Bentley(BSY) - 2022 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION This section presents the company's unaudited financial statements, management's analysis of financial condition and operations, market risk disclosures, and internal controls for the period Unaudited Consolidated Financial Statements This section presents Bentley Systems' unaudited consolidated financial statements for Q1 2022, including balance sheets, statements of operations, cash flows, and related accounting notes Consolidated Balance Sheets The balance sheets show an increase in total assets and liabilities, primarily driven by goodwill and long-term debt from acquisitions - Total assets increased to $3.16 billion as of March 31, 2022, from $2.66 billion at December 31, 2021, primarily driven by a significant increase in Goodwill and Intangible assets, reflecting recent acquisition activity[9] - Total liabilities rose to $2.70 billion from $2.25 billion, largely due to an increase in long-term debt to $1.87 billion[9] Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Total current assets | $414,061 | $615,831 | | Goodwill | $2,217,578 | $1,588,477 | | Total assets | $3,158,303 | $2,659,243 | | Total current liabilities | $612,790 | $593,874 | | Long-term debt | $1,871,527 | $1,430,992 | | Total liabilities | $2,700,650 | $2,250,021 | | Total stockholders' equity | $457,653 | $409,222 | Consolidated Statements of Operations The statements show a 24.1% increase in total revenues for Q1 2022, while net income remained relatively flat due to higher operating expenses - Total revenues for the three months ended March 31, 2022, increased by 24.1% year-over-year to $275.5 million, driven by strong growth in subscription revenues[13] - Net income remained relatively flat at $56.4 million for Q1 2022 compared to $57.0 million in Q1 2021, as higher revenues were offset by increased operating expenses, particularly in R&D, Selling & marketing, and General & administrative categories[13] Q1 2022 vs Q1 2021 Statement of Operations (in thousands) | Metric | Three months ended March 31, 2022 | Three months ended March 31, 2021 | | :--- | :--- | :--- | | Total revenues | $275,517 | $222,005 | | Subscriptions | $241,233 | $188,125 | | Gross profit | $219,732 | $172,716 | | Income from operations | $56,592 | $55,647 | | Net income | $56,388 | $57,006 | | Net income per share, diluted | $0.18 | $0.18 | Consolidated Statements of Cash Flows Cash flow statements indicate decreased operating cash, significantly increased investing cash due to acquisitions, and substantial financing activities - Net cash provided by operating activities decreased to $101.7 million in Q1 2022 from $132.8 million in Q1 2021[22] - Net cash used in investing activities significantly increased to $700.6 million in Q1 2022, primarily due to $696.0 million spent on acquisitions, compared to $60.6 million in the prior year period[22] - Net cash provided by financing activities was $399.9 million, mainly from proceeds from credit facilities of $563.9 million, which were used to fund acquisitions[22] - Cash and cash equivalents decreased by $199.7 million during the quarter, ending at $129.6 million[22] Notes to Consolidated Financial Statements Notes detail the Power Line Systems acquisition, revenue disaggregation by type and geography, and significant long-term debt obligations - On January 31, 2022, the Company completed the acquisition of Power Line Systems for $696.0 million in cash, net of cash acquired[30] - Total revenues are disaggregated by type (Subscriptions, Perpetual licenses, Services) and geography (Americas, EMEA, APAC); subscription revenues form the largest component[52][56] - The company has significant long-term debt, including a bank credit facility and convertible senior notes due in 2026 and 2027[96] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2022 financial performance, highlighting revenue growth, key business metrics, operational results, and liquidity, including the impact of acquisitions Overview This overview describes Bentley Systems as a global software provider for infrastructure engineering, emphasizing its recurring revenue model and diversified client base - Bentley Systems is a global provider of software for infrastructure engineering, serving sectors such as public works/utilities (52%), industrial/resources (34%), and commercial/facilities (14%)[204][205] - The company's revenue model is heavily reliant on recurring revenues, which constituted 86% of total revenues in 2021 (84% from subscriptions and 2% from recurring services)[210] - The business is diversified with no single account representing more than 2.5% of total revenues in 2021, and over 70% of 2021 revenues came from accounts with a tenure of over ten years[210] Key Business Metrics This section presents key business metrics, including strong Annualized Recurring Revenues (ARR) growth and high recurring revenue retention rates Key Business Metrics Comparison (in thousands, except percentages) | Metric | As of March 31, 2022 | As of March 31, 2021 | | :--- | :--- | :--- | | Last twelve-months recurring revenues | $885,882 | $716,902 | | ARR growth rate (Constant Currency) | 27% | 10% | | Account retention rate (Constant Currency) | 98% | 98% | | Recurring revenues dollar-based net retention rate (Constant Currency) | 108% | 107% | - The Annualized Recurring Revenues (ARR) growth rate of 27% for the twelve months ended March 31, 2022, was favorably impacted by 15% from the platform acquisitions of Power Line Systems and Seequent[232] - In response to the Russia-Ukraine war, the company paused sales in Russia and Belarus and reduced its related ARR by $5.2 million; as of March 31, 2022, total ARR was $962.6 million[233] Non-GAAP Financial Measures This section defines and reconciles non-GAAP financial measures, including Adjusted EBITDA and Adjusted Net Income, used for evaluating ongoing operations - The company uses Adjusted EBITDA and Adjusted Net Income to