Good morning, everyone, and thank you for joining us for this call about Bentley Systems' intention to acquire Sequent. I'm Carey Mann, Bentley's VP of Investor Relations. On the webcast today, we have Bentley Systems' Chief Executive Officer, Greg Bentley and Chief Financial Officer, David Hollister. Before we begin, allow me to provide a disclaimer regarding forward looking statements. This webcast, including the question and answer portion of this webcast, contains forward looking statements that involve risks and uncertainties, including statements regarding the planned acquisitions of Sequent and the timing thereof, the impact of the acquisition on Bentley's financial conditions and results of operations and the product services and business relationships of each of Bentley and Sequent.
Any statements made in this presentation that are not statements of historical fact, including statements about our beliefs and expectations, are forward looking statements and should be evaluated as such. This webcast will be made available for replay on Bentley Systems' Investor Relations website at investors. Bentley.com. Greg and David will begin with an overview of the presentation and then we'll take your questions. With that, I will turn it over to Greg.
Well, thank you for your interest. And I think this is a most and I might say the most propitious acquisition, notwithstanding the number of digits in the purchase price. And I'd like to literally illustrate the significance for our company and for Sequent and for infrastructure engineering That this provides. I think this combination enables leapfrogging ahead not only immediately, But through new advancement for many years to come and what I call deepening the potential of infrastructure digital trends. Now, first reminder that we've announced only our agreement to combine.
And since this is subject to regulatory approval process, We are admonished that the companies remain separate in the meantime, so my presentation today will rely primarily on existing materials of the companies. I do look forward to when we can present jointly our new ideas for ProgressEnergies. It also means that I should excuse myself in advance To the geoscience community that might be listening for my probable lay misuse of terminology that's new to me, The Sequent colleagues will straighten me out when we can actually work together. And so I'd like to start With Sequent's new self presentation.
Challenges that no one imagined. We only have one planet. To make critical decisions for its future, We must first understand it. Working together with customers in over 100 countries, we Create the earth modeling, geo data management and collaboration software that connects science, people and the planet. Because when everyone sees the bigger picture, they can make faster, more sustainable decisions with And Energy Industries.
Professionals use Sequent Software to integrate their teams and data to build Earth models that better reflect reality and can evolve with changes, turning complexity Into Clari. Every day, they're changing the world. We're here to help them.
So here's a reminder from our roadshow materials that we View our competitive advantage at Bentley Systems consisting of our unique comprehensiveness as the infrastructure engineering software company. And we've just worked longer and harder at a platform which brings together all sectors and disciplines for infrastructure success. Our comprehensiveness improves our scale economies and our diversification within infrastructure, But it most significantly can increase the quality of the work of our users and accounts, especially by minimizing and mitigating the risks So incomplete project or asset data and engineering considerations related to that by covering everything comprehensively To the extent of Infrastructure Digital Twins. And we've previously presented our portfolio development Activity of programmatic acquisitions has substantially enabled this comprehensiveness. Importantly, most of our acquisitions are software that's already in our ubiquitous ecosystem and Already working with our platform's APIs.
That's the case also with Sequent, where we've already been technical partners. Of course, We usually do these acquisitions to improve the depth of our substance of integrations To add more value as will also be the case here. Our infrastructure engineering software portfolio may have looked Comprehensive from our advantage here above ground, but infrastructure depends on its subsurface And we have so far considerably integrated the near surface already. And that started with For roads and rail, the subsurface utility design and analysis, and by the way, coping with Berry Utilities is always an expensive risk. I have participated in regional, let alone Conferences in the UK just about that subject and how those costs are addressed and coped with.
Then our open flows leading water modeling software, of course, involves on one hand what's in pipes and what drains And Hal, our offshore structural Software, Saks and Moses is about the subsea foundations. Our stat and RAM, leading structural products are all about the interface between structures And their foundations and their seismic resilience and stability. And then a few years ago, we began borehole data management, ground investigation data through our Ghent and now Open Ground Cloud solution, which keeps track of ground investigations. And then a couple of years ago, our Plax's acquisition of geotechnical analysis software that has grown very well as we have taken the advantage of the to have geotechnical analysis also be 3 d rather than where it started 2 d. But when you are analyzing foundations and their Strength and success below ground, the 3 d plexus requires knowledge of the Earth Strata, a 3 d model, if you like, that has to come from somewhere in the subsurface.
