also includes a range for AOI less operating SBC, reflecting the annual constant currency margin improvement I referenced earlier. With regards to foreign exchange rates, through the first half, the US dollar strengthened, relative to the exchange rates assumed in our 2026 annual financial outlook, resulting in approximately 5 million less revenue from currency, approximately 2 million in the first quarter, and 3 million in the second.

Speaker #2: Overall, our performance through the first half of the year compared favorably with our expectations. We delivered consistent growth in revenues, recurring revenues, and ARR, while maintaining disciplined profitability and cash flow generation to remain comfortably within our full year financial outlook.

Speaker #2: If end of July exchange rates were to prevail for the remainder of the year, our second half revenues would be negatively impacted by an incremental 8 to 10 million, relative to the exchange rates assumed in our 2026 outlook.

Speaker #2: And with that, over to Eric for Q&A. Thank you.

Speaker #1: Thanks, Werner. Before we begin, I just wanted to remind everyone to please limit yourselves to one question today. And with that, our first question comes from Matt Hedberg, from RBC Capital Markets.

Speaker #1: Oh, thanks, Werner. Before we begin, I just wanted to remind everyone, just limit themselves to one question. And with that, our first question comes from Matt Hedberg from RBC Capital Markets.

Speaker #2: And with that, over to Eric for Q&A. Thank you.

Speaker #2: Oh, sorry, Eric. Sorry about that. Can you hear me okay now?

Speaker #3: Yeah, we can hear you.

Speaker #2: Excellent. Thanks for the question. Congrats on the results. And the ARR growth at 12% was certainly impressive here, the acceleration versus last quarter. I guess, what are the keys now as we get to the back half of the year on sustaining that growth, or even improving it?

Speaker #2: I know we've talked about maybe getting to the high end or above that, and at 12%, you're close to that. But I guess I'm wondering, continued success from Asset Analytics, is there a macro element?

Speaker #3: Oh, sorry, Eric. Sorry about that. Can you hear me okay now?

Speaker #2: Anything that could kind of help us on that trajectory?

Speaker #4: Yeah. Yeah, I can hear you.

Speaker #3: Excellent. Thanks for the question. Congrats on the results. And the ARR growth at 12% was certainly impressive here, the acceleration versus last quarter. I guess, what are the keys now as we get to the back half of the year on sustaining that growth, or even improving it?

Speaker #3: Yeah, thank you, Matt. So yes, definitely we were quite pleased with the performance in Q2. Consistent with Q1, an acceleration nevertheless, because of momentum in resources, which is still our fastest growing sector, and particularly in mining.

Speaker #3: I know we've talked about maybe getting to the high end or above that, and at 12% you're close to that. But I guess I'm wondering, continued success from asset analytics is our macro element.

Speaker #3: And then just general strength in public works, utilities, which includes electric grid. But we've seen strength across the sector. So the momentum is definitely there.

Speaker #3: Anything that could kind of help us on that trajectory?

Speaker #3: For us to get to the upper part of the range, we will need this momentum to continue, and there's no sign why it will slow down.

Speaker #4: Yeah, thank you, Matt. So yes, definitely we were quite pleased with the performance in Q2. Consistent with Q1, an acceleration nevertheless, because of momentum in resources, which is still our fastest growing sector, and in particular in mining, and then just general strength in public works, utilities, which includes electric grid.

Speaker #3: But we will also need to do an acquisition, potentially. And yes, bringing some big deals with Asset Analytics, which is a rather lumpy business, as we discussed in previous calls, where we depend a lot on big deals.

Speaker #4: But we've seen strength across the sector. So the momentum is definitely there. For us to get to the upper part of the range, we will need this momentum to continue, and there's no sign why it will slow down.

Speaker #4: So I'd say each of those factors that Nicholas mentioned are relatively likely, but they all have to happen together to wind up at the top end of the range.

Speaker #4: But we will also need to do an acquisition, potentially. And yes, bringing some big deals with asset analytics, which is a rather lumpy business, as we discussed in previous calls, right, where we depend a lot on big deals.

Speaker #4: And that's what we hope.

Speaker #1: Thanks, Matt. The next question comes from Joe Vruwink, from Robert W. Baird.

Speaker #2: great. Thanks. The discussion on your owner, customer base, I thought was interesting. And I know it's not the same basis for comparison that you highlighted last quarter with project delivery firms and kind of your earn rates with those customers.

Speaker #5: So I'd say each of those factors that Nicholas mentioned are relatively likely, but they all have to happen together to wind up at the top end of the range.

Speaker #2: But just the 21 dollars in earn rate for Bentley, relative to the million in assets, where do you think that can go? And I guess, inherent in the question is, you've grown your portfolio of solutions that are relevant for owners quite a bit over the last 15 years.

Speaker #5: And that's what we hope.

Speaker #1: Thanks, Matt. The next question comes from Joe Brewick from Robert W. Baird.

Speaker #6: great. Thanks. The discussion on your owner-customer base, I thought, was interesting. And I know it's not the same basis for comparison that you highlighted last quarter with project delivery firms and kind of your earn rates with those customers.

Speaker #2: And so do some of the recently acquired IP or just the way that infrastructure cloud is evolving, unlock a much bigger opportunity with that side of your customer base?

Speaker #6: But just the 21 dollars in earn rate for Bentley, relative to the million in assets, where do you think that can go? And I guess, inherent in the question is, you've grown your portfolio of solutions that are relevant for owners quite a bit over the last 15 years.

Speaker #4: Well, it's all of the opportunity with infrastructure and AI. To improve the quality resilience the lifecycle of the infrastructure assets. The owner-operators benefit from better CapEx, which optimized designs will provide in terms of constructability, less subsurface risk, and so forth, things we're working on through our open applications.

Speaker #6: And so do some of the recently acquired IP or just the way that infrastructure cloud is evolving, unlock a much bigger opportunity with that side of your customer base?

Speaker #4: But just as you say, the biggest opportunity is in operations and maintenance, and especially for optimizing that to do only what's needed and what works.

Speaker #5: Well, it's all of the opportunity with infrastructure and AI. To improve the quality resilience the lifecycle of the infrastructure assets. The owner-operators benefit from better CapEx, which optimized designs will provide in terms of constructability, less subsurface risk, and so forth, things we're working on through our open applications.

Speaker #4: And for AI to help discern that by operating on Bentley infrastructure cloud, and using the as-operated inspection and monitoring that's made possible through Asset Analytics.

Speaker #4: So we think we've closed that circle conceptually, leaving a lot of opportunity. And we should monitor that 21 dollars per million dollars of net assets just as we do on the correspondingly on the engineering firm side, to see how they're going to go about improving their economics by spending more on software and AI together, as Nicholas described.

Speaker #5: But just as you say, the biggest opportunity is in operations and maintenance, and especially for optimizing that to do only what's needed and what works.

