10-Q: Bentley Systems Reports Q1 2025 Results: Subscription Growth Drives Revenue Increase

Bentley Systems saw a 9.7% increase in total revenue, driven by subscription growth, in the first quarter of 2025.

Summary

• Bentley Systems reported a 9.7% increase in total revenue for the three months ended March 31, 2025, reaching $370.5 million.
• Subscription revenues increased by 11.5% to $342.3 million.
• ARR grew by 12% on a constant currency basis, reaching $1.32 billion.
• The last twelve-month recurring revenues dollar-based net retention rate was 110%.
• Operating income increased to $115.2 million, compared to $91.9 million in the same period last year.
• AOI less SBC was $126.2 million, up from $112.3 million.
• Cash flows from operations were $219.4 million, compared to $205.0 million.
• The company repurchased 673,898 shares for $30.0 million, and $10.0 million aggregate principal amount of its outstanding 2026 Notes for $9.8 million under the Repurchase Program.
• A separation agreement was reached with Michael Campbell, resulting in a $1.5 million separation payment.

Sentiment

Score: 8

Explanation: The document presents a positive outlook with strong growth in key metrics like subscription revenue and ARR. While there are some challenges noted, the overall tone is optimistic and indicates a healthy business performance.

Positives

• Strong growth in subscription revenues and ARR indicates a healthy shift towards recurring revenue streams.
• High recurring revenue dollar-based net retention rate suggests strong customer loyalty and expansion within existing accounts.
• Increased operating income and cash flows from operations demonstrate improved profitability and financial health.
• The company is actively managing its capital through stock and debt repurchases.
• Revenue from the Americas increased by 8.0%.

Negatives

• Services revenues decreased by 17.6%, indicating potential weakness in that segment.
• The future results in China remain uncertain as a result of continued geopolitical challenges, the obstacles there to clouddeployed software, and the financial timing impact of the preference there for license sales, rather than subscriptions.
• Deferred compensation plan (income) expense was $(1,246) for the three months ended March 31, 2025.

Risks

• Fluctuations in foreign currency exchange rates could impact future results.
• The company's future capital requirements may be materially different than those currently planned in our budgeting and forecasting activities and depend on many factors, including our strategy of regularly acquiring and integrating specialized infrastructure engineering software businesses, our rate of revenue growth, the timing and extent of spending on research and development, the expansion of our sales and marketing activities, the timing of new product introductions, market acceptance of our products, competitive factors, our discretionary payments of dividends or repurchases of our Class B common stock and convertible debt, funding of our purchase commitments, currency fluctuations, and overall economic conditions, globally.
• Failure to comply with covenants under the Credit Facility, the 2026 Notes, and the 2027 Notes could result in default and acceleration of debt payments.

Future Outlook

The company believes that cash generated from operations, together with existing cash and cash equivalent balances, and external borrowings including available liquidity under the Credit Facility, will be sufficient to meet our domestic and international working capital and capital expenditure requirements.

Industry Context

Bentley Systems' focus on infrastructure engineering software aligns with the growing demand for digital solutions in the construction and infrastructure sectors. The shift towards subscription-based models is a common trend in the software industry, providing recurring revenue and greater predictability.

Comparison to Industry Standards

• Comparing Bentley Systems to similar companies like Autodesk (ADSK) and Trimble (TRMB) in the AEC (Architecture, Engineering, and Construction) software market, Bentley's subscription growth and ARR metrics are competitive.
• Autodesk, for example, has also been focusing on transitioning its customers to subscription models.
• Bentley's net retention rate of 110% is a strong indicator of customer satisfaction and loyalty, placing it favorably against industry benchmarks.
• The company's focus on infrastructure engineering provides a niche that differentiates it from broader CAD software providers.

Management Changes

Stakeholder Impact

• Shareholders will likely view the strong financial results and stock repurchase program positively.
• Employees may be affected by the strategic realignment program and changes in compensation structures.
• Customers should benefit from the company's continued investment in research and development and new product introductions.

Next Steps

• The company intends to continue paying quarterly dividends, subject to the discretion of the Board of Directors.
• The company will continue to evaluate whether share awards will be required to be received by awardees on a gross basis, or if net settlement may be elected by awardees.

Key Dates

Keywords

Bentley Systems, ARR, Subscriptions, Revenue, Financial Results, Software, Infrastructure Engineering