And that has been a holdup so far. You could say, I guess, that Underlying all infrastructure sectors and disciplines, there's been this Missing but critical aspect, the deep earth subsurface. So you could say that subsurface earth modeling, geodata can complete this picture of our comprehensiveness And all the advantages I've already mentioned. So let's start now to learn more about Seequent. I haven't asked them about any connection between their subject matter of geology and where they are in their New Zealand headquarters.
But in Christchurch, we just observed the 10th anniversary But in Christchurch, we just observed the 10th anniversary of the consequential earthquake that was there. In fact, we were working on our deal together last weekend when there were more concerning earthquakes just offshore In New Zealand. But we see in our history At Bentley Systems, recalling that acquisitions led to our own comprehensiveness, we see in Sequent A similar affinity where they've programmatically done portfolio development to extend the reach of their own platform To better support the full geoscience software ecosystem and in that day and we see Even greater potential mapped out ahead. And in particular, these are There are these many directions of growth that already are underway in Sequent's ecosystem, Which we believe we can and will now accelerate. So to go over the history and progression, Sequent started with Leapfrog.
And very interestingly, it was spun out of a company Formed to do 3 d medical imaging and then sought a vertical to apply that very usefully. Being in Australasia Mining was significant and the Leap Frog name refers to jumping ahead With doing 3 d earth modeling rather than the 2 d that was the norm, you might say everything above ground we started with 3 d Because we can see in 3 d, but we can't see underground. And I suppose that's why even the geosciences started With 2 d representations before leapfrogging ahead. So mining was a very natural place to Exploit this first, if you think of mines, they are never ending Infrastructure and construction projects, but we're being able to make quick decisions. The 2 d Workflows took months after surveying to understand if you can comprehend and understand immediately, That's priceless in terms of improved production and minimized risk in mining and that grew across The mining world.
The next progression was their GeoSoft acquisition. And GeoSoft It's for various geophysical advancements, which includes ways of measuring and understanding With magnetometers and ground penetrating radar and other modalities To better understand the strata in the subsurface and resource estimation And so forth. There's a broad portfolio for that in turn. And then most recently, GEO Studio Was acquired for geotechnical analysis. It focuses in particular on slope stability and special methodologies Slope stability is essential for mining and for dams, but it's ever more broadly applicable.
And then bringing it all together and again this is an affinity with Bentley Systems, the central cloud platform now transitioning to What they call the EVO SaaS service brings together for collaboration across The Geo Data and Integrated Geoscience Digital Workflows and I would say that this is about Creating and curating subsurface digital twins. Another affinity with Bentley Systems is that Sequent annually convenes This Lyceum thought leadership event for billing digital in the geosciences. Our comparable event at Bentley Systems is our year in infrastructure and we published this yearbook, which I hope you have Taking advantage of either online or you can ask for a fiscal yearbook, remember it brings together Our users projects that they nominate for going digital awards, and what I've done here is to excerpt A few of those that demonstrate the potential of deepening infrastructure digital twins. And the first example is this one in mining. It's on Page 124 for those of you who have the yearbook.
And we could say that mining has new tailwinds now With battery minerals and rare earths, which are critical to electrification sustainability, maybe that's the new gold. But this is an actual gold mine in GoldMine in Kazakhstan and digital twin technology and the integration were of the essence Here, but in future, they would be able to include the drilling and geologic studies for even better results And competitive advantage in a deeper infrastructure digital twin. Recently, even in the U. S, We've had palpable concerns about the risk of failure of our dams and other earth and structures. And this project on Page 89 is what turned out perhaps to be the most at risk Horaville, Dan, and it shows what's at stake in terms of environmental risks on this dimension.
The UK's National Infrastructure Commission identified ground risk as the most significant source Of costs and delays to its priorities and commission this project iceberg to arrive at all the benefits And I think our strategy with Sequent responds to this opportunity. An obvious application of deeper infrastructure digital twins is for tunneling. And that's so much more important than infrastructure All the time, whatever is the destiny of Hyperloop, China has sponge cities, new cities that are built around tunnel Networks that they're not even sure what will be used for, but clearly will be important assets for the future. Metros are so important So it's a new business for us, especially in Asia and to improve energy sustainability. They Often involve tunnel boring machines where the essence of how well or if they work has to do with the seepage Both water in the subsurface.