Speaker #5: And for AI to help discern that by operating on Bentley infrastructure cloud, and using the as-operated inspection and monitoring that's made possible through asset analytics.

Speaker #1: Thanks, Joe. The next question comes from Jason Celino from KeyBank.

Speaker #5: So we think we've closed that circle conceptually, leaving a lot of opportunity. And we should monitor that $21 per million dollars of net assets, just as we do correspondingly on the engineering firm side, to see how they're going to go about improving their economics by spending more on software and AI together, as Nicholas described.

Speaker #2: Great. Hold on one second. Oh, yeah, there we go. Thank you for the update on PLS. I think it's a business that we often kind of forget about.

Speaker #2: I think when you originally acquired that asset, it was kind of growing similar to Bentley's corporate average, but its margins were meaningfully better. And then I think entering the year, when we thought about permitting reform, that was one of the businesses that could really benefit from it.

Speaker #1: Thanks, Joe. The next question comes from Jason Salino from KeyBank.

Speaker #2: Are you able to maybe provide an update on maybe the financial profile of what PLS looks like today? And if you've seen any acceleration in the business from any type of permitting reform?

Speaker #3: Great. Hold on one second. Oh, yeah, there we go. Thank you for the update on PLS. I think it's a business that we often kind of forget about.

Speaker #2: Thank you.

Speaker #3: I think when you originally acquired that asset, it was kind of growing similar to Bentley's corporate average, but its margins were meaningfully better. And then I think entering the year, when we thought about permitting reform, that was one of the businesses that could really benefit from it.

Speaker #3: So actually, PLS has been a growth engine from almost from the time of the acquisition. And very consistent. And the growth has been both in the US and internationally.

Speaker #3: You heard in the prepared remarks that now our business with PLS outside of the US is as big as the entire PLS business was when we did the acquisition.

Speaker #3: Are you able to maybe provide an update on maybe the financial profile of what PLS looks like today and if you've seen any acceleration in the business from any type of permitting reform?

Speaker #3: So we grew very well outside of the US. But in the US as well. And in the US, we continue to grow despite the lack of permitting reform, because there's a lot of investments going into the existing grid, just to make sure that it is capable of keeping up with the demand for more electricity and that it is resilient in the face of extreme weather events.

Speaker #3: Thank you.

Speaker #4: So actually, PLS has been a growth engine almost from the time of the acquisition, and very consistently. The growth has been both in the US and internationally.

Speaker #3: It's better. And therefore, we are well positioned to see our PLS AR even accelerating as permitting reform goes through. And permitting reform, there's always a lot of discussion.

Speaker #4: You heard in the prepared remarks that now our business with PLS outside of the US is as big as the entire PLS business was when we did the acquisition.

Speaker #4: So we grew very well outside of the US. But in the US as well. And in the US, we continue to grow despite the lack of permitting reform, because there's a lot of investments going into the existing grid just to make sure that it is capable of keeping up with the demand for more electricity.

Speaker #3: It is, in a sense, a bipartisan topic. Everybody wants it. But we need Congress to get it act together, no pun intended. And conversations have resumed about permitting reform.

Speaker #4: That it is resilient in the face of extreme weather events. It's there. And therefore, we are well positioned to see our PLS AR even accelerating as permitting reform goes through.

Speaker #3: And a fantastic vehicle for permitting reform would be the new surface transportation bill, which has been passed by the House of Representatives, but is now a bit on hold.

Speaker #4: And permitting reform, there's always a lot of discussion. It is, in a sense, a bipartisan topic. Everybody wants it. But we need congress to get its act together, no pun intended.

Speaker #3: Until a bigger decision is made. But yeah, there's just a lot of activity for permitting reform in the US. And when if and when I think it's more about when this goes through, then this will have further grow our PLS business, which is already doing very well.

Speaker #4: And conversations have resumed about permitting reform. And a fantastic vehicle for permitting reform would be the new surface transportation bill, which has been passed by the House of Representatives, but is now a bit on hold.

Speaker #1: Thank you. Thanks, Jason. Next question comes from Daniel Jester from BMO.

Speaker #5: Hey, good morning. Thanks for taking my question. And sorry, my camera for some reason is not working. So Greg in the last couple of quarters, you've talked about sort of the accelerating of the art of what's possible in AI and the prepared remarks today.

Speaker #4: Until a bigger decision is made. But yeah, there's just a lot of activity for permitting reform in the US. And when if and when I think it's more about when this goes through, then this will have further grow our PLS business, which is already doing very well.

Speaker #5: You commented about sort of the opportunity and what you're seeing in your customers. I guess new MCP servers, you've got a lot of opportunity here.

Speaker #3: Thank you.

Speaker #1: Thanks, Jason. Next question comes from Daniel Jester from BMO.

Speaker #5: I guess from a customer enablement perspective, and their ability to harness these tools, are Oh.

Speaker #6: Hey, good morning. Thanks for taking my question. And sorry, my camera for some reason is not working. So Greg in the last couple of quarters, you've talked about sort of the accelerating of the art of what's possible in AI and the prepared remarks today.

Speaker #3: Lost you.

Speaker #4: I think Daniel was going to ask where do they stand. And that is, my point was, we're embedded closely with the largest engineering firms and owner-operators whom are especially the engineering firms in a hurry because of the resource capacity constraints.

Speaker #6: You commented about sort of the opportunity and what you're seeing in your customers. I guess new MCP servers, you've got a lot of opportunity here.

Speaker #6: I guess from a customer enablement perspective, and their ability to harness these tools, are you

Speaker #4: They could do more business if they could improve efficiency and effectiveness, as Nicholas said. So they're in a hurry. But they understand the best way to get there is a hybrid approach where they're AI assistants, their own agents, would take advantage of established functionality and our education is how to put those two together into a hybrid approach.

Speaker #5: I think Daniel was going to ask where do they stand. And that is, my point was, we're embedded closely with the largest engineering firms and owner-operators whom are especially the engineering firms in a hurry because of the resource capacity constraints they could do more business if they could improve efficiency and effectiveness, as Nicholas said.

Speaker #4: I mentioned hybrid, particularly as something which over my career, I've seen repeatedly be the result of innovation waves, is that there isn't something that's going to take over one particular phenomenon, but a combination together.

Speaker #5: So they're in a hurry. But they understand the best way to get there is a hybrid approach where they're AI assistants, their own agents, would take advantage of established functionality and our education is how to put those two together into a hybrid approach.

Speaker #4: And in addition to the nature of the hybrid, Nicholas described of inference on the part of assistants, calling established deterministic engineering logic another aspect of hybrid that I expect to come about is in the computing form factor, which will include a lot of or choices for what we could call sovereign AI computing on local and edge devices, because in the case of engineering firms of the sensitivity of their intellectual property, in the case of owner-operators, of the cyber risks involved.

