Summary
Bentley Systems reported first quarter fiscal 2023 results with revenue of $314.4 million, up 14.1% year over year, or 17.1% on a constant currency basis. Gross profit was $247.2 million, up 12.5%. Gross margin was 78.6%, down 1.1 percentage points. Operating income was $65.8 million, up 16.2%, and operating margin was 20.9%, up 0.4 percentage points. Net income fell 19.3% to $45.5 million. Diluted EPS was $0.14, down 22.2%. The quarter showed top-line growth and better operating leverage, but the bottom line declined even as operating income rose.
Key business metrics point to durable recurring demand. ARR was $1,071.0 million as of March 31, 2023, and the constant currency ARR growth rate was 13% from March 31, 2022. The last twelve-month recurring revenues dollar-based net retention rate was 110%, compared with 108% for the same period last year. For the twelve months ended March 31, 2023, 89% of revenues were recurring. Deferred revenue was $250.7 million, up 9.8% from the prior-year quarter. Operating cash flow was $176.2 million, up 73.2%. Capital expenditures were $4.3 million, up 2.6%. On the non-GAAP side, Adjusted OI w/SBC margin was 28.8%, compared with 28.4% for the same period last year, and Adjusted EPS was $0.25, consistent with the same period last year. The company said the cash flow result offset 22Q4 timing shortfalls in early 2023, making 23Q1 a strong cash flow quarter.
Management offered a mixed view of end markets. The CEO said infrastructure sector trends were consistent with the previous quarter: very strong growth in resources, strong growth in public works/utilities, solid growth in industrial, and commercial facilities flat. Application consumption seasonally regained growth momentum, and E365 and Virtuosity initiatives continued their upward inflection. Regions largely performed as expected, with continued strong growth in India, continued solid growth in Europe, and solid growth in the Americas. China had a better first quarter than in recent years, but the company's strategic shift there toward a more localized indirect go-to-market structure and on-premise perpetual licenses will lead to an increasing ARR headwind. The CEO also said the results demonstrate the resilience of end-markets, the predictability of the accretive business model, and the consistency of execution.
Risks revolve around China and commercial facilities. The CFO said the 2023 financial outlook is appropriately balanced between favorable business momentum and a cautious approach toward China and the commercial facilities sector because of geopolitical and macro uncertainties. The company also faces a higher interest rate and tax environment. On a trailing-twelve-month basis, management anticipates cash flow from operations at an approximately 80% conversion rate from Adjusted EBITDA, consistent with prior guidance. This cash conversion expectation is not next-quarter guidance. It applies on a trailing-twelve-month basis. Other risks listed in the filing include adverse changes in global economic or political conditions, sanctions and embargoes, failure to retain personnel, competitive pressure, product quality, the ability to develop and market new products, financing access, and the ability to integrate acquisitions successfully.
Guidance commentary applies to the full 2023 fiscal year, not the next quarter. Management said the strong start to 2023 enhances confidence in the annual financial outlook. The balanced outlook leaves room for continued ARR growth and cash generation while acknowledging uncertainty in China and commercial facilities. The quarter's cash flow strength and the 110% net retention rate support the recurring revenue model. Still, GAAP profitability did not keep pace with revenue growth.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q1 FY2023 | Q4 FY2022 | QoQ | Q1 FY2022 | YoY |
|---|---|---|---|---|---|
| Revenue | $314.4M | $286.9M | +9.6% | $275.5M | +14.1% |
| Gross profit | $247.2M | $224.6M | +10.1% | $219.7M | +12.5% |
| Gross margin | 78.6% | 78.3% | +0.4 pp | 79.8% | -1.1 pp |
| Research & development | $67.8M | $67.9M | -0.1% | $61.3M | +10.7% |
| Sales & marketing | $52.1M | $53.9M | -3.3% | $45.9M | +13.5% |
| General & administrative | $46.8M | $45.7M | +2.5% | $51.2M | -8.5% |
| Total operating expenses | $181.4M | $183.8M | -1.3% | $163.1M | +11.2% |
| Operating income (loss) | $65.8M | $40.8M | +61.4% | $56.6M | +16.2% |
| Operating margin | 20.9% | 14.2% | +6.7 pp | 20.5% | +0.4 pp |
| Net income (loss) | $45.5M | $25.7M | +76.9% | $56.4M | -19.3% |
| Net margin | 14.5% | 9.0% | +5.5 pp | 20.5% | -6.0 pp |
| Diluted EPS | $0.14 | $0.08 | +$0.06 | $0.18 | -$0.04 |
| Net retention rate | 110.0% | — | — | 108.0% | +2.0 pp |
Risks
Net income decreased 19.3% and diluted EPS decreased 22.2% in FY2023 Q1 even though operating income rose 16.2%, and MD&A attributes pressure to higher interest expense, net from a higher weighted average interest rate on borrowings under the revolving loan facility and term loan. This debt-service sensitivity can continue to weigh on net income if rates remain elevated.
Gross margin declined 1.1 percentage points to 78.6% in FY2023 Q1 as cost of subscriptions and licenses and cost of services rose on headcount-related costs, cloud-related costs, and channel partner compensation. R&D and selling and marketing expenses also increased on higher headcount and annual compensation costs.
MD&A states future results in China remain uncertain due to continued geopolitical challenges, obstacles to cloud-deployed software, and a preference for license sales of locally-developed solutions. EMEA revenue growth was partly offset by reductions in Russia after the company exited operations beginning in Q2 2022.
MD&A reports the effective tax rate was higher in FY2023 Q1 primarily due to a decrease in discrete tax benefits recognized compared with the prior-year period. Lower discrete benefits can increase tax expense and contribute to net income down 19.3% in the quarter.
Deferred compensation plan swung to expense in FY2023 Q1 from income in FY2022 Q1 due to mark-to-market movements on plan liabilities, and the change in fair value of the interest rate swap was a loss in FY2023 Q1 versus a gain in FY2022 Q1. These non-operating swings can materially affect other income and net income.
ARR from annualized recurring contracts with consumption measurement durations of less than one year rose to 44% of total ARR from 39% as of March 31, 2023 and 2022, and daily consumption-measured ARR rose to 36% from 30%. The shift toward consumption-based and E365 subscriptions may increase variability in recurring revenues.
FY2023 Q1 subscriptions revenue growth was primarily driven by expansion from existing accounts, with only 3% growth attributable to new accounts, most notably smaller- and medium-sized accounts. Continued growth depends on maintaining high retention and net expansion, with recurring revenues dollar-based net retention rate at 110% and account retention rate at 98%.
SaaS KPIs
All quarters →Account Retention Rate
Last Twelve-Months Recurring Revenues
Constant Currency ARR Growth Rate
Adjusted OI w/SBC margin
Annualized Recurring Revenue (ARR)
Recurring Revenues Dollar-Based Net Retention Rate
Summary, forecast, risks and KPIs are extracted from BENTLEY SYSTEMS INC's SEC filings for Q1 FY2023 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 2, 2026.