Group 1 - The article discusses the author's perspective on Bentley Systems (NASDAQ: BSY), maintaining a hold rating due to uncertainty about near-term earnings performance and concerns regarding high valuation [1] - The author emphasizes a fundamentals-based approach to value investing, focusing on companies with long-term durability, steady growth, and strong balance sheets [1] - There is a belief that while investing in successful companies carries risks, the potential for significant development can make immediate price less critical [1]

Core Viewpoint - Investors in Bentley Systems, Incorporated (BSY) should closely monitor the stock due to significant movements in the options market, particularly the high implied volatility of the Dec 20, 2024 $70.00 Call option [1] Company Analysis - Bentley Systems currently holds a Zacks Rank 3 (Hold) in the Internet - Software industry, which is positioned in the top 16% of the Zacks Industry Rank [3] - Over the past 60 days, no analysts have raised their earnings estimates for the current quarter, while three analysts have lowered their estimates, resulting in a decrease of the Zacks Consensus Estimate from earnings of 25 cents per share to 23 cents per share [3] Options Market Insights - The high implied volatility surrounding Bentley Systems shares suggests that options traders are anticipating a significant price movement, which could indicate an upcoming event that may lead to a substantial rally or sell-off [2][4] - Options traders often seek to sell premium on options with high implied volatility, aiming to benefit from the decay of the option's value if the underlying stock does not move as much as expected by expiration [4]

Financial Data and Key Metrics Changes - In Q3 2024, the company reported a 12% year-over-year growth in Annual Recurring Revenue (ARR), reaching $1.271 billion, with a constant currency growth rate of 12.5% excluding China [45][59]. - Subscription revenues grew 12% year-over-year, now representing 91% of total revenues, up from 88% in the prior year [53][54]. - Total revenues increased by 9% year-over-year, driven by strong subscription performance despite a decline in professional services revenues [57][75]. - Adjusted operating income with stock-based compensation was $90 million for the quarter, up 4% year-over-year, with a margin of 26.7% [64]. Business Line Data and Key Metrics Changes - The E365 programs were highlighted as a major growth driver, contributing significantly to ARR growth through upgrades and new accounts [46][59]. - The professional services segment saw a decline of 14% year-over-year, primarily due to delays in IBM Maximo related implementations [55][75]. - The asset analytics business is expected to add incremental revenue opportunities, although it currently contributes less than 50 basis points to ARR growth [60][94]. Market Data and Key Metrics Changes - The Americas region delivered strong growth, particularly in North America, while Asia Pacific also showed robust performance, especially in Southeast Asia and India [50][51]. - China’s contribution to ARR has decreased to approximately 2.5%, down from 3% a year ago, due to soft economic conditions and geopolitical tensions [45][59]. - The public works/utilities sector remains a key growth driver, benefiting from global infrastructure spending [49]. Company Strategy and Development Direction - The company is focusing on enhancing its digital twin capabilities and integrating AI into its product offerings, which is expected to open new monetization opportunities [39][41]. - The acquisition of Cesium is seen as a strategic move to enhance 3D geospatial capabilities and expand the customer base [36][26]. - The company aims to maintain a consistent annual margin improvement of 100 basis points while investing in long-term initiatives [66][74]. Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ongoing visibility and linearity of ARR growth, with expectations for continued strong performance in Q4 [9][74]. - The sentiment in the U.S. engineering sector remains positive, with firms expecting higher backlogs and optimistic financial outlooks [48]. - The company anticipates that the upcoming U.S. elections may not significantly disrupt infrastructure investment priorities, which are expected to remain bipartisan [90][91]. Other Important Information - The company has entered into a new five-year senior secured credit agreement, providing increased flexibility for capital allocation and debt management [71][72]. - The company is raising its cash flow conversion expectations for the year from 80% to 85% due to strong cash collections and profitability [75][68]. Q&A Session Summary Question: About the Year in Infrastructure Conference and AI capabilities - Management indicated that the asset analytics portfolio represents an incremental opportunity for AI-enabled digital twins, while existing products will also benefit from enhanced interoperability and new features [80][82]. Question: Growth drivers for next year - Management expects next year to be consistent with this year, driven by project backlogs and the asset analytics business, with a focus on maintaining low double-digit ARR growth [85][86]. Question: Impact of U.S. elections on project sentiment - Management noted that the IIJA provides visibility for infrastructure spending, and there is optimism about bipartisan support for infrastructure investment [89][90]. Question: Contribution of Cesium to ARR - Management clarified that while Cesium's financial impact is currently minimal, its strategic importance and user engagement are significant [94][96]. Question: Drivers of SMB growth - Management highlighted the success of Virtuosity subscriptions in attracting new SMB accounts, indicating a deep market for these services [97][100]. Question: Water infrastructure demand - Management acknowledged a long-term growth trend in water infrastructure, with a global uptick in orders, although it is not concentrated in the U.S. [102]. Question: Changes in customer selection criteria - Management noted that customers are increasingly prioritizing data management and interoperability, which aligns with the company's open approach [106][108].