Speaker #5: I mentioned hybrid, particularly as something which over my career, I've seen repeatedly be the result of innovation waves, is that there isn't something that's going to take over one particular phenomenon, but a combination together.

Speaker #5: And in addition to the nature of the hybrid, Nicholas described of inference on the part of assistants, calling established deterministic engineering logic another aspect of hybrid that I expect to come about is in the computing form factor, which will include a lot of or choices for what we could call sovereign AI computing on local and edge devices, because in the case of engineering firms of the sensitivity of their intellectual property, in the case of owner-operators, of the cyber risks involved.

Speaker #4: So anyway, they're hybrid directions are going to be where things settle out in the long term. And you probably were asking me about the long-term given my longevity.

Speaker #4: Thank you, Daniel.

Speaker #1: Next question comes from Siti Panigrahi from Mizuho.

Speaker #2: Greg, thank you. Just to continue to that prior question, Daniel's question maybe, I'll extend that. I mean, the opportunity you talked about AI, like can you give us more concrete signal even directionally, like whether this AI or the commercial model API consumption on this, when do you think is kind of going to like you can monetize it in more end of '26 or '27, even kind of thing?

Speaker #5: So, at any rate, their hybrid directions are going to be where things settle out in the long term. And you probably were asking me about the long term, given my longevity.

Speaker #5: Thank you, Daniel.

Speaker #1: Next question comes from CD Panagrahi from Mizuho.

Speaker #2: And in that context, you talked about the data and ChatGPT, does it help Bentley system as a platform, or does it create opportunity for standalone companies to pipe the data into these interfaces?

Speaker #2: Great. Thank you. Just to continue to that prior question, Daniel's question maybe, I'll extend that. I mean, the opportunity you talked about AI, like can you give us more concrete signal even directionally, like whether this AI or the commercial model API consumption on this, when do you think is kind of going to like you can monetize it in more end of '26 or '27, even kind of thing?

Speaker #2: How do you differentiate their when cloud or ChatGPT become an integration layer?

Speaker #3: All right. So let's go after these different questions one by one. So the signals we're getting from the accounts we're engaging with on this novel way of using our engineering applications, the signal is very positive.

Speaker #2: And in that context, you talked about the data and interface, whether cloud or ChatGPT, does it help Bentley system as a platform, or does it create opportunity for standalone companies to pipe the data into these interfaces?

Speaker #3: The effort on our side is really to cut through the noise, because there's so much noise around AI. Obviously, every software provider under the sun is approaching the different accounts, talking about their own AI capabilities.

Speaker #2: How do you differentiate their when cloud or ChatGPT become an integration layer?

Speaker #3: So we need to cut through the noise. And then when infrastructure organizations realize what we're talking about and the potential there, then the reaction is very positive.

Speaker #4: All right. So let's go after these different questions one by one. So the signals we're getting from the accounts we're engaging with on this novel way of using our engineering applications, the signal is very positive.

Speaker #3: We hear words like, oh, this is a game changer. This is changing everything. There's a lot of value that's going to be created and so on and so forth.

Speaker #3: So that's a very encouraging. And therefore, we are really sticking to the phasing we talked about before, which is our number one priority is adoption, exploration, validation, right?

Speaker #4: The effort on our side is really to cut through the noise, because there's so much noise around AI, obviously, every software provider under the sun is approaching the different accounts talking about their own AI capacity.

Speaker #4: So we need to cut through the noise. And then when infrastructure organizations realize what we're talking about and the potential there, then the reaction is very positive.

Speaker #3: Getting, making sure that accounts are aware of those capabilities. They're really adopting those capabilities. And they're validating the potential value there. And monetization next.

Speaker #4: We hear words like, oh, this is a game changer. This is changing everything. There's a lot of value that's going to be created and so on and so forth.

Speaker #4: So that's very encouraging. And therefore, we are really sticking to the phasing we talked about before, which is: our number one priority is adoption, exploration, validation, right?

Speaker #3: And we're very transparent about that exact sequence with our accounts, saying at some point, of course, we will need to monetize. And the reaction from the accounts on the monetization is shared understanding that indeed the traditional way for us to monetize, which is attended consumption, with e365 or user-based subscriptions, and it's all about users, wouldn't quite work going forward when so much value is going to be created with AI itself interacting with our applications and using them at machine speed.

Speaker #4: Getting, making sure that accounts are aware of those capacities, that they're really adopting those capacities, and they're there. And monetization next. And we're very transparent about that exact sequence with our accounts, saying at some point, of course, we will need to monetize.

Speaker #3: And therefore, the metrics have to change. So we're taking this time off adoption, exploration, validation of our applications at the time, also to validate what is going to be the potential commercial model.

Speaker #4: And the reaction from the accounts on the monetization is shared understanding that indeed the traditional way for us to monetize, which is attended consumption, with E365 or a user-based subscriptions, and it's all about users, wouldn't quite work going forward when so much value is going to be created with AI itself interacting with our applications and using them at machine speed.

Speaker #3: So that when we start to monetize, there is great receptivity from our accounts on the way we're going to monetize that. We're not planning to monetize this year.

Speaker #3: We're planning to start monetizing next year. And you should expect us to monetize in a very reasonable way. What we don't want is a big price tag to become suddenly an obstacle for infrastructure organization to use these capabilities.

Speaker #4: And therefore, the metrics have to change. So we're taking this time of adoption, exploration, validation of our applications at the time, also to validate what is going to be the potential commercial model.

Speaker #4: So that when we start to monetize, there is great receptivity from our accounts on the way we're going to monetize that. We're not planning to monetize this year.

Speaker #3: It will be really going against what we're trying to achieve here. We want to unlock a lot of value and we want to unlock a lot of value for all the players of the value chain, from the end clients, because they will end up having much better design because they've been optimized at machine speed.

Speaker #4: We're planning to start monetizing next year. And you should expect us to monetize in a very reasonable way. What we don't want is a big price tag to become suddenly an obstacle for infrastructure organization to use these capabilities.

Speaker #3: For the engineering firms themselves, because potentially this is the opportunity for them now to evolve also their commercial model and capture a fair share of the value that's going to be created and for us as well as provider, right?

Speaker #4: It will be really going against what we're trying to achieve here. We want to unlock a lot of value and we want to unlock a lot of value for all the players of the value chain, from the end clients, because they will end up having much better designs because they've been optimized at machine speed.

Speaker #3: So we've been very thoughtful, very diligent on how we're introducing these capabilities. And then to your last question, about us having this very open approach, and letting our users use whatever AI systems they want, and using those assistants to interact with engineering data that is coming from our systems or third-party systems.

Speaker #4: For the engineering firms themselves, because potentially this is the opportunity for them now to evolve also their commercial model, and capture a fair share of the value that's going to be created.

