BENTLEY SYSTEMS INC Q2 FY2024 earnings

Bentley Systems reported fiscal 2024 second quarter total revenues of $330.3 million, up 11.3%, or 11.9% on a constant currency basis. For the first six months, total revenues were $668.1 million, up 9.3%, or 9.5% on a constant currency basis. Gross profit was $267.1 million for the quarter, up 16.0%, and gross margin was 80.9%, up from the prior-year quarter. For the six months, gross profit was $543.1 million, up 13.7%, and gross margin was 81.3%. The company said growth came from subscriptions, while services revenue declined.

Operating income was $80.2 million for the quarter, up 50.4%, and operating margin was 24.3%, up from the prior-year quarter. Net income was $72.0 million, up 48.0%. Diluted EPS was $0.22, up from the prior-year quarter. For the six months, operating income was $172.1 million, up 44.5%, operating margin was 25.8%, up from the prior-year period, and net income was $142.4 million, up 51.2%. Diluted EPS for the six months was $0.44, up from the prior-year period.

Cash generation was mixed. Operating cash flow was $62.6 million for the quarter, down 22.3%, but $267.6 million for the six months, up 4.2%. Capital expenditures were $3.1 million for the quarter, down 55.7%, and $6.7 million for the six months, down 40.6%. Deferred revenue and remaining performance obligations were both $251.9 million, up 1.7% from the prior-year quarter.

Key business metrics showed steady recurring demand. Annualized recurring revenue was $1,215.9 million as of June 30, 2024, compared with $1,105.9 million as of June 30, 2023, a constant currency ARR growth rate of 11%. The last twelve-month recurring revenues dollar-based net retention rate was 108%, compared with 110% for the same period last year. Management said ARR growth was 11.5% excluding China. Public Works Utilities and North America remained the main growth drivers. The company continued to add new small- and medium-sized accounts at a rapid pace, and it noted traction with AI-based solutions for asset analytics.

Non-GAAP profitability also improved. Adjusted OI w/SBC margin was 28.8%, compared with 24.7% for the same period last year. Adjusted EPS was $0.31, compared with $0.24. For the six months, adjusted OI w/SBC margin was 31.1%, compared with 26.8%, and adjusted EPS was $0.62, compared with $0.49. Management said the second quarter financial performance positions the company solidly within its annual outlook range for ARR growth, profitability, and operating cash flow. That outlook is for the full fiscal year. The company also flagged that total revenue growth is being affected by expected lower non-recurring professional services at its Cohesive digital integrator, primarily Maximo-related work.

Risk factors remain familiar. Bentley cited adverse changes in global economic or political conditions, sanctions and similar laws, and political, economic, regulatory, and public health risks in the countries where it operates. The company also pointed to competition, the need to develop and market new products, capital market access, interest rate changes, acquisition integration, and personnel retention, including succession. China remains a specific source of uncertainty because of geopolitical challenges, obstacles to cloud-deployed software, and a preference for license sales over subscriptions. Foreign currency movements also affect comparability. The CEO transition took effect July 1, 2024, with Greg Bentley moving to Executive Chair and Nicholas Cumins becoming CEO.