Bentley Systems, Incorporated (NASDAQ:BSY) Q3 2023 Earnings Call Transcript

In Asia Pacific, the main growth drivers were Australia and India. In the region, transportation water continued to be strong performance. China continued to weigh down broader ARR growth given the preference there for perpetual licenses. Returning to the Departments of Transportation in the U.S., we are partnering with the DOTs in new ways, both to help them secure funding and help them in going digital across their respective ecosystems. We are squarely in year two of the IIJA’s implementation and new and increased funding streams are available for DOTs to take advantage of. For example, we helped 13 departments apply for federal advanced digital construction management systems grants, which can fund software purchases. We believe these efforts will help strengthen our momentum next year as these grants get awarded.

Despite the new funding, the DOTs are also impacted by engineering resource capacity constraints, which create an exciting opportunity for us to help them drive efficiency. For example, we partnered with AASHTO, a nonprofit organization of all U.S. state DOTs to support digital delivery across their value chain, including streamlined design to construction processes. Overall, we are excited about the expanding opportunities with the DOTs and our increasing role as a trusted partner. Regarding products, the main growth drivers are also in line with the previous quarter. We had noticeable growth with our civil engineering applications, OpenRoads and OpenBridge. Our structural engineering application STAAD and SACS as well as PLS for electrical transmission structures, we’ve also seen continued success with our open flows water modeling application, which is becoming a go-to product for water infrastructure around the world.

As Greg mentioned, 2023 was a groundbreaking year for Infrastructure Intelligence. We have been impressed by the progress made by infrastructure organizations in leveraging data to improve project delivery and asset performance as exemplified by the Going Digital Awards finalist. If data is the obvious foundation of infrastructure intelligence, digital wins of the building blocks. Digital Twins are used to unlock engineering data from FARs so that it can be analyzed, reuse across projects enrich with operational and enterprise data and mobilize across infrastructure life cycle. Because of the power of Digital Twins, we are evolving our entire product portfolio to leverage iTwin or Digital Twin platform to accelerate infrastructure intelligence.

At Year in Infrastructure last year, we launched Bentley Infrastructure Cloud, including ProjectWise, part by iTwin. This year, we announced that we’re bringing iTwin to Bentley open applications, starting with the next release of MicroStation, for systematic use of Digital Twins in the design phase of the infrastructure life cycle. This will enable users to collaborate in real time, evaluate the impact of changes more seamlessly and significantly reduced rework in errors, resulting in better designs faster. When we talk about infrastructure intelligence, we, of course, think about the significant role that artificial intelligence can play in improving project delivery and asset performance. AI was an important topic at the infrastructure and it was top of mind for the jury firm CEOs I met two weeks ago.

They seek opportunities to use AI to increase exponentially, the efficiency and effectiveness of the engineers. As I mentioned last quarter, Bentley is not new to AI. We already use AI in our software for asset monitoring, and we see huge potential for generative AI during the design phase of the infrastructure life cycle. We believe generative AI will empower not replace infrastructure engineers. Consider our own software engineers use GitHub Copilot, a generative AI tool to assist with development by generating routine or basic code, documentation, automated test cases and more. We envision a comparable copilot for infrastructure engineers which can take on mundane and time-consuming tasks during the design process so that engineers can focus on higher-value activities.

At Year in Infrastructure, we presented our approach to generative AI for infrastructure engineering beginning with an AI agent that assists engineers in further optimizing site layout by leveraging designs and data from their previous projects. We also showed how generative AI can be applied to minimize time spent on product documentation by automating drawing production with fit-for-purpose and notations. Capabilities like this can improve engineers productivity and their overall work experience, both being essential in light of the engineering resource capacity gap. Of course, to train generative AI models, you need data. And we have a responsibility to our users to be very explicit about our approach to their data. We presented our commitment to data stewardship at Year in Infrastructure.

While we are committed to help our users derive even more value from the engineering data they secure in Bentley Infrastructure Cloud, including maximizing its potential for generative AI, we are also clear that they retain all access and control over it. Our users’ data is their data, always. They get to decide how to use it to train AI for their benefit. One last stop, for infrastructure engineering, as proven by our software enduring experience, the results will be better, not weaker from accounts for use of their own product data rather than the least common denominator of unknown engineering data that will be somehow aggregated. With that said, I will now hand over to Werner for details of our financial results.