Michael Funk: Hey, good morning guys. Thank you again for the time and Greg, thank you so much for the time you have given us over the years, and congratulations to you. And you as well Nicholas. So Greg, earlier you mentioned greater focus on marketing is one thing Nicholas has brought to Bentley. So to put it another way, I guess, where do you believe there have been deficiencies in marketing and how can you improve?
Greg Bentley: Well, Nicholas is a particularly good fit for our company because we recruited him as Chief Product Officer. And he has a real zeal for product management. You’ve been hearing some of that, the chops and so forth that make a difference in how you fit into a company of engineers for engineers. But prior to being a public company, we felt more entitled to stay in our comfort zone. And for instance, we never tried in SMB. As you know, we never had any e-commerce transaction ever until we were a public company and 36 years of age. So what’s important going forward is that we identify what opportunities we hadn’t taken advantage of and be sure we configure ourselves to be able to be competitively superior there as well.
And we’ve got to start on that with, Nicholas, with excellent new marketing resources we just announced in our company. I have to smile when I say we have a wonderful new Chief Storyteller, who comes to us from Amazon and prior to that, GE. And I know Eric mentioned our infrastructure year book, just published in hard copy. I hope everyone will take a look at that. And read stories like that project in water and others with SYNCHRO and so forth that are ready to tell, that are — the reason that infrastructure improves our economy and environment at the same time, and we want to take a part of infrastructure engineers in telling those stories. So I think it’s all green light, all it’s — we’re so pleased by the return on investment in SMB. It is just symbolic of something that we couldn’t be bothered with at one point in time that’s helping balance the business and balance and roundedness and both sides of a brand are what I’m expecting from your team, Nicholas, I’m pointing to you from the screen.
Thank you very much.
Michael Funk: Great. Thank you Greg and congratulations again to you.
Greg Bentley: So I’m still in my CEO seat for another two months.
Michael Funk: Of course you are. Okay, take care.
Eric Boyer: Next question comes from Dylan Becker from William Blair.
Dylan Becker: Great, thanks guys. Congrats Greg, congrats Nicholas, and maybe first for the happy early birthday, Greg. Nicholas, you called out some of the U.S. transmission reform that’s potentially accelerating investment on the energy side. I wonder how you kind of pair that because I think that was kind of somewhat of a gatekeeper of incremental new spend with some of the sustainability initiatives and maybe how that can kind of pair with asset analytics from your perspective, Greg, around things like reliability, resiliency, intermittency, and things of the like, given that always on is maybe now more readily available or readily addressable, if that makes sense?
Nicholas Cumins: I will get started and — so we’re starting to — for the past few quarters, we start to see some, let’s say, announcements around IAG funding for the electric grid, all related to expanding the grid. And we do need to expand the grid, especially to go and tap into a renewable source of energy, which are typically quite far away from the point of consumption. And I think the estimate is that we need to expand it by two third by 2035 in order to meet our clean energy targets in the U.S. And indeed, the biggest issue we see, the limiting factor for the expansion of the grid is permitting. So we saw some good news from the White House, but we are really cautiously optimistic, right. They’re basically saying that within a standard two-year schedule, all the environmental reviews will happen for the projects that is primarily actually for the clean energy projects, and that should be a gain of 50% in review time.
We are cautiously optimistic. We need to see exactly how does that translate. In the meantime, however, while we are already quite busy, our users are already quite busy using PLS or Power Line System tools in order to take care of the existing grid. And our existing grid is old, and it’s a potential issue with climate change, with extreme weather events, etcetera. So we still see PLS growing quite fast, even before we’re talking about the expansion of the electric grid actually happening.
Dylan Becker: Great, thank you very much.
Eric Boyer: Thanks Dylan. Next question comes from [indiscernible] from Wolfe Research.
Unidentified Analyst : Thanks for taking the question. This is Orsetti Manovich [ph] on for Josh Tilton. Congratulations, Nicholas. And congratulations, Greg, for your successful tenure as CEO. Wanted to ask on Digital Twin revenue from iTwin. I think the last time you had a target was for eight figures of ARR, which you met exiting the fourth quarter of 2020. Where are we today, like has that doubled and how accretive has it been to overall ARR growth? And then just a brief follow-up to make sure that we understand the comment on ARR regarding the floor and ceiling dynamic of E365 renewals. So in this scenario where in the fourth quarter, a renewal was made with the floor and ceiling reset. And in the following first quarter, the consumption of E365 was below the floor set in the fourth quarter. The ARR contribution in that first quarter is based on the floor for consumption set in the fourth quarter and not based on the consumption in the first quarter? Thank you.
