Bentley Systems, Inc. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023. Unaudited results compared with the three months ended March 31, 2022; balance-sheet amounts compared with December 31, 2022. Amounts below are in U.S. dollars.
Business context
Bentley provides software and cloud services for infrastructure engineering, construction, and operations. Revenue is primarily subscription-based, with additional perpetual license and services revenue.
Financial performance and liquidity
| Metric | Q1 2023 | Q1 2022 / comparison |
|---|---|---|
| Total revenue | $314.4 million | $275.5 million; up 14.1% reported and 17.1% at constant currency |
| Subscriptions | $277.8 million | $241.2 million; up 15.2% reported |
| Gross profit / margin | $247.2 million / 78.6% | $219.7 million / 79.8% |
| Operating income / margin | $65.8 million / 20.9% | $56.6 million / 20.5% |
| Net income / diluted EPS | $45.5 million / $0.14 | $56.4 million / $0.18 |
| Operating cash flow | $176.2 million | $101.7 million |
| Cash and cash equivalents | $93.6 million | $71.7 million at December 31, 2022 |
| Total debt | $1,675.0 million | $1,780.7 million at December 31, 2022 |
Cash provided by investing activities was $20.8 million; cash used in financing was $134.2 million. Financing cash outflows included a $107.2 million net credit-facility paydown, $20.9 million of share-related payments, and $14.5 million of dividends. The company reported $610.2 million available under its credit facility and compliance with debt covenants. Current assets were $431.7 million and current liabilities were $719.8 million.
Key operating metrics: ARR was $1,071.0 million, up 13% at constant currency; last-twelve-month recurring revenue was $1,014.1 million. Account retention was 98%, and recurring-revenue dollar-based net retention was 110%.
Material changes versus the prior period
- Revenue growth was led by subscriptions, including expansion in existing accounts and growth in new accounts; perpetual license revenue declined 6.4%.
- Revenue increased across all regions. EMEA and APAC grew faster than the Americas on a reported basis; foreign exchange reduced reported growth relative to constant-currency growth.
- Net income fell despite higher revenue and operating income. Higher net interest expense and a sharp reduction in other income were significant factors. Q1 2022 other income included a $12.1 million interest-rate-swap fair-value gain and a $2.0 million aircraft-sale gain; Q1 2023 included a $4.5 million swap fair-value loss.
- Operating cash flow increased by $74.5 million, primarily from changes in operating assets and liabilities, including higher Cloud Services Subscription deposits and timing of tax payments.
- Q1 2023 included one acquisition for $10.3 million net cash paid, versus $696.0 million net cash paid in Q1 2022, which included the PLS acquisition.
Outlook, risks, and unusual items
The filing provides no specific quarterly or annual revenue or earnings guidance. Management said existing cash, operating cash generation, and credit-facility availability should be sufficient for working capital and capital expenditures over the next 12 months, while noting that future capital needs may vary and additional financing may be required.
Management cited uncertainty in China related to geopolitical challenges, obstacles to cloud-deployed software, and local customer preferences for license sales. Results are also exposed to foreign-exchange movements and borrowing costs; the weighted average rate on the revolving facility and term loan rose to 6.67% from 2.32% a year earlier. The company said there were no material changes to previously disclosed risk factors or market-risk exposure.
Other items to note include $19.5 million of stock-based compensation expense, a $14.5 million dividend declared at $0.05 per share, and $169.8 million remaining under the share and convertible-note repurchase authorization. Management did not expect pending legal matters to have a material adverse effect and reported no material litigation pending. Disclosure controls were assessed as effective; no material change in internal control over financial reporting was identified.
Most important facts for investors to verify
- Whether subscription, ARR, and recurring-revenue growth persist, particularly given the gap between reported and constant-currency growth.
- Whether operating cash flow remains strong after accounting for timing effects and customer deposits.
- Debt costs, credit-facility usage, covenant compliance, and the impact of interest-rate changes and swap fair-value movements.
- The sustainability of profitability as costs, stock-based compensation, acquisition activity, and foreign-exchange effects change.
- How China market conditions and the transition toward cloud and subscription offerings affect future growth.