Bentley Systems, Inc. — Q3 2022 Form 10-Q
Reporting period: Three and nine months ended September 30, 2022; comparisons are with the same 2021 periods. Amounts below are in U.S. dollars, millions, unless stated otherwise. Bentley provides infrastructure engineering software and related services.
Financial performance
| Metric | Q3 2022 | Q3 2021 | Nine months 2022 | Nine months 2021 |
|---|---|---|---|---|
| Revenue | $268.3 | $251.4 | $812.1 | $697.3 |
| Gross profit / margin | $209.1 / 77.9% | $197.2 / 78.4% | $637.5 / 78.5% | $540.3 / 77.5% |
| Operating income (loss) | $55.5 | $(37.5) | $167.9 | $51.3 |
| Net income (loss) | $37.0 | $(48.0) | $149.1 | $54.6 |
| Diluted EPS | $0.12 | $(0.16) | $0.46 | $0.17 |
| Operating cash flow | Not separately provided for the quarter | Not separately provided for the quarter | $238.2 | $207.4 |
- Q3 revenue rose 6.7% reported and 14.7% in constant currency; nine-month revenue increased 16.5% reported and 22.6% in constant currency. Subscription revenue grew 9.4% reported in Q3 and 20.2% over nine months. Perpetual-license and services revenue declined in reported terms in both periods.
- Reported growth benefited from acquisitions, notably Power Line Systems (acquired January 2022) and Seequent (acquired June 2021), and was reduced by U.S. dollar strength. Management attributed organic business growth mainly to expansion within existing accounts.
- Q3 and nine-month 2022 GAAP net income contrasts with prior-year results partly because 2021 included a $90.7 million deferred-compensation charge associated with a plan amendment. This makes the year-over-year earnings comparison unusually favorable; 2022 also included deferred-compensation income.
- Adjusted EBITDA was $89.7 million in Q3 (33.4% of revenue) and $273.9 million for nine months (33.7%). Adjusted net income was $61.8 million in Q3 and $215.2 million for nine months. These are non-GAAP measures; the filing describes adjustments and limitations.
Liquidity, debt and capital allocation
- Cash and cash equivalents were $72.9 million at September 30, 2022, down from $329.3 million at year-end 2021. Cash from operations was $238.2 million; investing activities used $740.4 million, mainly for $719.5 million of acquisitions, net of cash acquired. Financing provided $254.7 million, including increased credit-facility borrowing. Cash declined $256.5 million over the nine months.
- Total debt carrying value was $1.782 billion, versus $1.436 billion at year-end 2021; cash less debt was approximately negative $1.709 billion. Debt includes $690 million of 2026 convertible notes, $575 million of 2027 convertible notes, and borrowings under the bank facility. The revolving facility had $344.7 million outstanding; $505.2 million remained available. The company reported compliance with debt covenants.
- Net interest expense for nine months was $23.0 million, up from $8.6 million. Management cited higher revolving balances and borrowing rates. The company’s $200 million interest-rate swap generated a $29.3 million fair-value gain for the nine months, recorded in other income; foreign-exchange losses were $18.8 million.
- The company paid $25.8 million in dividends and repurchased $28.3 million of shares during the nine months. The board authorized repurchases of up to $200 million through June 30, 2024.
Business indicators, outlook and risks
- At September 30, ARR was $983.7 million, up 14% year over year on a constant-currency basis, versus 26% growth a year earlier. Last-twelve-month recurring revenue was $950.4 million; recurring revenue represented 88% of revenue over that period. Account retention was 99% and recurring-revenue dollar-based net retention was 110%.
- Management said ARR growth included a 2.5% contribution from Power Line Systems onboarding. The company exited Russia after pausing sales; it reduced ARR by approximately $11.2 million in total in connection with the war and subsequent exit. Russia-related reductions and weaker conditions in China were among regional offsets to growth.
- The filing provides no specific numerical revenue or earnings guidance. Management stated it expects cash, operating cash flow and available credit to meet working-capital and capital-expenditure needs for the next 12 months, while noting future needs depend on acquisitions, growth investment, repurchases, currency movements and economic conditions.
- Key exposures include foreign-exchange movements (the company does not hedge its general currency exposure), higher borrowing costs, acquisition integration and provisional purchase accounting, and execution of the Russia exit. The company reported no material pending litigation and did not expect ordinary-course legal matters to have a material adverse effect. Disclosure controls were judged effective at the reasonable-assurance level.
- Unusual items include the prior-year deferred-compensation charge, 2022 deferred-compensation mark-to-market income, derivative fair-value gains, foreign-exchange losses, acquisition costs, and a $2.0 million gain on a related-party aircraft sale. These items affect period comparability and, in some cases, non-GAAP results.
Important facts for investors to verify
- How much reported revenue and ARR growth reflects underlying customer expansion versus acquisitions, currency effects and the timing of acquired revenue.
- Whether ARR growth and retention remain resilient, particularly after the Russia exit and amid the disclosed regional softness.
- Cash conversion and acquisition funding needs, given the substantial year-to-date cash decline, higher debt, and increased interest expense.
- The sensitivity of GAAP and non-GAAP earnings to deferred-compensation and interest-rate-swap fair-value movements, foreign exchange, and excluded adjustments.
- Progress on integrating Power Line Systems and completing purchase accounting for 2022 acquisitions; the filing says fair values for four acquisitions remained provisional.