Speaker #3: We absolutely want that. We welcome that, right? What we've learned with all the infrastructure organizations we've been engaging with in the context of the infrastructure AI initiative is that we need to be ready for all sorts of permutations in how exactly our applications are going to be used, how benefactor style is going to be used, how data is going to be used, right?

Speaker #4: And for us as well as provider, right? So we've been very thoughtful, very diligent on how we're introducing these capabilities. And then to your last question, about us having this very open approach, and letting our users use whatever AI systems they want, and using those assistants to interact with engineering data that is coming from our systems or third-party systems.

Speaker #3: Some of them are saying we want to use the Bentley AI system called Bentley Copilot, because it's a much better user experience. The users stay with the same Bentley applications.

Speaker #3: Others are saying, no, no, actually, we want to continue to use another AI assistant, for example, Claude, because we've been tailoring it with data that is specific to us as an engineering firm, for example.

Speaker #4: We absolutely want that. We welcome that, right? But what we've learned with all the infrastructure organizations we've been engaging with in the context of the infrastructure AI initiative is that we need to be ready for all sorts of permutations in how exactly our applications are going to be used, how benefactor style is going to be used, how data is going to be used, right?

Speaker #3: And we don't want users to have to swap and go from one AI assistant to another. We want them to continue to use exactly the same.

Speaker #4: Some of them are saying, "We want to use the Bentley AI system called Bentley Copilot because it's a much better user experience." So users stay with the same Bentley applications.

Speaker #3: So that's the kind of feedback that we're getting, which is a lot of creativity, and we need to be ready for all sorts of use cases.

Speaker #3: In that context, we're very clear that where we're bringing value, where we're adding value, and ultimately where we need to monetize, is with the underlying engineering applications, and then with Bentley infrastructure cloud overall, regardless exactly how these applications are used, whether it's with our own Copilot or with third-party assistants.

Speaker #4: Others are saying, no, no, actually, we want to continue to use another AI assistant, for example, Claude, because we've been tailoring it with data that is specific to us as an engineering firm, for example.

Speaker #4: And we don't want users to have to swap and go from one AI assistant to another. We want them to continue to use exactly the same.

Speaker #4: So that's the kind of feedback that we're getting, which is a lot of creativity, and we need to be ready for all sorts of use cases.

Speaker #3: Regardless how our data or the data that's been created with our platform has been used, whether it's through our Copilot or with third-party AI assistants, we need to be completely open to that and not having any artificial limit in order to do this.

Speaker #4: In that context, we're very clear that where we're bringing value, where we're adding value, and ultimately where we need to monetize, is with the underlying engineering applications, and then with the and then Bentley infrastructure cloud overall, regardless exactly how these applications are used, whether it's with our own Copilot or with third-party assistants.

Speaker #3: Again, we will monetize at the underlying level, at the underlying level, which are the engineering applications themselves, and Bentley infrastructure cloud.

Speaker #1: Great.

Speaker #2: That's super helpful. Thank you, Nicholas.

Speaker #1: Yeah, thanks. The next question comes from Kristen Owen from Oppenheimer.

Speaker #4: Great. Good morning. Thank you for taking the question. Wanted to dig into the sequence results a bit and specifically in mining. We're seeing a lot of capital discipline in the space.

Speaker #4: Regardless how our data or the data that's been created with our platform is being used, whether it's through our Copilot or with third-party AI assistant, we need to be completely open to that and not having any artificial limit in order to do this.

Speaker #4: So I'm wondering if you can unpack for us how much of the growth are you seeing from Greenfield versus maybe Brownfield expansion versus just this general trend toward adopting digital tools?

Speaker #4: Again, we will monetize at the underlying level—at the underlying level—which are the engineering applications themselves, and then infrastructure cloud.

Speaker #4: And then somewhat related, I'm also seeing across my coverage a lot of M&A in the digital mining technology space. So when you look at your acquisition pipeline, is this an area where you'd see opportunity for inorganic growth?

Speaker #1: That's super helpful. Thank you, Nicholas.

Speaker #2: Yeah, thanks. The next question comes from Kristen Owen from Oppenheimer.

Speaker #5: Great. Good morning. Thank you for taking the question. I wanted to dig into the sequence results a bit and specifically in mining. We're seeing a lot of capital discipline in the space.

Speaker #4: Thank you.

Speaker #3: Yeah. On the thank you, Kristen. On the first point, so yes, 2026 is probably going to be a record year in terms of investments in capex in mining.

Speaker #5: So I'm wondering if you can unpack for us how much of the growth are you seeing from greenfield versus maybe brownfield expansion versus just this general trend toward adopting digital tools?

Speaker #5: And then somewhat related, I'm also seeing across my coverage a lot of M&A in the digital mining technology space. So when you look at your acquisition pipeline, is this an area where you'd see opportunity for inorganic growth?

Speaker #3: With and we see it around the world. Across geographies, so it's very much is broad-based. And the kind of investment we're seeing is primarily Brownfield in order to have a much faster return on investment than high-risk, very long-term return on investments Greenfield investments.

Speaker #5: Thank you.

Speaker #4: Yeah. On the thank you, Kristen. On the first point, so yes, 2026 is probably going to be a record year in terms of investments in capex in mining.

Speaker #3: So it's primarily Brownfield. We're seeing it also with the use of our software. As we're tracking it, that it's primarily used for Brownfield rather than Greenfield.

Speaker #4: With and we see it around the world. Across geographies, so it's very much is broad-based. And the kind of investment we're seeing is primarily brownfield in order to have a much faster return on investment than high-risk, very long-term return on investments, greenfield investments.

Speaker #3: And why is that? It's because of this underlying trend of self-sufficiency. Countries around the world who want to get to critical minerals on their own and fast, because of the geopolitical tensions, because of the disruption to the supply chains I think there's wide understanding around the world on the critical nature of those minerals.

Speaker #4: So it's primarily brownfield. We're seeing it also with the use of our software. As we're tracking it, that it's primarily used for brownfield rather than greenfield.

Speaker #3: And the need to be able to access them without obstacles. So that's the underlying trend. And therefore, our growth as well with our software, which is being used for exploration and operations of mines, is also very broad-based.

Speaker #4: And why is that? It's because of this underlying trend of self-sufficiency. Countries around the world want to get to critical minerals on their own, and fast, because of the geopolitical tensions and the disruptions to supply chains.

Speaker #3: And we've also seen growth around the world. We've seen it with large accounts and smaller accounts. Especially with there's a mid-size mining company. So it's very encouraging.

Speaker #4: I think there's a wide understanding around the world on the critical nature of those minerals. And the need to be able to access them without obstacles.

Speaker #3: Because it's so broad-based, it means this is a quite durable from that standpoint. And then in terms of M&A or appetite remains the same.