Greg Bentley: Yes. So I’ll answer that last one first since it’s in our mind. The ARR growth for the first quarter was zero because the consumption occurred, but it didn’t get up to the level of a floor. The level of a floor is kind of — it’s going to be reached sometime during the year. Hopefully, the level of a ceiling would also be reached during the year. We don’t know that. But there’s ARR equal to the floor, but the ARR growth is none for such a — and that is a rather representative. The phenomenon we remarked on last time is that the accounts are asking for multiple year contracts, asking for floors and ceilings to kind of put a gate around. They know going digital is really important and is their top priority, but they would like to have boundaries around what they’re going to be spending on that, but they’re willing to commit to increases, step-ups in floors and ceilings.
We just don’t go to the science of having them step up every quarter. That’s too hard. So they only step up once per year, and that’s the reason for the phenomenon becoming more important along with more and more of the overall ARR is under E365. And I’m going to let Nicholas address the first question.
Nicholas Cumins: Yes, the reason we haven’t given a number in terms of Digital Twin ARR for quite a while, it’s because it’s almost impossible now to separate it from the growth of our products because more and more of our products are leveraging Digital Twin, are leveraging iTwin to support new capabilities. And so you can argue iTwin is a reason why we see momentum with an infrastructure cloud, including project-wise, powering new capabilities such as ceiling design validation or advanced design review or even the 4D modeling piece of Synchro that is also powered by iTwins. So we cannot really separate it, yes. And then asset analytics by the way, we’ll also then can be considered as Digital Twin revenue because we actually create Digital Twins of the cell towers. We create a Digital Twin of the road network as we use Open Tower or Blyncsy.
Greg Bentley: And for cell [ph] we will break out the asset analytics ARR curves. We’re preparing a lot of marketing launch materials. It’s going to have a proper name like cohesive dose and Seequent dose and so forth, and we’ll provide a lot of visibility into that. That’s entirely owing to the iTwin platform, along with the other AI we incorporate in it, but we sort of enviewed iTwin platform and everything now as a preference, not only financially, but to get it fully taken up so that we don’t have an evangelism barrier in each account is something explicit for Digital Twins. We’d like Digital Twins to be implicit to start with.
Eric Boyer: Thanks. The next question comes from Blair Abernethy from Rosenblatt Securities.
Greg Bentley: Hello Blair.
Blair Abernethy: Okay, here we go. Sorry about that. Congrats to Greg and Nick as well from me. Just a quick one. Can you give us an update on the IIJA funding programs, how are you seeing or where you’re at there particularly on the road side? And secondly, Greg, just like Blyncsy, what’s the go-to-market program look like there over the next couple of years, is it embedded with your core go-to-market or because it’s more of a specialized solution, is it something you’re going to do separately?
Greg Bentley: It’s not so specialized that it can’t come through our account managers covering the transportation agencies. However, a lot of the opportunity is with smaller municipalities and counties and metropolitan planning organizations, for instance. And they have an engineer of record, and we would like to work with that engineer to enable them to bring lengthy offerings to all of their funds. So that’s what we’re working on ramping up. In the meantime, we’re meeting with, now I mentioned the 7-figure ARR deal that was with a state DOT and there will be many others of that magnitude, but we want to reach every roadway owner, and we’ll do that through our engineering income in the plan.
Nicholas Cumins: Yes. And then on IIJA. Now 37% of the funding has been announced. And as we commented in the last quarter, there is a time gap between being announced and then being awarded. So you can consider IIJA as still a strong tailwind that we have in the U.S., and it’s going to just sustain our momentum. What’s interesting is — and the bulk of it is indeed in transportation as we were alluding to Blair. Now what is interesting is that the states themselves are layering on top of that, their own investments for their own infrastructure. So we saw the budget of transportation for the different states increased by, I think, 11% year-over-year. And there were even voters who had decided that indeed we should increase investment infrastructure in 15 states. So there were measures on ballot in 15 states asking voters whether yes or no, we need to increase investment infrastructure. So there’s clearly momentum there, from federal level and at the state level.
Greg Bentley: And at the federal level, believe it or not in the U.S. I think you’re there in Canada. The airports funding is controversial. Yet it just passed the Houses of Congress is about to become law. This Bill is the best yet in explicitly allowing advanced digital construction management systems to qualify for federal funding and have an explicit funding for drone inspection programs that will really lead the way and raise of the gain for infrastructure in there in the U.S.
Blair Abernethy: Great.
Eric Boyer: Yeah, thanks Blair. Before we conclude, Werner, you want to touch upon revenue seasonality real quick.
Werner Andre: Yes. So as I mentioned in the prepared remarks, we expect that our maximum upgrade work in Q2 remains at Q1 levels before it’s going to pick up again, but it’s expected to pick up again really in the second half. So we expect that our services revenues in Q2 remain essentially at Q1 level. So that means that our revenues will be more concentrated on subscriptions in Q2.
Eric Boyer: Great. So that concludes our call today. We thank each of you for your interest and time in Bentley Systems. We look forward to updating you on our progress in coming quarters.
Greg Bentley: Thank you.
Nicholas Cumins: Thank you.
