EXTON, PA — Bentley Systems, Incorporated (NASDAQ: BSY), the infrastructure engineering software company, recently announced operating results for its quarter ended September 30, 2020.
Third Quarter 2020 Financial Results:
- Total revenues were $203.0 million, up 8.8% year-over-year;
- Subscriptions revenues were $173.2 million, up 11.6% year-over-year;
- Last twelve-month recurring revenues were $682.7 million, up 11.0% year-over-year;
- Last twelve-month recurring revenues dollar-based net retention rate was 110%, compared to 107% for the same period last year;
- Last twelve-month account retention rate was 98%, consistent with the same period last year;
- Annualized Recurring Revenue (“ARR”) was $715.3 million as of September 30, 2020, representing Constant currency growth in ARR of 9% over September 30, 2019;
- GAAP operating income was $5.3 million, compared to $41.4 million for the same period last year;
- GAAP net income was $5.8 million, compared to $20.4 million for the same period last year. GAAP net income per diluted share was $0.02, compared to $0.07 for the same period last year;
- Adjusted Net Income was $51.4 million, compared to $39.3 million for the same period last year. Adjusted Net Income per diluted share was $0.17 compared to $0.14 for the same period last year;
- Adjusted EBITDA was $73.6 million, compared to $52.8 million for the same period last year. Adjusted EBITDA margin was 36.3%, compared to 28.3% for the same period last year;
- Cash flow from operations was $39.8 million, compared to $35.5 million for the same period last year.
Definitions of the non-GAAP financial measures used in this press release and reconciliations of such measures to their nearest GAAP equivalents are included below under the heading “Use and Reconciliation of Non-GAAP Financial Measures.”
“Our encouraging operating results for the third quarter of 2020 continue to reinforce the relative resilience of infrastructure engineering, and the priority placed by our user organizations this year on going digital, as they have resourcefully ‘virtualized’ their mission-critical work,” said Greg Bentley, CEO. “2020’s inflection in their digital advancement is evidenced by the burgeoning use cases for infrastructure digital twins which our users and accounts showcased at our just-completed Year in Infrastructure 2020 Conference.”
Mr. Bentley continued, “Although infrastructure investment at large– and our predictable business model– continues to demonstrate resilience, we have now discerned a change within our application usage trends. During the first half of 2020, we could see waves of pandemic-related lockdowns adversely impacting our days of usage by a few percent, and then abating progressively by region. Beginning in the third quarter, we’ve been observing global usage impacts that instead are primarily a function of infrastructure sector — with the commercial/facilities sector most affected, and our mainstay public works and utilities sector least affected. In the industrial / resources sector, capital projects activity has now perceptibly declined, reducing consumption of our applications by those affected (‘EPC’ engineering/procurement/construction firms). EPC accounts tend to have been early adopters of our consumption-based E365 commercial model, so our ARR and revenue growth are being somewhat attenuated. Our usual visibility into ARR momentum is likely to remain obscured to this degree.”
“Overall, we are nonetheless confident about promising returns on the purposeful reinvestment of our significant 2020 cost savings. Our new Chief Product Officer (Nicholas Cumins), inaugural Chief Success Officer (Katriona Lord-Levins), and new Chief Marketing Officer (Chris Bradshaw) bring us world-class public company experience in succession to many of our ‘foundation pillar’ executives whose retirements, upon our IPO after 36 years, have been anticipated. While maintaining our commitment to annual improvement in operating efficiency and margins, we are enthusiastically investing to accelerate accretion in our existing accounts, to better reach more small and mid-market prospects, to further enable our applications and systems through our iTwins Platform, and to develop our ecosystem of digital integrators to curate infrastructure digital twins.”
- In August 2020, Bentley Systems declared a special dividend of $1.50 per share ($392.5 million in the aggregate) and used its bank credit facility to fund the special dividend.
- In September 2020, Bentley Systems completed its initial public offering (“IPO”) of its Class B common stock at a price of $22.00 per share. Selling stockholders completed the sale of 12.4 million shares, including 1.6 million shares issued pursuant to the full exercise of the underwriters’ option to purchase additional shares. The Company did not receive any proceeds from the sale of shares of common stock by the selling stockholders in the IPO. For the three and nine months ended September 30, 2020, the Company recorded in its consolidated statement of operations $26.1 million in expenses associated with its IPO. Expenses associated with the IPO include certain non‐recurring costs consisting of underwriting discounts and commissions applicable to the sale of shares by the selling stockholders, professional fees, and other expenses.
- During the third quarter of 2020, the Company initiated a strategic realignment program to better align talent resources with the evolving needs of the business. The Company incurred realignment costs related to this program of $10.0 million for the three and nine months ended September 30, 2020, representing termination benefits for colleagues whose positions were eliminated. These realignment activities have been broadly implemented across the company with substantially all actions expected to be completed by the beginning of 2021.
- For the three and nine months ended September 30, 2020, the Company reported an effective tax rate of 62.5% and 22.6% respectively. The unusually high effective tax rate, especially in the third quarter, is primarily due to officer compensation limitation provisions resulting from the Company’s IPO and the non‑deductibility of expenses associated with the Company’s IPO, partially offset by increased tax benefits from stock‑based compensation.
2020 Financial Outlook
For the full year of 2020, the Company currently expects:
- Total revenues in the range of $790 million to $800 million, representing growth of 7.2% to 8.6%;
- Constant currency growth in ARR of 7.5% to 9.0%;
- Adjusted EBITDA in the range of $250 million to $265 million, representing growth of 33% to 41%, including the impact of transitioning approximately $7.5 million of quarterly executive compensation from cash-based incentives to stock-based incentives for the fourth quarter of 2020;
- Its effective tax rate for 2020 to be 23% to 25%. However, normalized for the unusual IPO-related activity in the third quarter of 2020, the effective tax rate is expected to be approximately 19% to 21%.
Bentley Systems is not providing a quantitative reconciliation of its Non-GAAP financial outlook to the corresponding GAAP information because the GAAP measures that it excludes from its Non-GAAP outlook are not available without unreasonable effort on a forward-looking basis due to their unpredictability, high variability, complexity and low visibility.
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