Speaker #4: So that's the underlying trend. And therefore, our growth as well with our software, which is being used for exploration and operations of mines, is also very broad-based.

Speaker #3: And we did indicate already last quarter that besides asset analytics, which remains a big priority, we're definitely looking for other opportunities, including in resources.

Speaker #4: And we've also seen growth around the world. We've seen it with large accounts and smaller accounts—especially with those mid-size mining companies. So it's very encouraging.

Speaker #3: So if we see some assets out there that can help us excel our vision, that can help us excel our strategy, that can fill some gaps that we have, in helping mining companies get a better understanding of the subsurface, then we'll do it.

Speaker #4: Because it's so broad-based, it means this is quite durable from that standpoint. And then, in terms of M&A, our appetite remains the same.

Speaker #3: By the way, it's for mining. It could be also in geothermal, other sources of energy, et cetera. Resources overall.

Speaker #4: And we did indicate already last quarter that, besides asset analytics, which remains a big priority, we're definitely looking for other opportunities, including in resources.

Speaker #1: And it's still our expectation to be able to do that this year.

Speaker #4: Thank you.

Speaker #1: Thanks. The next question comes from Faith Bruner from William Blair.

Speaker #4: So if we see some assets out there that can help us excel our vision, that can help us excel our strategy, that can fill some gaps that we have, in helping mining companies get a better understanding of the subsurface, then we'll do it.

Speaker #5: Hey, guys. Thanks for taking my question. Maybe just wanted to jump into some of the AI noise. It seems like lately we hear new announcement from anyone talking about some new AI solution, whether it's a broad infrastructure use case, a more specialized.

Speaker #4: By the way, it's for mining. It could be also in geothermal, other sources of energy, et cetera. Resources overall.

Speaker #5: So maybe what do you guys thinking about as the competitive landscape kind of shifts and how can this maybe play into your open ecosystem approach for AI?

Speaker #3: And it's still our expectation to be able to do that this year.

Speaker #5: Thank you.

Speaker #2: Thanks. The next question comes from Faith Bruner from William Blair.

Speaker #3: So there's a lot of noise. In our space, maybe not so much in core infrastructure. We're going to see it in existing spaces like AC or, let's say, buildings.

Speaker #6: Hey, guys. Thanks for taking my question. Maybe just wanted to jump into some of the AI noise. It seems like lately we hear new announcement from anyone talking about some new AI solution, whether it's a broad infrastructure use case, a more specialized.

Speaker #3: There's quite a bit of activities there. And they're indicative of where things could go. What's quite clear is that a lot of use cases are more at the edges of what we're doing.

Speaker #6: So maybe what do you guys thinking about as the competitive landscape kind of shifts and how can this maybe play into your open ecosystem approach for AI?

Speaker #3: And when it comes to using AI in, let's say, core engineering and engineering for infrastructure, there's really no better value proposition than this combination of our own engineering applications that are trusted, that are already integrated in workflows across infrastructure value chains around the world.

Speaker #4: So there's a lot of noise. In our space, maybe not so much in core infrastructure. We're going to see it in adjacent spaces like AC or let's say buildings.

Speaker #4: There's quite a bit of activities there. And they're indicative of where things could go. What's quite clear is that a lot of use cases are more at the edges of what we're doing.

Speaker #3: Together with third-party AI assistance, AI models, LLMs, right? And that combination is here and now. So this is not a startup activity. It's not a this is where it could go.

Speaker #4: And when it comes to using AI in, let's say, core engineering and engineering for infrastructure, there's really no better value proposition than this combination of our own engineering applications that are trusted, that are already integrated in workflows across infrastructure value chains around the world.

Speaker #3: It's already there. Those capabilities are there. And so when we're engaging with accounts, this is where the conversation is, which is, let's not go into in very forward-looking conversations.

Speaker #4: Together with third-party AI assistance, AI models, LLMs, right? And that combination is here and now. So this is not a startup activity. It's not a this is where it could go.

Speaker #3: Let's just talk about what is possible right now. And this is where typically the eyes then open very, very wide. When they realize the capabilities, the possibilities, the value that can be created today already.

Speaker #1: By myself, I'm glad to hear each occasion of engineering organization infrastructure engineering organizations adopting AI for whatever it is they're adopting it for. In my ideal these organizations would take pride in promoting and marketing their proprietary AI approaches to their overall strategy to optimize design.

Speaker #4: It's already there. Those capabilities are there. And so when we're engaging with accounts, this is where the conversation is, which is let's not go into in very forward-looking conversations.

Speaker #4: Let's just talk about what is possible right now. And this is where typically the eyes and open very, very wide. When they realize the capacities, the possibilities, the value that can be created today already.

Speaker #3: By myself, I'm glad to hear each occasion of engineering organization, infrastructure engineering organizations adopting AI for whatever it is they're adopting it for. In my ideal, these organizations would take pride in promoting and marketing their proprietary AI approaches to their overall strategy to optimize designs.

Speaker #1: And heuristics, you can imagine learning applications and so forth that would be particular and specific and proprietary. And there have been in the past waves of innovation in engineering design that were where organizations competed on the quality and differentiation of their approaches.

Speaker #1: In all cases, that can be accelerated if they use existing functionality for the modeling and simulation so that they don't need to take on building up from the ground what exists already.

Speaker #3: And heuristics, you can imagine learning applications and so forth that would be particular and specific and proprietary. And there have been in the past waves of innovation in engineering design that were where organizations competed on the quality and differentiation of their approaches.

Speaker #1: It's in the how the solution space is explored and learned from and what you optimize and so forth that there is so much to be gained.

Speaker #1: And that should be proprietary and specialized and differentiated. And AI can accelerate that for our user organizations. And that's why the open approach that Nicholas described is the right one for us.

Speaker #3: In all cases, that can be accelerated if they use existing functionality for the modeling and simulation so that they don't need to take on building up from the ground what exists already.

Speaker #3: Thanks. The next question comes from Jay Vleeschhouwer from Griffin Securities.

Speaker #2: Thank you. Good morning. First part of the question is from Werner. For the quarter and for the year to date, your increase in sales and marketing was fairly considerable and more than the increase in R&D on a smaller base.

Speaker #3: It's in how the solution space is explored and learned from, and what you optimize, and so forth, that there's so much to be gained. That should be proprietary, specialized, and differentiated, and AI can accelerate that for our user organizations.

Speaker #2: Spending what is your expectation for R&D for the remainder of the year and into 2027, particularly when we think about the recent uptrend, for example, in your engineering open positions which have been noticeably higher over the last few months.

Speaker #3: And that's why the open approach that Nicholas described is the right one for us.

Speaker #2: Thanks. The next question comes from Jay Blechauer from Griffin Securities.

Speaker #2: And then the technical side of that question is for Greg and Nicholas, could you remind us what your R&D and developmental priorities are including but they're not limited to your design side of the portfolio, which you've been highlighting as a priority since 2022, but maybe bring us up to date on all of that.

