BENTLEY SYSTEMS INC Q2 FY2022 earnings

Bentley Systems posted a solid second quarter of 2022. Total revenues were $268.3 million, up 19.8% year over year, or 26.2% in constant currency. Gross profit rose to $208.6 million, up 22.4%, and gross margin improved to 77.7%, up 1.6 percentage points. Operating income climbed to $55.7 million, up 67.8%, lifting operating margin to 20.8%, up 5.9 percentage points. Net income was $55.7 million, up 22.0%, and diluted EPS was $0.17, up 21.4%. For the six months ended June 30, 2022, total revenues were $543.8 million, up 21.9%. The quarter also showed stronger cash generation. Operating cash flow was $67.0 million, up 313.0% from the prior-year quarter, while year-to-date operating cash flow was $168.7 million, up 13.2%. Capital expenditures were $2.4 million in the quarter, up 15.2%, and $6.6 million year to date, up 38.7%. Deferred revenue and remaining performance obligations were each $214.8 million, down 3.7% from a year earlier.

Operationally, annualized recurring revenue reached $971.9 million as of June 30, 2022, an ARR growth rate of 14% from June 30, 2021. Last twelve-month recurring revenues were $930.8 million, up 24.6% year over year. The dollar-based net retention rate for recurring revenues was 109%, compared with 106% in the same period last year, and the account retention rate was 98%, consistent with the prior year. For the twelve months ended June 30, 2022, 88% of revenues were recurring. Adjusted EBITDA was $86.5 million, compared with $69.3 million, and Adjusted EBITDA margin was 32.2%, compared with 31.0%. Adjusted Net Income was $73.8 million, compared with $74.5 million, and Adjusted Net Income per diluted share was $0.22, compared with $0.23. Management said business performance ARR growth rate was 11.5% in constant currency, which includes the write down of the remaining half, or 0.5%, of ARR in Russia. The Power Line Systems acquisition added a further 2.5% to the ARR growth rate.

Guidance remains anchored to full-year 2022. The CFO noted that reported GAAP total revenues of $268.3 million would have been $275.4 million if the exchange rates used in the annual financial outlook had remained in effect. The 2022 full-year outlook has not materially changed, including after netting year-to-date acquisitions and divestitures and the discontinuation of business operations in Russia. If recent exchange rates prevail for the remainder of the year, full-year total revenues as reported would be negatively impacted by about $25 million relative to the revenues based on exchange rates in effect when the outlook was set, with adjusted EBITDA margin still approximately 33%. Acquisitions are part of the story. Power Line Systems closed on January 31, 2022 for $695,968 in cash, net of cash acquired, and Seequent closed on June 17, 2021. The acquisitions impact in subscriptions revenues relates to Seequent and Power Line Systems, and management says improvements in business performance were led by structural and civil engineering applications and Enterprise Systems for project delivery.

The main risks are familiar but real. Foreign exchange headwinds from a stronger U.S. dollar weighed on reported results, and the Russia exit reduced ARR by $6,000 in the second quarter after a $5,190 reduction in the first quarter. Realignment expenses tied to the Russia wind down were $3.194 million. Management also flagged macro concerns, though new business in China stabilized after the 22Q1 setback and new business in Central Europe and Southern Europe improved. The company lists broader risks including adverse global economic and political conditions, sanctions and embargoes, COVID-19 pandemic effects, failure to retain personnel, competition, product development, acquisition integration, and access to capital markets. On capital allocation, the board approved a stock repurchase program of up to $200 million through June 30, 2024, and the company repurchased 463,001 shares for $13.2 million in the first six months of 2022.