Bentley(BSY) - 2023 Q4 - Annual Results

Financial Performance Summary This section details Bentley Systems' financial results for Q4 and full year 2023, management commentary, and recent corporate actions Fourth Quarter 2023 Financial Highlights Bentley Systems reported increased Q4 2023 revenues and net income per diluted share, with strong Annualized Recurring Revenues growth Q4 2023 Key Financial Metrics (YoY) | Metric | Q4 2023 | Q4 2022 | Change | Constant Currency Change | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $310.6M | $286.9M | +8.3% | +7.3% | | Subscriptions Revenues | $272.5M | $251.5M | +8.3% | +7.4% | | Operating Income Margin | 12.2% | 14.2% | -200 bps | N/A | | Net Income per Share (Diluted) | $0.54 | $0.08 | +575% | N/A | | Cash Flow from Operations | $87.1M | $36.1M | +141.3% | N/A | - Annualized Recurring Revenues (ARR) reached $1,174.8 million as of December 31, 2023, representing a constant currency growth rate of 12.5% compared to the previous year[6] - The last twelve-month recurring revenues dollar-based net retention rate was 109%, slightly down from 110% in the prior year period[6] Full Year 2023 Financial Highlights Bentley Systems achieved strong full year 2023 financial performance with increased revenues, stable operating margin, and higher net income and cash flow Full Year 2023 Key Financial Metrics (YoY) | Metric | Full Year 2023 | Full Year 2022 | Change | Constant Currency Change | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $1,228.4M | $1,099.1M | +11.8% | +11.9% | | Subscriptions Revenues | $1,080.3M | $960.2M | +12.5% | +12.5% | | Operating Income Margin | 18.8% | 19.0% | -20 bps | N/A | | Net Income per Share (Diluted) | $1.00 | $0.55 | +81.8% | N/A | | Adjusted EPS | $0.91 | $0.85 | +7.1% | N/A | | Cash Flow from Operations | $416.7M | $274.3M | +51.9% | N/A | Management Commentary Management expressed confidence in 2023 results, highlighting ARR growth and strategic AI investments, while outlining the 2024 outlook - CEO Greg Bentley emphasized a strategic priority to invest in and acquire asset analytics businesses, citing the success of AI-enabled 'instant-on' digital twins like OpenTower and Blyncsy[8][21] - COO Nicholas Cumins identified key growth drivers as North America, application mix accretion in E365 enterprise accounts, and Virtuosity subscriptions for small- and medium-sized businesses[22] - CFO Werner Andre stated the 2024 outlook assumes a wider range of outcomes to account for a commercial model shift in China, lower acquisition expectations, and reduced inflation-based price escalations[8] Recent Developments In Q4 2023, Bentley Systems underwent internal restructuring, leading to a significant one-time net income tax benefit and realignment charges - A net discrete income tax benefit of $170.8 million was recognized in Q4 2023, attributable to internal legal entity restructuring and alignment of intellectual property ownership[8] - The company recorded a $12.6 million charge for realignment expenses, affecting under 5% of the workforce, to reinvest in go-to-market functions and AI product development[23] 2024 Financial Outlook and Shareholder Returns This section outlines Bentley Systems' financial projections for 2024 and details the recent increase in its quarterly cash dividend 2024 Financial Outlook Bentley Systems projects 2024 total revenues with 10% to 12% constant currency growth and anticipates an annual improvement in adjusted operating margin 2024 Full Year Financial Outlook | Metric | Outlook | | :--- | :--- | | Total Revenues | $1,350M - $1,375M | | Total Revenues Constant Currency Growth | 10% - 12% | | Constant Currency ARR Growth Rate | 10.5% - 13% | | Adjusted OI w/SBC Margin | ~100 bps annual improvement | | Cash Flow from Operations Conversion | ~80% of Adjusted EBITDA | | Effective Tax Rate | ~20% | | Capital Expenditures | ~$22M | Increased Quarterly Cash Dividend The Board of Directors approved an increase in the quarterly cash dividend, scheduled for payment in late March 2024 - The Board of Directors increased the regular quarterly dividend to $0.06 per share, effective Q1 2024[26] - The dividend is payable on March 28, 2024, to stockholders of record as of the close of business on March 20, 2024[26] Consolidated Financial Statements (Unaudited) This section presents Bentley Systems' unaudited consolidated statements of operations, balance sheets, and cash flows for the reported periods Consolidated Statements of Operations For the full year 2023, total revenues increased, gross profit rose, and a significant tax benefit drove a substantial increase in net income Full Year Statement of Operations Highlights (in thousands) | Line Item | 2023 | 2022 | | :--- | :--- | :--- | | Total Revenues | $1,228,413 | $1,099,082 | | Gross Profit | $962,330 | $862,069 | | Income from Operations | $230,542 | $208,612 | | Net Income | $326,787 | $174,780 | | Net Income per Share, Diluted | $1.00 | $0.55 | Consolidated Balance Sheets As of December 31, 2023, Bentley Systems' balance sheet showed increased total assets and a significant rise in total stockholders' equity Balance Sheet Highlights (in thousands) | Category | Dec 31, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Total Current Assets | $419,557 | $415,895 | | Goodwill | $2,269,336 | $2,237,184 | | Total Assets | $3,319,850 | $3,165,005 | | Total