At any rate, here in this example on Page 93 is a subway extension in Moscow Where determination, identification of geological issues saved the day here in ADVANCE. So here's a bridge that collapsed in an earthquake in 2018 And was replaced here in Indonesia. And you can see the consideration of seismic risks And Subsurface Digital Twin being essential for that project success. And again, here in 2011, we just yesterday observed the anniversary of the Earthquake disaster in Japan. This project on Page 257 It's kind of interesting.
It has in mind resilience to earthquakes, in particular, for its very purpose, which is To allow oil shipments, but needing to be resistant to the earthquake in order to be able to accomplish that. And then turning also just this month or this year to Awareness of the broad risks of slope stability, if you like, in our near Surface and this project again in Japan on Page 98 is about risks to their And bankments, which has to do with the subsurface geo data. And then bringing it Home here in the U. S, this model based contracting project in New York State happens to show how the whole playbook is Used together and how important in roadways and bridges are the geosurface consideration the subsurface Considerations. And then we all worry about water Security and water quality that has to do.
Our water comes from what seeps through our subsurface and can be modeled And studied in the ways that changes this project on Page 25, Special Recognition Award winner In China, it's all about the deeper subsurface solutions To Water Security and Water Conservancy. And then something that had all of our attention Where foundation problems in San Francisco, this project on Page 97 is about avoiding those And the creative solutions it takes to consider what's below the foundations in our Digital Twins. So putting that all together, where we what we now can do As deep in our infrastructure digital twins with the Sequent platform and portfolio Comparable to our own above ground and in the near surface, that's in the deeper surface And particular opportunities that introduces an energy transition are the terrific opportunity for geothermal energy where Sequent He's a leader in mining, of course, and water resources and environmental resilience for that And in tunneling, as I've mentioned, I'll just say we'll cover everything except when it comes to the environment. We're not yet working on atmospheric modeling and it happens that there's a particular specialized industry for Oil and Gas reservoirs and Sequin doesn't tend to participate much in that.
So when we put it all together, you could say Sequent will underlie the potential of infrastructure digital twins. And in terms of our Offerings together to our modeling applications will add Leapfrog and GeoSoft And to our simulation applications adding GeoStudio and Central For a combination of project delivery and asset performance and thus overall deepening the potential of subsurface digital trends. And I'd like to emphasize that summarizing this opportunity and this advancement, It's not a matter of a new startup requiring incremental investment on our part. But here with Sequent, we leverage They are investments already made and proven. They are the established subsurface market leader.
They have dynamic momentum And already the levels of profitability and growth in ARR and profitability that characterizes the best technical Mission critical software franchises, which I consider to be the best investments in the world that we are entering into So for more on the financial aspects, over to David Hollister. Thanks, Greg. So you will have all seen that the headline consideration The transaction is $1,050,000,000 approximately. That includes 3,100,000 shares of Bentley Systems common stock In exchange for 5% of the outstanding shares of Sequent. We say approximately because the share consideration, the number of shares is fixed and that will obviously Be subject to the market value of Bentley Systems.
The share consideration is subject to a lockup, Half of which releases after 6 months and the remainder after a year. We like the valuation. We of course benchmark value to appropriate technical We're Sequent's high quality recurring revenue. It's high growth rate, it's margin profile And its large healthy and growing end markets are unique. Of course, we also benchmark to the most relevant recent M and A transactions And it's clear to us that there is just no comparison in terms of acquisition quality, business quality and valuation.
The impact on our balance sheet and how we're financing this, the cash element of the consideration that we paid With a combination of cash on hand, which is significantly the results of our $690,000,000 convertible notes offering earlier this year, Plus availability on our $850,000,000 undrawn revolver. Our pro form a Total net leverage post closing is estimated to be well under 4 times, of course subject to when we close and the extent of our ongoing And more normal for us, programmatic acquisition activity. We're targeting to get below 2.5 times total net leverage by the end of our Fiscal year 2022. As I've previously shared, I presently see our optimal capital structure to carry Total net debt at 2 to 3 times EBITDA. Of course, and while we don't have anything specifically planned, Any subsequent follow on equity offering would further accelerate deleveraging.
