Bentley Systems, Incorporated Class B Common Stock 2026 Q2 Earnings Call

Welcome, thanks as always to each of you for your interest and attention. Bentley Systems' positively exemplary operating results for 26Q2 and the year, as we see it, accord with our expectations to sustain foreseeably our dependable double-digit growth record. Early in 2025, I quantified that our outlook range for last year would serve to at least double over the five 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. 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. Within these priorities, relative proportions fluctuate, presently most benefiting our offerings for integrated grid and for subsurface resources.

Infrastructure engineering consumption has tended overall to remain predictively consistent, perhaps due to the constancy of engineering resource constraints. 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. 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.

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. Our emerging asset analytics offerings, monetized through asset consumption subscriptions per asset, are breaking through to finally leverage digital twins in operations and maintenance for infrastructure owner/operators. 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. 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 1,000 Successforce 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.

Underscoring our incumbency advantage in helping these firms to leverage their engineers with AI agentic assistants 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 each. 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. The most recent 2025 BI 500, it no longer includes Russia, own and manage about $21 trillion 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. 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. 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/facility sector, where we are less focused, 90% of ex-China top owners' infrastructure assets are managed by BSY accounts.

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. 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 Fortasset Analytics. 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/facility sector, and collectively representing about 20% of our overall business.

Annual BSY expenditures currently average $21 per million dollars of the $15.5 trillion of net infrastructure assets owned by these 346 ex-China top owners who are BSY accounts. 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. 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 in 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.

In sum, I believe this enterprise account springboard will continue foreseeably to improve Bentley Systems' own economics and growth prospects. 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. 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 ASC 606 subscription accounting, other than for BSY, with our consumption-dominated revenues being recognized primarily ratably to the virtual exclusion of multi-year noise. 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 2026 Q2. 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. 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. 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 SBC. 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 SBC margin, served indeed to double over the last four years this valuation metric, which to me seems most economically appropriate to us shareholders.

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 SBC dilution. Here are the quarterly expenditure amounts for all repurchases, including de facto repurchases associated with net distributions through this period up until 2025 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. 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 Seequent and PowerLine Systems in 2021 and 2022 to a tolerably optimum range of about 2x.

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. What eventuated during 2026 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. We variously repurchased 3.1 million shares during 2026 Q2, and subject to remaining within an optimal leverage range, I expect us to continue to responsibly act upon any such opportunities going forward. Indeed, the net result of this SBC 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.

In fact, the redemption of our 2026 maturing convertible debt during 2026 Q1 reduced our fully diluted share count by about 3%, as will presumably recur in 2027 Q3 with the maturity of our remaining convertible debt. Reflecting a compounded average growth rate of negative 1% through this period, at the end of 2026 Q2, our fully diluted share count was down to 319 million shares. We thank you for being among, or interested in becoming, or informing those of us who are the holders of those shares. Now over to Nicholas and then Werner to cover this quarter's developments. Thank you. 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. 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. 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. I also shared that we had released our first MCP server for STAAD.