Current Liabilities | $760,363 | $628,358 | | Long-term Debt | $1,518,403 | $1,775,696 | | Total Liabilities | $2,435,868 | $2,591,551 | | Total Stockholders' Equity | $883,982 | $573,454 | Consolidated Statements of Cash Flows For the full year 2023, net cash from operating activities increased substantially, and investing activities used significantly less cash compared to the prior year Full Year Cash Flow Highlights (in thousands) | Category | 2023 | 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $416,696 | $274,324 | | Net cash used in investing activities | ($60,504) | ($770,127) | | Net cash (used in) provided by financing activities | ($359,074) | $243,034 | | Decrease in cash and cash equivalents | ($3,272) | ($257,653) | Reconciliation of GAAP to Non-GAAP Financial Measures This section provides reconciliations of Bentley Systems' GAAP financial measures to their non-GAAP counterparts, including constant currency adjustments Reconciliation of Net Income to Adjusted Net Income GAAP Net Income for full year 2023 was reconciled to Adjusted Net Income, driven by adjustments for non-cash items and a significant tax benefit Full Year Reconciliation to Adjusted Net Income (in thousands) | Line Item | 2023 | 2022 | | :--- | :--- | :--- | | Net Income (GAAP) | $326,787 | $174,780 | | Total non-GAAP adjustments, prior to tax | $172,827 | $115,585 | | Tax benefit related to internal restructuring | ($170,784) | $0 | | Adjusted Net Income (Non-GAAP) | $297,175 | $274,518 | | Adjusted EPS (Non-GAAP) | $0.91 | $0.85 | Reconciliation of Operating Income to Adjusted Operating Income GAAP Operating Income for full year 2023 was reconciled to Adjusted Operating Income by adding back non-cash expenses and one-time charges Full Year Reconciliation to Adjusted Operating Income (in thousands) | Line Item | 2023 | 2022 | | :--- | :--- | :--- | | Operating Income (GAAP) | $230,542 | $208,612 | | Amortization of purchased intangibles | $51,219 | $53,592 | | Stock-based compensation expense | $71,470 | $74,566 | | Realignment expenses (income) | $11,470 | $2,109 | | Adjusted Operating Income (Non-GAAP) | $396,147 | $348,495 | Reconciliation of cash flow from operations to Adjusted EBITDA For full year 2023, GAAP cash flow from operations was reconciled to Adjusted EBITDA, with adjustments for cash interest, taxes, and changes in operating assets and liabilities Full Year Reconciliation to Adjusted EBITDA (in thousands) | Line Item | 2023 | 2022 | | :--- | :--- | :--- | | Cash flow from operations (GAAP) | $416,696 | $274,324 | | Cash interest | $37,389 | $26,581 | | Cash taxes | $42,431 | $25,890 | | Changes in operating assets and liabilities | ($94,458) | $8,088 | | Adjusted EBITDA (Non-GAAP) | $416,789 | $366,440 | Constant Currency Reconciliation The company updated its constant currency definition in Q4 2023 to better reflect performance, providing reconciliations under the new methodology - In Q4 2023, the company changed its definitions of constant currency and constant currency growth rates to better align with how it manages the business and to improve period-over-period comparability[28] Revenue Growth vs. Constant Currency Growth (Current Definition) | Period | Revenue Type | Actual Growth % | Constant Currency Growth % | | :--- | :--- | :--- | :--- | | Q4 2023 | Total Revenues | 8.3% | 7.3% | | Q4 2023 | Subscriptions Revenues | 8.3% | 7.4% | | FY 2023 | Total Revenues | 11.8% | 11.9% | | FY 2023 | Subscriptions Revenues | 12.5% | 12.5% | Disclosures and Company Information This section provides important disclosures regarding non-GAAP measures, forward-looking statements, and an overview of Bentley Systems Non-GAAP Financial Measures This report includes non-GAAP financial measures, which supplement GAAP reporting and have updated constant currency definitions as of Q4 2023 - The press release uses non-GAAP financial measures which require supplemental explanations and reconciliations as provided in the company's Form 8-K furnished to the SEC[11] - The company changed its definition of constant currency and constant currency growth rates during Q4 2023 to better align with internal management and performance evaluation[28] Forward-Looking Statements The earnings release contains forward-looking statements regarding future performance, subject to various risks and uncertainties that could cause actual results to differ - The report includes forward-looking statements based on current expectations and projections about future events and financial trends[13] - A number of risks and uncertainties could cause actual results to differ materially, including economic conditions, competition, personnel retention, and ability to integrate acquired businesses[13] About Bentley Systems Bentley Systems is a global leader in infrastructure engineering software, providing solutions for design, construction, and operation, powered by the iTwin Platform - Bentley Systems provides software solutions for the design, construction, and operations of global infrastructure, including roads, rail, water, utilities, buildings, and industrial facilities[39] - The company's offerings are powered by the iTwin Platform and include applications like MicroStation, Seequent, ProjectWise, SYNCHRO, and AssetWise[39] - Bentley Systems employs 5,200 colleagues and generates annual revenues of more than $1 billion in 194 countries[39]