Bentley Systems, Inc. — Q3 2020 Form 10-Q
Reporting period: Three and nine months ended September 30, 2020; unaudited consolidated results. Amounts below are in millions of U.S. dollars unless noted. Bentley provides infrastructure engineering software and related services.
Financial performance
| Metric | Q3 2020 | Q3 2019 | Nine months 2020 | Nine months 2019 |
|---|---|---|---|---|
| Revenue | $203.0 | $186.6 | $582.0 | $533.7 |
| Gross profit / margin | $160.4 / 79.0% | $151.5 / 81.2% | $465.4 / 80.0% | $429.5 / 80.5% |
| Operating income / margin | $5.3 / 2.6% | $41.4 / 22.2% | $95.9 / 16.5% | $99.2 / 18.6% |
| Net income | $5.8 | $20.4 | $74.6 | $66.8 |
| Diluted EPS | $0.02 | $0.07 | $0.25 | $0.23 |
| Operating cash flow | Not presented quarterly | Not presented quarterly | $176.0 | $118.2 |
- Q3 revenue grew 8.8% year over year (6.8% in constant currency); nine-month revenue grew 9.0% (9.2% in constant currency). Subscription revenue increased 11.6% in Q3 and 12.5% for the nine-month period. Perpetual-license and services revenue declined in both comparisons.
- Q3 GAAP operating income and net income fell sharply, principally reflecting $26.1 million of IPO-related expense, higher stock-based compensation and realignment costs. A $13.7 million other-income gain, primarily foreign-exchange related, partly supported Q3 pretax income.
- Nine-month Adjusted EBITDA was $189.1 million, up from $132.2 million; Adjusted EBITDA margin was 32.5% versus 24.8%. These are non-GAAP measures and exclude, among other items, IPO costs, stock compensation and realignment expense.
- Cash and cash equivalents were $137.6 million at September 30, 2020. Debt was $589.6 million, implying approximately $452.0 million of net debt. Credit-facility availability was $34.9 million; the company reported covenant compliance.
- Nine-month investing cash use was $88.8 million, including $68.9 million for acquisitions. Financing cash use was $70.1 million, including $412.9 million of dividends. Stockholders’ equity was $7.2 million, down from $334.6 million at year-end 2019, largely reflecting the special dividend.
Material changes and management commentary
- Bentley completed its IPO on September 25, 2020. Selling stockholders sold 12.36 million Class B shares at $22 per share; Bentley sold no shares and received no IPO proceeds.
- The board declared a $1.50-per-share special dividend, approximately $392.5 million in aggregate, funded with borrowings under the credit facility. Debt rose from $233.8 million at year-end 2019 to $589.6 million.
- Management said COVID-19’s financial impact had been modest and described the software as mission critical. Application usage was down about 2–3% versus comparable 2019 periods in the latest pattern reported; the company cited delayed projects and shifts toward subscriptions as pressures on perpetual-license and services sales.
- Account retention was 98%, recurring-revenue dollar-based net retention was 110%, and ARR growth was 9% for the twelve months ended September 30, 2020. ARR was $715.3 million at period-end. Management cited expansion within existing accounts and acquisitions as growth drivers.
- A strategic realignment generated approximately $10.0 million of costs, primarily termination benefits; substantially all actions were expected to be completed by early 2021. Four acquisitions were completed in the first nine months, with $68.9 million of net cash paid.
Outlook, risks and contingencies
- The filing provides no specific revenue or earnings guidance. Management said existing cash, operating cash flow and credit-facility liquidity were expected to cover working-capital and capital-expenditure needs for the next twelve months, while noting future capital needs could vary.
- Key risks include COVID-19-related project delays and usage declines, foreign-exchange exposure, interest-rate exposure, and the company’s increased debt and limited remaining credit availability. Management estimated that a 10% strengthening of the U.S. dollar would have reduced 2019 operating income by approximately $10.2 million; the company does not hedge its foreign-currency exposure.
- The company had a $90.7 million non-cancelable commitment for hosted-software services through May 2023. Management said ordinary-course legal matters were not expected to have a material adverse effect and reported no material litigation pending.
- The $26.1 million IPO expense and special dividend were unusual items. Management also cited higher public-company costs going forward. Disclosure controls were assessed as effective; no material change in internal control was reported.
Important facts for investors to verify
- Whether recurring-revenue and ARR growth translate into sustained GAAP revenue, operating income and cash generation, given declines in perpetual licenses and services.
- The effect of the special dividend and increased borrowings on leverage, interest costs, covenant headroom and future capital allocation.
- The size and recurrence of excluded items—especially stock-based compensation, realignment costs and IPO-related costs—and how they affect comparisons with non-GAAP results.
- Whether COVID-19-related project delays, usage trends, foreign exchange and acquisition performance materially change subsequent-period results.