Bentley Systems, Inc. — FY2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021. This annual filing is not limited to the fourth quarter. Bentley provides infrastructure engineering software and related services; subscriptions accounted for 84% of revenue, and recurring revenue, including recurring services, was 86%.
Financial performance
| Metric | FY2021 | FY2020 | Change |
|---|---|---|---|
| Revenue | $965.0 million | $801.5 million | +20.4%; +18.2% constant currency |
| Gross profit / margin | $748.5 million / 77.6% | $634.4 million / 79.2% | Margin down about 1.6 percentage points |
| Operating income / margin | $94.6 million / 9.8% | $150.2 million / 18.7% | Down 37.0% |
| Net income | $93.2 million | $126.5 million | Down 26.3% |
| Diluted EPS | $0.30 | $0.42 | Down 28.6% |
| Adjusted EBITDA | $324.9 million; 33.7% margin | $266.4 million; 33.2% margin | Up 22.0% |
| Operating cash flow | $288.0 million | $258.3 million | Up $29.7 million |
Revenue growth reflected organic subscription expansion, Seequent and other acquisitions, and favorable foreign exchange. Subscriptions rose 19.7%; perpetual-license revenue fell 7.5%. The reported service-revenue increase of 52.8% was largely acquisition-driven. ARR reached $921.2 million, with constant-currency ARR growth of 26%; the Seequent acquisition contributed 13 percentage points to that growth. Account retention was 98%, and recurring-revenue net retention was 109%.
Cash, debt, and liquidity
- Cash and cash equivalents were $329.3 million at year-end, versus $122.0 million a year earlier. Approximately 48% was held outside the United States.
- Cash used in investing was $1.057 billion, principally reflecting $1.035 billion of acquisition payments, net of acquired cash. Cash from financing was $982.6 million, including proceeds from convertible notes.
- Year-end debt had a $1.436 billion carrying value and $1.465 billion aggregate principal: $690 million of 2026 convertible notes, $575 million of 2027 convertible notes, and a $200 million term loan. Cash less debt principal was approximately $1.136 billion of net debt.
- The amended revolving facility was $850 million, with $849.9 million reported available at year-end; the company reported compliance with debt covenants. The credit facility matures in 2025; the notes mature in 2026 and 2027.
- Current assets were $615.8 million and current liabilities were $593.9 million. The company stated that cash, operating cash generation, and facility availability should meet working-capital and capital-expenditure needs for the next 12 months.
- Quarterly dividends were $0.03 per share, or $0.12 for the year. The board retains discretion over future dividends.
Material changes and unusual items
- Seequent was acquired in June 2021 for approximately $883.3 million in cash, net of cash acquired, plus 3.14 million Class B shares. The acquisition was a major driver of higher goodwill, intangible assets, revenue, and financing needs.
- Net income and operating margin included a $90.7 million one-time deferred-compensation charge after certain executives shifted phantom stock holdings to cash-settled investments. Related deferred-compensation plan liabilities were $102.2 million at year-end. Management’s non-GAAP measures exclude this charge.
- The effective tax rate was negative 3.7%, including $49.0 million of discrete stock-compensation tax benefits. The resulting $3.4 million income-tax benefit supported reported net income; results may not be representative of a normalized tax rate.
- Other income included a $9.8 million gain from the fair-value change in the interest-rate swap. FY2020 other income included unusually large foreign-exchange gains, making year-over-year comparisons less comparable.
- On January 31, 2022, Bentley completed its approximately $700 million cash acquisition of Power Line Systems, funded with cash and credit-facility borrowings. Management said it was not expected to be material to the income statement but would be material to financial position and cash flows.
Outlook, commentary, and risks
The filing does not provide specific revenue or earnings guidance. Management described recurring growth, customer retention, expansion within existing accounts, digital-twin adoption, and acquisitions as important growth drivers, while noting that investment in digital-integrator services and early-stage initiatives may initially carry lower margins. Management also said COVID-19 had modestly affected usage and delayed some services projects; the duration and economic effects remained uncertain.
- Key exposures include global infrastructure-spending cycles, foreign exchange (59% of revenue came from outside the U.S.; 47% was denominated in foreign currencies), and customer renewal and usage trends.
- Management estimated that a 10% strengthening of the U.S. dollar against other currencies would have reduced 2021 operating income by approximately $9.3 million; the company did not hedge foreign-currency exposure beyond natural offsets.
- Other disclosed risks include cybersecurity and cloud-service availability, privacy and data-protection regulation, competition, acquisition integration, and the effects of convertible-note dilution or cash settlement.
- The company reported no material pending litigation and no material adverse effect expected from ordinary-course legal matters. A material weakness involving user-access controls over certain financial-reporting systems was identified and remediated during the fourth quarter; no misstatement resulted. Management and the auditor concluded internal control over financial reporting was effective at year-end, excluding Seequent from the assessment as permitted.
Important facts for investors to verify
- Separate underlying operating trends from acquisition and currency contributions, especially the Seequent impact on ARR growth and reported service revenue.
- Assess the sustainability of margins and earnings after the $90.7 million deferred-compensation charge, acquisition costs, and unusually favorable stock-compensation tax benefits.
- Review the post-year-end Power Line Systems acquisition’s funding, leverage, and effect on liquidity and cash flows.
- Check convertible-note terms, potential dilution or cash-settlement exposure, credit-facility covenants, and the company’s substantial debt maturities.
- Monitor recurring-revenue retention, consumption-based subscription usage, foreign-exchange exposure, and customer infrastructure spending.