Summary
Bentley Systems reported second quarter fiscal 2023 total revenues of $296.7 million, up 10.6% from the prior-year quarter, or 10.1% on a constant currency basis. Six-month revenues reached $611.2 million, up 12.4% from the prior-year period, or 13.6% in constant currency. Gross profit rose 10.4% to $230.3 million, while gross margin slipped to 77.6% from 77.7%. Operating income fell 4.3% to $53.3 million, and operating margin declined to 18.0% from 20.8%. Net income dropped 12.6% to $48.7 million, and diluted EPS fell to $0.15 from $0.17.
The subscription base stayed the main engine. Annualized recurring revenue was $1,105.9 million as of June 30, 2023, compared with $971.9 million as of June 30, 2022, a 13% constant currency growth rate. The last twelve-month recurring revenues dollar-based net retention rate was 110%, up from 109%. Account retention rate was 98%, flat with the prior year. Recurring revenues represented 89% of total revenues for the twelve months ended June 30, 2023. Management said growth in Public Works/Utilities remained strong and Industrial improved, while Resources normalized from record levels and Commercial Facilities stayed soft. North America and Asia-Pacific led regional ARR growth, and Europe grew steadily.
Cash generation improved. Operating cash flow was $80.6 million for the quarter, up from $67.0 million a year earlier. For the first six months, operating cash flow was $256.8 million, up from $168.7 million. Capital expenditures were $6.97 million in the quarter, up from $2.41 million, and $11.25 million year to date, up from $6.59 million. Deferred revenue was $247.8 million, up 15.3% from the prior-year quarter. The company also paid dividends, repurchased shares to offset dilution from stock-based compensation, and repaid net bank borrowings during the first half.
Non-GAAP profitability was stronger. Adjusted operating income inclusive of stock-based compensation expense margin was 24.7% for the quarter, compared with 24.0% a year earlier, and 26.8% for the first half, compared with 26.2%. Adjusted EPS was $0.24 for the quarter, compared with $0.23, and $0.49 for the first half, compared with $0.47. Adjusted EBITDA was $95.5 million for the quarter, compared with $86.5 million, and $209.5 million for the first half, compared with $184.1 million. These non-GAAP measures exclude amortization of purchased intangibles, stock-based compensation, deferred compensation plan adjustments, acquisition expenses, and realignment expenses.
For full-year 2023, management narrowed its ARR growth outlook to 12% to 13% on a constant currency business performance basis. It kept its financial outlook for other metrics unchanged. The narrower ARR range reflects lower expectations for programmatic acquisition contributions and a business model shift in China away from ARR because of geopolitical concerns. China revenues decreased in both the quarter and first half, and future results there remain uncertain given geopolitical challenges, obstacles to cloud-deployed software, and a local preference for license sales rather than subscriptions. Other risks include continued softness in Commercial Facilities, Resources growth normalizing from record levels, the wind-down of Russian operations, and higher interest expense. The exit from Russia reduced ARR by $11,190 for the six months ended June 30, 2022.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q2 FY2023 | Q1 FY2023 | QoQ | Q2 FY2022 | YoY |
|---|---|---|---|---|---|
| Revenue | $296.7M | $314.4M | -5.6% | $268.3M | +10.6% |
| Gross profit | $230.3M | $247.2M | -6.8% | $208.6M | +10.4% |
| Gross margin | 77.6% | 78.6% | -1.0 pp | 77.8% | -0.1 pp |
| Research & development | $70.1M | $67.8M | +3.4% | $64.9M | +8.1% |
| Sales & marketing | $54.4M | $52.1M | +4.3% | $49.6M | +9.6% |
| General & administrative | $39.3M | $46.8M | -16.1% | $40.0M | -1.9% |
| Total operating expenses | $177.0M | $181.4M | -2.4% | $152.9M | +15.8% |
| Operating income (loss) | $53.3M | $65.8M | -19.0% | $55.7M | -4.3% |
| Operating margin | 18.0% | 20.9% | -3.0 pp | 20.8% | -2.8 pp |
| Net income (loss) | $48.7M | $45.5M | +7.0% | $55.7M | -12.6% |
| Net margin | 16.4% | 14.5% | +1.9 pp | 20.8% | -4.3 pp |
| Diluted EPS | $0.15 | $0.14 | +$0.01 | $0.17 | -$0.02 |
| Net retention rate | 110.0% | 110.0% | ±0.0 pp | 109.0% | +1.0 pp |
Risks
Interest expense, net increased 24.2% for the quarter ended June 30, 2023 and 43.0% for the six months ended June 30, 2023, primarily due to a higher weighted average interest rate on borrowings under the revolving loan facility and the Term Loan, partially offset by lower weighted average debt outstanding.
Revenue in China decreased for the three and six months ended June 30, 2023 compared with the prior-year periods, and management says 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 based on its platforms. EMEA revenue growth for the three and six months ended June 30, 2023 was partially offset by reductions in Russia due to exiting operations beginning in the second quarter of 2022.
Deferred compensation plan expense was $3.777M for the quarter ended June 30, 2023 versus income of $12.159M in the prior-year quarter, and expense of $7.923M versus income of $17.297M for the six months, driven by mark-to-market changes in plan liabilities.
Other expense, net included investment impairment charges of $7.318M for the three and six months ended June 30, 2023, contributing to other income, net of $0.965M for the quarter and $1.254M for the six months.
The effective tax rate was higher for the six months ended June 30, 2023 compared to the prior-year period, partly due to the increase in the forecasted effective tax rate impact of the GILTI inclusion from mandatory capitalization of research and development expenses for U.S. tax purposes.
The company says future capital requirements may be materially different than planned and depend on its strategy of regularly acquiring and integrating specialized infrastructure engineering software businesses; it may need additional equity or debt financing, which could dilute stockholders or introduce restrictive covenants.
SaaS KPIs
All quarters →Account Retention Rate
Last Twelve-Months Recurring Revenues
ARR
ARR growth rate (constant currency)
Adjusted OI w/SBC margin
Recurring Revenues Dollar-Based Net Retention Rate
Summary, forecast, risks and KPIs are extracted from BENTLEY SYSTEMS INC's SEC filings for Q2 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.