We're expecting to close by the end of June. Of course, that isn't really in our control, but we'll be doing all we can to get this smoothly through the necessary regulatory approval processes. We expect Sequent to contribute more than $80,000,000 to our ARR for our fiscal year end 2021. Again, ARR is a point in time measure, annualized recurring revenue. I choose to highlight ARR here because It's a measure of scale and it isn't subject to when we close and it isn't subject to SKUs created by accounting revenue recognition results.
Also to help people understand scale and trying to provide sufficient transparency without Disposing specifics that are otherwise unhelpful to us competitively and commercially, we really describe Sequent as a 10% version of Bentley In terms of its scale, its number of colleagues, its revenues, its quality of recurring revenues and its margin profile. A distinction I do make, however, is that Sequent revenues are growing significantly faster than Ventasyskin's revenues, which is impressive and a testament to the quality of the business is that it also does this while maintaining those impressive EBITDA margins. We expect Sequent to be accretive to adjusted EBITDA, to adjusted net income, to earnings per share. This won't have any impact on our dividend policy. We remain committed to a quarterly dividend.
And Once we close the transaction, we'll then update our fiscal year 2021 outlook as it obviously would meaningfully Impact our results. So those are the highlights of the transaction. Greg's described Our excitement about the company and I guess Carey, we're going to turn it over to questions.
Yes. We'll start with Mizuho with Matt Broom.
Can you hear me now?
Yes. Yes.
Great. Yes, congrats on the deal. So just to begin, could you maybe talk a bit about your plans for integrating Sequent's technology across your software portfolio? You've discussed where the different products fit in, but to what extent do you intend to integrate this technology with your existing design offerings such as Open Roads As well as cloud services such as ProjectWise and AssetWise and if you had some sort of a time frame for that.
Well, Matt, the integration is through geotechnical analysis. And already, We have Ghent and Open Ground for boreholes, Plaxis for foundation analysis And Plexus can work already with Leap Frog. So there isn't a huge agenda To be done. When we talk about the cloud services and digital twins and bringing EVO together with Itwin, That'll be something we start working on, but shouldn't be shouldn't take very long to take care of that. I want to emphasize that, Sequent has tremendous management.
As I describe it as a Dynamo. And not everyone's in New Zealand. They're global in this respect. And so we've determined that it will operate as Sequent Event Company, Reporting to our Chief Product Officer, Nicholas Cummins, in effect as a 5th business unit, but we wish to Continue its and accelerate its existing momentum and that won't require Distracting anyone by virtue that the product integration is already possible and underway.
Right. That makes sense. And I mean, it's good to hear that Sequent's revenue is already growing faster than Bentley. Do you anticipate rolling out Bentley's licensing, your select nephrix E 365 plans to Sequent. And if so, what do you anticipate the timelines beyond that?
Well, we don't yet have a plan for that. It's one of the things we'll reserve until after Closing and upon closing, Seequent will operate as Seequent of Bentley Company under its existing Contracts and with this existing intact structure and then we'll be able to figure that out in the long run.
Okay, makes sense. Thanks very much.
We'll go to RBC now. Matt Hedberg.
Hey, thanks guys. Good morning. Congrats on the deal to all of you. Greg, I'm wondering, could you give us a sense For the competitive landscape here, you guys are typically the dominant player in a number of these categories. But where does Sequent sit in terms of understanding the 3 d characteristics of the earth?
Any sort of market share, Datta, you can share with us?
No, I don't have that. I know that each of the Seequent products have lots of competitors. I don't think there is anyone as comprehensive nearly in terms of what we call subsurface Digital Twins. There are lots of competitors in mining in particular, but Sequent's Scope has turned more broadly than that over the last several years. And I just think they're like Bankly Systems and being ahead in comprehensiveness and openness platform ecosystem and so forth.
A lot of the individual competitors are also ecosystem participants. And Just this opportunity for 3 d modeling and we say digital twins It's just happening so quickly. The underground is going from 2 d to 3 d, and everyone is benefiting lots of opportunity for all. But we think Sequent is our counterpart below the ramp.
That's great. Then maybe just a quick follow-up for David. Thanks on the $80,000,000 ARR. I think that's helpful obviously from a timing perspective. But trying to get a sense for what their revenue was in 20 You noted they're growing significantly faster than Bentley.
Just wondering if you can share their rough revenue run rate and growth rate in 2020, just to kind of get a for the magnitude on that side.