Speaker #7: Thank you. Good morning. First part of the question is from Werner. For the quarter and for the year to date, your increase in sales and marketing was fairly considerable and more than the increase in R&D on a smaller base.

Speaker #7: Spending what is your expectation for R&D for the remainder of the year and into 2027, particularly when we think about the recent uptrend, for example, in your engineering open positions which have been noticeably higher over the last few months?

Speaker #2: Thank you.

Speaker #1: Well, maybe I'll start with the latter Jay, because then it's good context for the conversation about where exactly we're investing. So the priorities are AI in Bentley Open Applications.

Speaker #7: And then the technical side of that question is for Greg and Nicholas, could you remind us what your R&D and developmental priorities are including but they're not limited to your design side of the portfolio, which you've been highlighting as a priority since 2022, but maybe bring us up to date on all of that.

Speaker #1: AI with Bentley Infrastructure Cloud and then a synergy across a full portfolio including our SQLite portfolio. So across, if you want, Bentley Infrastructure Cloud and SQLite.

Speaker #1: Those are the priorities for my R&D standpoint. And then within AI for Engineering Applications, then it's both building our own AI capabilities, which we haven't talked about this call, but also instrumenting our applications to interact with third-party AI, which we've discussed at length now.

Speaker #7: Thank you.

Speaker #4: Well, maybe I'll start with the latter Jay because then it's good context for the conversation about where exactly we're investing. So the priorities are AI in Bentley Open Applications.

Speaker #1: So those are the priorities. So when it comes to investments, I will say going forward, we're leaning very hard in adopting AI internally. And across all functions.

Speaker #4: AI with Bentley Infrastructure Cloud and then a synergy across a full portfolio including our Cequence portfolio. So across, if you want, Bentley Infrastructure Cloud and Cequence.

Speaker #4: Those are the priorities for my R&D standpoint. And then within AI for engineering applications, then it's both building our own AI capabilities, which we haven't talked about this call, but also instrumenting our applications to interact with third-party AI with which we've discussed at length now, right?

Speaker #1: What I think we can expect is that in the longer run, we grow a certain functions as a percentage of revenue faster than others.

Speaker #1: And you may have heard some of us talk about growing R&D in particular, and of course, we will do that as a software company.

Speaker #4: So those are the priorities. So when it comes to investments, I will say going forward, we're leaning very hard in adopting AI internally and across all functions.

Speaker #1: There's so much potential for AI that we that we want more engineers and we want them to work much faster thanks to the AI capabilities.

Speaker #1: But most probably, we'll also be an increase of spend as a percentage of revenue into go-to-market functions. Because of the point I mentioned earlier, which is there's so much noise around AI that we need to cut through it.

Speaker #4: What I think we can expect is that in the longer run, we grow a certain functions as a percentage of revenue faster than others.

Speaker #4: And you may have heard some of us talk about growing R&D in particular, and of course, we will do that as a software company.

Speaker #1: And that does require investment in marketing. And it requires investments also with our success force application engineers, solution architects, to be right there as four deployed engineers with our accounts to make sure they're aware of these capabilities, they adopt these capabilities, they explore the potential, they validate the value.

Speaker #4: There's so much potential for AI that we that we want more engineers and we want them to work much faster thanks to the AI capabilities.

Speaker #4: But most probably will also be an increase of spend as a percentage of revenue into go-to-market functions. Because of the point I mentioned earlier, which is there's so much noise around AI that we need to cut through it.

Speaker #3: Great. Thank you. Next question comes from Andrew Diazberry from BMP.

Speaker #4: Thanks. It's good to see everyone. And I just wanted to ask a question on in terms of your fastest growing segments, resources, utilities, and the grid.

Speaker #4: And that does require investment in marketing. And it requires investments also with our success force application engineers, solution architects to be right there as four deployed engineers with our accounts to make sure they're aware of these capabilities that adopt these capabilities, they explore the potential, they validate the value.

Speaker #4: And they could be construed as kind of related or indirectly related to data center spend and AI spend. And I'm just wondering, number one, would you agree with that?

Speaker #4: Number two, are you concerned that they could potentially slow in the future? And then I guess lastly, if it does slow, do you think that opens up capacity to work on other projects?

Speaker #2: Great, thank you. Next question comes from Andrew DiGasperri from BMP.

Speaker #4: Thanks.

Speaker #5: Thanks. It's good to see everyone. And just wanted to ask a question on in terms of your fastest growing segments, resources, utilities in the grid.

Speaker #1: So one point of clarification that resources is indeed our fastest growing sector. And then public works utilities in totality also grew strongly in Q2.

Speaker #5: And they could be construed as kind of related or indirectly related to data center spend and AI spend. I'm just wondering, number one, would you agree with that?

Speaker #1: So not just electric grid. It's not like the electric grid was growing necessarily much faster than other parts of the public works utility sector, such as transportation, our water utilities, et cetera.

Speaker #5: Number two, are you concerned that they could potentially slow in the future? And then I guess lastly, if it does slow, do you think that opens up capacity to work on other projects?

Speaker #1: There's definitely a link with the big investments in data centers. This is what's driving for self-sufficiency when it comes to critical minerals. This is also what's putting a lot of stress on the electric grid.

Speaker #5: Thanks.

Speaker #4: So one point of clarification that resources is indeed our fastest growing sector. And then public works utilities in totality also grew strongly in Q2.

Speaker #1: So for sure, there's a link with investments in data centers. With respect to durability, I think the need for critical minerals goes way beyond what's needed for data centers.

Speaker #4: So not just electric grid. It's not like the electric grid was growing necessarily much faster than other parts of the public works utility sector, such as transportation, our water utilities, etc.

Speaker #1: And I think investments on the electric grid also needed way beyond what's also needed for data centers. I think the under here of the need to secure critical minerals and the need to make the electric grid more resilient to potentially expand it, et cetera, that goes beyond data centers.

Speaker #4: There's definitely a link with the big investments in data centers. This is what's driving for self-sufficiency when it comes to critical minerals. This is also what's putting a lot of stress on the electric grid.

Speaker #4: So for sure, there's a link with investments in data centers. With respect to durability, I think the need for critical minerals goes way beyond what's needed for data centers.

Speaker #1: So we are confident as well about the robustness of those end markets.

Speaker #3: Thanks, Andrew. The next question comes from Alexei Gogolev from JP Morgan.

Speaker #4: And I think investments in the electric grid are also needed—way beyond what's required for data centers. I think the underpinning here is the need to secure critical minerals and the need to make the electric grid more resilient, to potentially expand it, etc. That goes beyond data centers.

Speaker #5: Thank you. Eric and hello everyone. Greg, I think in the past you've talked about how tokens are trivial relative to engineering modeling and simulation compute, and that much execution can remain local.