evaluate ongoing operations; Adjusted EBITDA is net income adjusted for items like interest, taxes, D&A, stock-based compensation, and acquisition expenses[238][239] Non-GAAP Financial Measures (in thousands) | Measure | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | Adjusted EBITDA | $97,616 | $82,976 | | Adjusted Net Income | $79,556 | $64,130 | Reconciliation of Net Income to Adjusted EBITDA (in thousands) | Line Item | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | Net income | $56,388 | $57,006 | | Interest expense, net | $7,042 | $2,319 | | Provision for income taxes | $3,231 | $10,358 | | Depreciation and amortization | $17,212 | $8,993 | | Stock-based compensation | $14,953 | $8,913 | | Deferred compensation plan | $(5,138) | $167 | | Acquisition expenses | $13,997 | $9,256 | | Other income, net | $(10,641) | $(14,482) | | Loss from equity method investment | $572 | $446 | | Adjusted EBITDA | $97,616 | $82,976 | Results of Operations This section details the results of operations, including revenue breakdown by type, changes in operating expenses, and the effective income tax rate Revenue Comparison (in thousands) | Revenue Type | Q1 2022 | Q1 2021 | Change ($) | Change (%) | Constant Currency Change (%) | | :--- | :--- | :--- | :--- | :--- | :--- | | Subscriptions | $241,233 | $188,125 | $53,108 | 28.2% | 32.0% | | Perpetual licenses | $10,205 | $10,116 | $89 | 0.9% | 5.9% | | Services | $24,079 | $23,764 | $315 | 1.3% | 2.8% | | Total revenues | $275,517 | $222,005 | $53,512 | 24.1% | 27.7% | - On a constant currency basis, the $60.2 million increase in subscriptions revenue was driven by acquisitions ($42.7 million) and improvements in business performance ($17.5 million), primarily from expansion within existing accounts[263][264] - Total operating expenses increased 39.4% to $163.1 million, driven by higher R&D, Selling & marketing, and General & administrative costs, largely due to increased headcount and expenses from acquisitions[272][273][274][275] - The effective income tax rate for Q1 2022 was 5.4%, significantly lower than 15.3% in Q1 2021, primarily due to a $5.2 million increase in discrete tax benefits from stock-based compensation[283] Liquidity and Capital Resources This section discusses the company's liquidity, capital resources, and debt obligations, highlighting cash usage for acquisitions and available credit facilities - The primary use of cash during the quarter was to fund the acquisition of Power Line Systems, using available cash and borrowings under the Credit Facility[288] - As of March 31, 2022, 95% ($122.5 million) of the company's total cash and cash equivalents were held outside the U.S.; $100 million was repatriated during Q1 2022 and another $50 million after quarter-end to fund the Power Line Systems acquisition[289][291] Cash Flow Summary (in thousands) | Activity | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | Net Cash Provided By Operating activities | $101,731 | $132,798 | | Net Cash Used In Investing activities | $(700,575) | $(60,630) | | Net Cash Provided By Financing activities | $399,931 | $372,137 | - As of March 31, 2022, the company had $409.6 million available under its $850 million revolving credit facility[296] Quantitative and Qualitative Disclosures About Market Risk The company states that there have been no significant changes in its market risk exposure from what was described in its 2021 Annual Report on Form 10-K - There have been no significant changes in the company's market risk exposure as described in the 2021 Annual Report on Form 10-K[329] Controls and Procedures Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective at a reasonable assurance level as of March 31, 2022 - Based on an evaluation as of the end of the period, the principal executive officer and principal financial officer concluded that the company's disclosure controls and procedures were effective at the reasonable assurance level[331] - No changes in internal control over financial reporting occurred during the quarter ended March 31, 2022, that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[333] PART II. OTHER INFORMATION This section provides other information, including legal proceedings, risk factors, unregistered equity sales, and a list of exhibits filed with the report Legal Proceedings The company is subject to various legal proceedings in the ordinary course of business but does not believe the outcome will have a material adverse effect on its financials - The company is not currently involved in any material litigation and does not expect the outcome of ordinary course legal actions to have a material adverse effect on its financials[336] Risk Factors This section refers the reader to the risk factors described in the company's 2021 Annual Report on Form 10-K, stating they could materially affect the business - The report directs investors to consider the risk factors previously disclosed in the company's 2021 Annual Report on Form 10-K[337] Unregistered Sales of Equity Securities and Use of Proceeds During Q1 2022, the company issued shares of its Class B Common Stock in several unregistered transactions, including for vested RSUs and deferred compensation - From January 1, 2022, to March 31, 2022, the company issued unregistered Class B Common Stock for three main purposes: 10,881 shares for vested RSUs, 809,751 shares for deferred compensation plan distributions, and 735,000 shares for exercised acquisition-related options[338][339] - These security issuances were exempt from registration under the Securities Act, relying on Rule 701 for compensatory plans and Section 4(a)(2) for transactions not involving a public offering[340] Exhibits This section lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications and Inline XBRL data files - The exhibits filed with this report include CEO and CFO certifications pursuant to Rule 13a-14(a) and Section 906 of the Sarbanes-Oxley Act, as well as various Inline XBRL documents[342]