Bentley Systems, Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024. Amounts below are in U.S. dollars; financial figures are rounded to millions unless stated otherwise. Comparisons are with Q1 2023 unless noted.
Business context and performance
Bentley develops and markets infrastructure engineering software and related services. It reports one operating segment. Subscription revenue remains the principal growth driver; management cited expansion in existing accounts and growth in new accounts, particularly small- and medium-sized accounts.
| Metric | Q1 2024 | Q1 2023 | Change / context |
|---|---|---|---|
| Total revenue | $337.8m | $314.4m | +7.4% (+7.2% constant currency) |
| Subscription revenue | $307.1m | $277.8m | +10.5% |
| Services revenue | $21.2m | $27.0m | -21.7%; management cited weakness in Maximo-related work at Cohesive |
| Gross profit / margin | $275.9m / 81.7% | $247.2m / 78.6% | Margin up approximately 3.1 percentage points |
| Operating income / margin | $91.9m / 27.2% | $65.8m / 20.9% | Operating income +39.8% |
| Net income | $70.3m | $45.5m | +54.6%; diluted EPS was $0.22 versus $0.14 |
| Adjusted OI w/SBC (non-GAAP) | $112.3m | $90.5m | Management’s primary performance measure |
| Operating cash flow | $205.0m | $176.2m | +16.3% |
ARR was $1,186.5m, up 11% on a constant-currency basis. Last-twelve-month recurring-revenue dollar-based net retention was 108% (110% a year earlier), and account retention was 99% (98%). Recurring revenues represented 90% of revenue over the last twelve months.
Financial position and liquidity
- Cash and cash equivalents were $141.6m at March 31, compared with $68.4m at December 31, 2023. Operating cash flow was partly offset by $126.4m of financing cash outflows; investing used $3.8m.
- Total debt was $1,435.4m, down from $1,528.4m at year-end, principally following repayment of revolving credit borrowings. Debt included $187.5m of term loans and $1,262.8m of convertible notes before unamortized issuance costs.
- The company reported $849.9m available under its credit facility and compliance with debt covenants. Current liabilities exceeded current assets; current assets were $473.7m and current liabilities $837.8m.
- Operating cash flow benefited from working-capital movements, including higher Cloud Services Subscription deposits. The filing does not quantify how much of the quarterly cash generation is likely to recur.
Material changes, outlook and risks
- Subscription growth and lower cost of services contributed to stronger gross profit. Services revenue fell, while subscriptions and licenses costs declined 1.7% and services costs declined 17.7%.
- Other income was $7.1m versus $0.3m, including a $2.8m interest-rate-swap fair-value gain and $2.4m foreign-exchange gain. Net interest expense fell to $6.5m from $11.1m, reflecting lower average debt. The effective tax rate rose to 24.0% from 17.3%, primarily because discrete tax benefits were lower.
- No formal revenue or earnings guidance is provided in the supplied filing text. Management said cash from operations, cash balances and available borrowing capacity are expected to meet working-capital and capital-expenditure needs; future capital requirements remain dependent on growth, acquisitions, investment plans and economic conditions.
- Management identified continued uncertainty in China, including geopolitical challenges, obstacles to cloud-deployed software and customer preference for license sales over subscriptions. Foreign-exchange movements also affect reported results; the company does not currently hedge its foreign-currency exposure beyond natural matching of revenues and expenses.
- The company expects to substantially complete payments of termination benefits under its 2023 realignment program by the end of Q2 2024. Accrued realignment costs were $4.7m at quarter-end. Non-cancelable future purchase commitments were approximately $116.5m, primarily for cloud provisioning and other software services, payable through September 2028.
- Management said ordinary-course legal matters are not expected to have a material adverse effect and reported no material litigation believed to be pending. No material changes to previously disclosed risk factors were reported. Disclosure controls were assessed as effective; no material change in internal control over financial reporting was identified.
Investor facts to verify
- Whether subscription and ARR growth continue, and whether retention and net expansion stabilize after the year-over-year decline in net retention.
- Whether the Q1 improvement in operating margin and cash flow is sustainable, particularly given the contribution of working-capital movements and non-GAAP adjustments.
- Execution against the planned Q2 completion of realignment payments and the company’s substantial cloud-related purchase commitments.
- Debt repayment, convertible-note terms, facility availability and covenant compliance, alongside dividend and repurchase spending.
- The filing describes a repurchase-program extension effective July 1, 2024, while also stating that the then-current authorization expired June 30, 2024. Verify the subsequent authorization and terms in later company disclosures.