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Revenue Performance - Total revenues for the three months ended September 30, 2024, were $335,173, representing a 9.3% increase compared to the same period in 2023[133]. - Subscription revenues for the three months ended September 30, 2024, were $303,239, up 12.0% year-over-year[133]. - Annual Recurring Revenue (ARR) as of September 30, 2024, was $1,270,726, reflecting a 12% growth rate in constant currency compared to the previous year[133]. - Revenues from the Americas for the three months ended September 30, 2024, were $175,609, an increase of 8.2% year-over-year[145]. - EMEA revenues for the three months ended September 30, 2024, were $95,343, reflecting a 9.6% increase compared to the same period in 2023[145]. - APAC revenues for the three months ended September 30, 2024, were $64,221, up 12.1% year-over-year[145]. - Total revenues for the nine months ended September 30, 2024, were $1,003,273, with a constant currency adjustment resulting in $1,002,382[200]. - Subscription revenues for the nine months ended September 30, 2024, were $907,772, adjusted to $906,988 in constant currency[200]. Operating Income and Expenses - Operating income for the three months ended September 30, 2024, was $68,630, a decrease from $73,679 in the same period of 2023[133]. - Total cost of revenues for the three months ended September 30, 2024, was $64,832, a slight increase of 0.2% compared to the same period in 2023[154]. - Research and development expenses for the three months ended September 30, 2024, increased by 7.0% to $70,068, primarily due to headcount-related costs[158]. - Selling and marketing expenses for the three months ended September 30, 2024, increased by 20.8% to $64,940, driven by higher headcount-related costs[162]. - General and administrative expenses for the three months ended September 30, 2024, increased by 20.3% to $51,359, mainly due to increased headcount-related costs and higher charitable contributions[163]. - Total operating expenses for the three months ended September 30, 2024, increased by 19.9% to $201,711 compared to the same period last year[158]. - Operating expenses for the three months ended September 30, 2024, totaled $201,711 million, compared to $168,257 million for the same period in 2023, indicating a significant increase[203]. Cash Flow and Liquidity - Cash flows from operations for the nine months ended September 30, 2024, were $353,660, compared to $329,643 for the same period in 2023[133]. - Cash and cash equivalents as of September 30, 2024, amounted to $72,175 million, up from $68,412 million at the end of 2023[204]. - Net cash provided by operating activities for the nine months ended September 30, 2024, was $353,660 million, an increase of $24,017 million compared to $329,643 million in the prior year[208]. - Net cash used in investing activities increased to $135,680 million for the nine months ended September 30, 2024, primarily due to higher acquisition-related payments[209]. - The company plans to continue funding acquisitions and growth investments through cash generated from operations and available liquidity under the Credit Facility[205]. Debt and Financing - Long-term debt as of September 30, 2024, was $1,418,870 million, down from $1,518,403 million at the end of 2023[212]. - On October 18, 2024, the company entered into a $1,300,000 revolving credit facility, including $125,000 in swingline loans and $125,000 in letters of credit[214]. - The company has a $500,000 "accordion" feature to increase the credit facility in the form of revolving indebtedness and/or incremental term loans[214]. - As of September 30, 2024, the company was in compliance with all covenants under the Credit Facility and the 2026 and 2027 Notes[213]. Shareholder Returns - The quarterly dividend per share increased to $0.06 in 2024 from $0.05 in 2023, resulting in higher dividend payments[210]. - Quarterly dividends paid were $0.06 per share during the nine months ended September 30, 2024, up from $0.05 per share in the same period of 2023[220]. - The Board of Directors authorized a stock repurchase program of up to $200,000 for Class B common stock and/or outstanding convertible senior notes, extended through June 30, 2026[215]. - The company repurchased 912,737 shares for $45,769 during the nine months ended September 30, 2024, compared to no repurchases in the same period of 2023[216]. - Future dividend payments will depend on various factors, including results of operations and capital requirements, and are subject to limitations under the Credit Facility[220]. Retention and Growth Metrics - The dollar-based net retention rate for recurring revenues was 109% as of September 30, 2024, slightly down from 110% in the prior year[133]. - The account retention rate for the twelve months ended September 30, 2024, was 99%, an increase from 97% in the prior year[172]. - The recurring revenues dollar-based net retention rate was a key metric, indicating the company's ability to retain and grow recurring revenues from existing accounts[183]. - The account retention rate is a critical metric for evaluating long-term account relationships, demonstrating the company's ability to maintain its account base[181]. - The company continues to focus on growing recurring revenues within existing accounts, as evidenced by the increase in the dollar-based net retention rate[185]. Tax and Interest - The effective tax rate for the three months ended September 30, 2024, was 28.1%, up from 23.7% in the same period last year, primarily due to decreased discrete tax benefits[168]. - The company reported a net interest expense decrease of 53.5% for the three months ended September 30, 2024, totaling $(4,669) due to lower average debt outstanding[166]. Non-GAAP Measures - Non-GAAP financial measures, including adjusted operating income, are used to provide investors with a clearer view of operational performance[186]. - Adjusted operating income for the three months ended September 30, 2024, was $105,419, compared to $104,366 for the same period in 2023, reflecting operational strength[193]. Market Risk and Other Considerations - There have been no material changes in the company's market risk exposure as described in the 2023 Annual Report[222]. - The impact of foreign exchange on total revenues was a consideration, with adjustments made to present results in constant currency for better comparability[196]. - The timing and value of shares repurchased under the Repurchase Program will depend on market conditions and the company's assessment of intrinsic value[217]. - The company recognized approximately $6,200 in costs associated with internal-use system implementations during the nine months ended September 30, 2024[164]. - The amortization of purchased intangibles decreased by 12.1% for the three months ended September 30, 2024, due to fully amortized intangible assets[165].