Speaker #5: So how does that shape your long-term gross margin profile for agentic workflows and where do you see the main incremental cost centers?

Speaker #4: So we are confident as well about the robustness of those end markets.

Speaker #1: Well, I think all the time there's more awareness that things are going to wind up being hybrid choices. We would like those choices to be able to be made by our accounts.

Speaker #2: Thanks, Andrew. The next question comes from Alexi Gogolev from JP Morgan.

Speaker #6: Thank you. Eric and hello everyone. Greg, I think in the past you've talked about how tokens are trivial relative to engineering modeling and simulation compute.

Speaker #1: And engineering firms and owner operators, each have reasons to, as I mentioned, to ultimately favor relatively sovereign computing. For reasons of their own sensitivities, that will be I think technically feasible as well with coming hardware advances.

Speaker #6: And as much execution can remain local. So how does that shape your long-term gross margin profile for agentic workflows and where do you see the main incremental cost centers?

Speaker #3: Well, I think all the time there's more awareness that things are going to wind up being hybrid choices. We would like those choices to be able to be made by our accounts.

Speaker #1: And I think my answer is as far as its impact on our gross margins, it's relatively it's likely to be relatively less impact on our gross margins as a result than perhaps others who are only investing in cloud-based computing requirements because I don't think the world back to the previous question is going to be covered with data centers going forward and that there won't be reasons to balance out the computing form factors in a hybrid way.

Speaker #3: And engineering firms and owner-operators, each have reasons to, as I mentioned, to ultimately favor relatively sovereign computing. For reasons of their own sensitivities, that will be I think technically feasible as well with coming hardware advances.

Speaker #3: And I think my answer is as far as its impact on our gross margins, it's relatively it's likely to be relatively less impact on our gross margins as a result than perhaps others who are only investing in cloud-based computing requirements because I don't think the world back to the previous question is going to be covered with data centers going forward and that there won't be reasons to balance out the computing form factors in a hybrid way.

Speaker #1: Providing AI is a good business, but that can include providing it in local environments as well.

Speaker #3: Thanks.

Speaker #5: Thank you.

Speaker #3: The next question comes from who I have here. Taylor McGinnis from UBS.

Speaker #6: Yeah, hi team. Thanks so much for answering my question. I'd actually love to hit on cash flow. So it looks like in order to hit the high end of the cash flow guide, you have to assume pretty material second-half cash flow margin expansion.

Speaker #3: Providing AI is a good business, but that can include providing it in local environments as well.

Speaker #6: Compared to it being down year over year in the first half. So could you just walk us through where you're tracking in terms of the guidance range?

Speaker #2: Thanks.

Speaker #6: What would cause the big reversal in the second half of expense growth, particularly given some of the AI investments and other areas?

Speaker #6: Thank you.

Speaker #2: The next question comes from who I have here. Taylor McGuinness from UBS.

Speaker #7: Yeah. Hi team. Thanks so much for answering my question. I'd actually love to hit on cash flow. So it looks like in order to hit the high end of the cash flow guide, you have to assume pretty material second-half cash flow margin expansion.

Speaker #3: Sure. Maybe I take that. So Taylor, we are in H1 exactly where we messaged in Q4 25 in our Outlook where we would be expected to be so we have 47% in H1 of our full-year Outlook and we guided towards 45 to 50% if I take the midpoint of the free cash flow Outlook.

Speaker #7: Compared to it being down year over year in the first half. So could you just walk us through where you're tracking in terms of the guidance range?

Speaker #7: What would cause the big reversal in the second half of expense growth, particularly given some of the AI investments and other areas?

Speaker #3: There were two things we pointed out in Q4 last year that will lead to a shift between from Q2 into sorry, from H2 into H1 in 2026.

Speaker #2: Sure. Maybe I take that. So Taylor, we are in H1 exactly where we messaged in Q4 25 in our Outlook where we would be expected to be so we have 47% in H1 of our full-year Outlook and we guide it towards 45 to 50% if I take the midpoint of the free cash flow Outlook.

Speaker #3: One was that we had really strong collections at the end of 2025, which benefited 2025, but which was a higher comparison than for Q1 2026.

Speaker #3: And then we talked about that we are doing investments into the business early in the year which also impacted the profitability and the cash flow in the first half of the year.

Speaker #2: There were two things we pointed out in Q4 last year that will lead to a shift between from Q2 into sorry, from H2 into H1 in 2026.

Speaker #3: So it's really just timing. It's working capital, mostly. And it's quarter to quarter movements that really catch up quickly between quarters. The underlying model with our recurring revenues negative working capital low capex, all of that is still intact.

Speaker #2: One was that we had really strong collections at the end of 2025, which benefited 2025, but which was a higher comparison than for Q1 2026.

Speaker #2: And then we talked about that we are doing investments into the business early in the year. Which also impacted the profitability and the cash flow in the first half of the year.

Speaker #3: So expect 50 to 55% of cash flow generated in the second half of the year and we are on point to reach our free cash flow outlook.

Speaker #2: So it's really just timing. It's working capital mostly. And it's quarter to quarter movements that really catch up quickly between quarters. The underlying model with our recurring revenues negative working capital low capex, all of that is still intact.

Speaker #5: Thanks.

Speaker #1: I want to just jump in to say that on expenses and margin, you can count on us hitting the goal for the year because it's a fundamental incentive requirement for our executives and we can manage to it and we do.

Speaker #1: Anything that happens during the year is just quarterly planning and it's not hard to achieve the goal because we manage to it. However, in terms of cash flow, we can't we've been surprised to have invoices be paid before their due date in previous years and that you just take it when it comes.

Speaker #2: So expect 50 to 55% of cash flow generated in the second half of the year. And we are on point to reach our free cash flow outlook.

Speaker #3: I want to just jump in to say that on expenses and margin, you can count on us hitting the goal for the year because it's a fundamental incentive requirement for our executives and we can manage to it and we do.

Speaker #3: Thanks. The next question comes from Joshua Tilton from Wolf Research.

Speaker #7: Hi guys, this is Arsenion for Josh. Thanks for taking the question. Just wanted to kind of ask if you could discuss maybe whether there's any benefit to including some more project-wise functionality.

Speaker #3: Anything that happens during the year is just quarterly planning and it's not hard to achieve the goal because we manage to it. However, in terms of cash flow, we can't we've been surprised I've been surprised to have invoices be paid before their due date in previous years and that you just take it when it comes.

Speaker #7: I think that was updated in E365 consumption. Whether that's driving any higher consumption or supporting higher ceiling resets. And kind of with 3Q having that lowest level of ceiling resets, you said kind of the same seasonal growth as fiscal 25, Q1 and Q2, but still marginally outperformed at both in Q1 and Q2.

Speaker #2: Thanks. And this question comes from Joshua Tilton from Wolf Research.