Yes. Matt, I can appreciate The interesting details. How about if I share this without getting in too much detail because it just doesn't serve as a purpose beyond Giving you guys a good sense of scale so you can assess valuation. That ARR, they're 90% plus recurring revenue. So that ARR is a good representation of 90% of the business.
And in terms of growth rate, We're going to leave it at significant and significant think about that as at least twice the Bentley Systems growth rate.
Okay. Well, even that's helpful. Thanks a lot, both of you, and congrats again, Neil.
Well, for all these reasons, I'll just comment that Sequent What had been a great IPO and just a measure of the Quality and potential of the business. You all would know in your universe the most profitable companies have the same characteristics That the Sequent has in terms of technical characteristics. I sort of didn't go into it, but when you're Going from boreholes and drill holes to 3 d models in the subsurface, it's a very mathematical process. You don't just And you have these technologies with professors' names who best understand how that comports with the organic nature of the earth's Composition and it is very technical, very vertically Intensive, both literally and figuratively. And as you know, businesses like that have lasting And profitable advantages that this company deserves because of the Investment they've made with terrific people and the forethought to start with mining and then expand to everything else.
What works in mining proves it And then it's applicable to these environmental risks everything else faces.
Thanks, Craig.
We'll next call to KeyBanc, Jason Celino.
Great. Thanks, guys. I think you talked about the competitive landscape a little bit, but I'm curious In terms of customer processes, I guess, is there is it mostly internal solutions that customers are using? I guess what exactly is this replacing, maybe not competitively?
So, Jason, it's my understanding and here again I have to apologize to the geoscience professionals that it's largely replacing 2 d processes. And I've seen historically, there even were 3 d physical models put together for The subsurface. But in general, it's advancing to 3 d to New instruments and modality for measuring geophysical characteristics And just generally advancing and has become indispensable in that respect.
Okay. And then, I guess I'd categorize this as maybe deep surface modeling. For the projects, where this is addressable and maybe civil, how much of project spend is deep service modeling today? And Maybe how much should it become given kind of all the articles and challenges that show up later?
Well, I don't have figures to hand yet. Perhaps we'll get smarter about that as we get closer to closing. And we expect another presentation where we'll put it all together with the help of the of the Sequent folks when we can be shoulder to shoulder to share what they've learned about that, especially in Civil, but it's just the case that on any significant infrastructure project, You'll hear an asterisk is, but we don't know what's below ground and we don't even know what utilities are buried, let alone The geological conditions that may be threats to the schedule and budget for the Project. So and weirdly, prior to our Plexus 3d, a lot of the Integration between structures and the geotechnical foundations was boiled down to like one figure strength rather when everything was otherwise available in a 3 d model for the BIM model And could be for the geotechnical model, it's pound foolish to not Focus on that risk and eliminate it. But I don't have the quantification of that at this point.
Okay. Thank you.
We'll next go to Berenberg, Gal Munda.
Hello. Hi. Good morning and congrats.
Long time no see here.
I know, I know. I appreciate it. Listen, yes. So, yes, congrats on the deal and nice poker face yesterday, I guess. I will ask you just a little follow-up question because I've covered the SOL for a number of years and also Hexagon.
And SOL paid almost $400,000,000 back in 2012 for Jemcom. I've seen quite a bit of overlap of the management team as well between the Sequent and GenComm. Is that potentially kind of the best Comparator in terms of the peer to really look into, those 2 companies kind of spearheading the mining industry Or am I missing something?
Well, I'll say from our own experience in mining in particular that I had the concerns of it being quite Cyclical, economically volatile. But then I've learned the aspects of it That has to do with the sub source. So we're familiar with CapEx projects for mining that often involve New roads and bulk materials handling systems and so forth things that would involve the remainder of our portfolio. And those do come and go with resource cycles, but the below ground operations, the environmental And projects of that sort, tailings dams and so forth. Those never Waver and are consistent.
So I think, I wouldn't compare it to Mining software at large, I think more of it to do with environmental software and there Not enough good examples of that yet. We need more focus on environmental quality and environmental risk, and this will help bring that to Bentley Systems.
That's very helpful. Maybe as a follow-up, kind of to develop on that point, you did mention that there's a lot of kind of Interesting civil. And you've obviously shown us the examples of where the collaboration will be so important. Do you have any idea on how many of their customers are already your customers today? And what's the opportunity to kind of Creative cross sell opportunities, is it a big