Core Viewpoint - Bentley Motors is delaying its target to exclusively offer all-electric vehicles until at least 2035 due to changing market conditions and low demand from current customers [2][3]. Group 1: Company Strategy - Bentley has an ambition to build only fully electric cars from 2035, but this timeline has been adjusted in response to market dynamics [2]. - The company plans to continue focusing on plug-in hybrid electric vehicles until the revised target date [1]. Group 2: Market Demand and Legislation - Current demand for electric vehicles (EVs) from Bentley's existing customer base is low, prompting the need for a revised strategy [2][3]. - Legislation and competition are significant factors driving the need for electrification in the automotive industry [3]. Group 3: Historical Context - Bentley initially announced plans to exclusively offer all-electric vehicles by the end of this decade in 2020, but these plans have faced delays [3]. - The former CEO indicated that the timeline would be pushed back by a few years without specifying a new timeframe [3].

Core Insights - Bentley Systems, Incorporated (BSY) reported revenue of $335.17 million for the quarter ended September 2024, reflecting a year-over-year growth of 9.3% [1] - The earnings per share (EPS) for the quarter was $0.24, an increase from $0.22 in the same quarter last year [1] - The reported revenue was below the Zacks Consensus Estimate of $339.93 million by 1.40%, and the EPS fell short of the consensus estimate of $0.25 by 4.00% [1] Revenue Performance - Total revenue growth year-over-year was 9.3%, compared to the average estimate of 10.8% from three analysts [3] - Annualized Recurring Revenues (ARR) reached $1.27 billion, slightly above the two-analyst average estimate of $1.25 billion [3] - Subscription revenue grew by 12% year-over-year, but was below the average estimate of 12.9% from two analysts [3] - Total revenues from subscriptions and licenses were reported at $314.51 million, compared to the three-analyst average estimate of $316.17 million [3] - Service revenues were $20.66 million, which is a decline of 13.8% year-over-year and below the average estimate of $23.54 million from three analysts [3] - Subscription revenues amounted to $303.24 million, slightly below the two-analyst average estimate of $305.61 million, with a year-over-year increase of 12% [3] - Revenues from perpetual licenses were $11.27 million, exceeding the two-analyst average estimate of $11 million, but reflecting a year-over-year decline of 5.2% [3] Stock Performance - Over the past month, shares of Bentley Systems have returned +2%, while the Zacks S&P 500 composite has seen a +3.2% change [4] - The stock currently holds a Zacks Rank 3 (Hold), indicating expected performance in line with the broader market in the near term [4]

Group 1: Earnings Performance - Bentley Systems reported quarterly earnings of $0.24 per share, missing the Zacks Consensus Estimate of $0.25 per share, but showing an increase from $0.22 per share a year ago, representing an earnings surprise of -4% [1] - The company posted revenues of $335.17 million for the quarter ended September 2024, missing the Zacks Consensus Estimate by 1.40%, compared to year-ago revenues of $306.61 million [2] - Over the last four quarters, Bentley Systems has surpassed consensus EPS estimates three times and topped consensus revenue estimates two times [2] Group 2: Stock Performance and Outlook - Bentley Systems shares have lost about 4.3% since the beginning of the year, while the S&P 500 has gained 24.3% [3] - The company's earnings outlook will be crucial for future stock movements, with current consensus EPS estimates at $0.25 for the coming quarter and $1.10 for the current fiscal year [4][7] - The estimate revisions trend for Bentley Systems is mixed, resulting in a Zacks Rank 3 (Hold), indicating expected performance in line with the market in the near future [6] Group 3: Industry Context - The Internet - Software industry, to which Bentley Systems belongs, is currently in the top 25% of over 250 Zacks industries, suggesting a favorable outlook compared to the bottom 50% [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can be tracked by investors [5]

Exhibit 99.1 Bentley Systems Announces Third Quarter 2024 Results EXTON, PA – November 7, 2024 – Bentley Systems, Incorporated (Nasdaq: BSY), the infrastructure engineering software company, today announced results for the quarter ended September 30, 2024. Third Quarter 2024 Results • Total revenues were $335.2 million, up 9.3% or 9.1% on a constant currency basis, year-over-year; • Subscriptions revenues were $303.2 million, up 12.0% or 11.8% on a constant currency basis, year-over-year; • Annualized Recur ...

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