Speaker #7: So when we're thinking continued momentum on organic basis, should investors kind of expect a similar slight improvement in organic sequential growth in 3Q on those ceiling resets?

Speaker #5: Hi guys. This is Arsenion for Josh. Thanks for taking the question. Just wanted to kind of ask if you could discuss maybe whether there's any benefit to including some more project-wise functionality.

Speaker #5: I think that was updated in E365 consumption. Whether that's driving any higher consumption or supporting higher ceiling resets. And kind of with 3Q having that lowest level of ceiling resets, you said kind of the same seasonal growth as fiscal 25, Q1 and Q2, but still marginally outperformed that both in Q1 and Q2.

Speaker #1: All right. Let's a number

Speaker #4: of questions there as well. So hopefully I won't miss any. First of all, strong renewals was definitely a growth driver in Q2. It is our second largest quarter for renewals, but it's a distant second.

Speaker #4: The first one is Q4. But when it came to floor and ceiling uplifts, it was aligned with what we've seen in previous quarters. So around 10%.

Speaker #5: So when we're thinking continued momentum on organic basis, should investors kind of expect a similar slight improvement in organic sequential growth in 3Q on those ceiling resets?

Speaker #4: Which gives us a lot of confidence because this is always a reflection both of past consumption but also what our accounts are seeing as the demand in their end markets.

Speaker #6: All right. Let's a number of questions there as well. So hopefully I won't miss any. First of all, strong renewals was definitely a growth driver in Q2.

Speaker #6: It is our second largest quarter for renewals, but it's a distant second. The first one is Q4. But when it came to floor and ceiling uplifts, it was aligned with what we've seen in previous quarters.

Speaker #4: So it's a clear vote of confidence for them. To agree on these uplifts. That's what we've seen in Q2 and it gives us a lot of confidence for the remainder of the year.

Speaker #4: Okay. Now, on project-wise, I would say Ben Infrastructure Cloud overall is a growth driver. We introduced Connect at the end of 2025 and it is definitely a growth driver for us.

Speaker #6: So, around 10%, which gives us a lot of confidence because this is always a reflection both of past consumption, but also what our accounts are seeing as the demand in their end markets.

Speaker #4: The value proposition resonates a lot with infrastructure organizations. And this helps really support growth with both existing accounts and potentially new accounts as well.

Speaker #6: So it's a clear vote of confidence for them to agree on these uplifts. So that's what we've seen in Q2 and it gives us a lot of confidence for the remainder of the year.

Speaker #6: Okay. Now, on project-wise, I would say Ben Infrastructure Cloud overall is a growth driver. We introduced Connect at the end of 2025. And it is definitely a growth driver for us.

Speaker #3: Thank you. Great. Thanks. And the last question comes from Tomer Zilberman from B of A.

Speaker #2: I wanted to go back to the line of question on AI competition, but maybe frame it a little bit differently. I think since last quarter, of course, there's been the announcement around Prometheus and I think also there has been a large European model announced a partnership with aerospace company for engineering simulation and design.

Speaker #6: The value proposition resonates a lot with infrastructure organizations. And this helps really support growth with both existing accounts and potentially new accounts as well.

Speaker #2: So Nicholas, I appreciate your earlier comments that these are kind of different areas of focus versus your core competency in infrastructure engineering, but is there any risk that they eventually start converging to your area?

Speaker #2: Thank you. Great. Thanks. And the last question comes from Tomer Zilberman from B of A.

Speaker #2: And is that driving any sort of hesitancy from customers or kind of a desire to wait to see that these models improve and get better and eventually get to the area of infrastructure engineering?

Speaker #4: Hey guys. Can you hear me?

Speaker #6: Yep.

Speaker #4: I think you can hear me, but you can see my empty desk in the office, as I'm working from home today. So, just hear my voice.

Speaker #4: I wanted to go back to the line of question on AI competition, but maybe frame it a little bit differently. I think since last quarter, of course, there's been the announcement around Prometheus and I think also there has been a large European model announced a partnership with aerospace company for engineering simulation and design.

Speaker #1: Well, Prometheus is particularly interesting. And it's a bit obscure, which is fine. At its early stage, what I think we can say is such are the level of its ambitions as measured by its investments so far and what's talked about is that software and providing software tools can't turn out to be very much of what it has in mind given the relative size of that market compared to its scale.

Speaker #4: So Nicholas, I appreciate your earlier comments that these are kind of different areas of focus versus your core competency in infrastructure engineering, but is there any risk that they eventually start converging to your area?

Speaker #4: And is that driving any sort of hesitancy from customers or kind of a desire to wait to see that these models improve and get better and eventually get to the area of infrastructure engineering?

Speaker #1: However, these are conspicuous investments in the world and I think it does serve to help increase the enthusiasm on the part of engineers about what AI can do for them and what we can start to do now with their to provide them assistance.

Speaker #3: Well, Prometheus is particularly interesting. And it's a bit obscure, which is fine. It's early stage. What I think we can say is such are the level of its ambitions as measured by its investments so far and what's talked about is that software and providing software tools can't turn out to be very much of what it has in mind given the relative size of that market compared to its scale.

Speaker #1: I believe that what these organizations develop will be useful and they include engineering functionality for their own purposes, but their own purposes are unlikely to be particularly competitive with our place in the market.

Speaker #4: And to the other question with respect to our accounts hesitation, because they hear things like some of these investments absolutely not. This is not coming up at all.

Speaker #3: However, these are conspicuous investments in the world and I think it does serve to help increase the enthusiasm on the part of engineers about what AI can do for them and what we can start to do now with their to provide them assistance.

Speaker #4: This is not the noise that I'm talking about. The noise is also their own explorations about what they can do with AI. And what we cut and the way we're cutting through is just really demonstrating what's possible here and now.

Speaker #4: Without speculation, right? What we're offering is possible now and it's offering tremendous value for everyone.

Speaker #3: I believe that what these organizations develop will be useful and may include engineering functionality for their own purposes, but their own purposes are unlikely to be particularly competitive with our place in the market.

Speaker #3: That concludes our call today. Thanks for your interest and time. We look forward to updating you on our performance in coming quarters. Thank you.

Speaker #6: And to the other question with respect to our accounts' hesitation, because they hear things like, "Some of these investments absolutely not, this is not coming up at all."

Speaker #6: This is not the noise that I'm talking about. The noise is also their own explorations about what they can do with AI and what we could and the way we're cutting through is just really demonstrating what's possible here and now.

Speaker #6: Without speculation, right? What we're offering is possible now and it's offering tremendous value for everyone.

Speaker #2: That concludes our call today. Thanks for your interest and time. We look forward to updating you on our performance in coming quarters. Thank you.

Speaker #6: Thank you.

Q2 2026 Bentley Systems Inc Earnings Call

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