Summary
Bentley Systems posted third-quarter 2021 revenue of $248.5 million, an increase of 22.4% from $203.0 million in the same quarter a year earlier. Adjusted total revenues came in at $251.4 million, up 23.7%, and adjusted subscriptions revenues were $215.1 million, up 24.0%. Gross profit rose 21.1% to $194.2 million, but gross margin slipped to 78.2% from 79.0%. The growth at the top of the income statement did not carry through. The quarter swung to a GAAP operating loss of $40.4 million from operating income of $5.3 million in the prior-year quarter. Net loss was $50.1 million against net income of $5.8 million. Diluted EPS was a loss of $0.16 compared with positive $0.02.
The swing traces to a single item. In August 2021 the board approved an amendment to the company's unfunded Nonqualified Deferred Compensation Plan that let certain active executives reallocate a limited portion of their DCP holdings out of phantom Class B shares and into other phantom investment funds. Participants diversified 24% of their phantom shares, cutting 1,500,000 shares from both the basic and diluted count and shifting the reallocated investments from equity to liability classification. The result was a one-time compensation charge of $90.7 million, or $83.4 million net of tax. Strip it out and the profitability picture flips. Adjusted Net Income was $56.3 million compared with $51.4 million, and Adjusted Net Income per diluted share was $0.17, flat with the prior year. Adjusted EBITDA rose to $84.5 million from $73.7 million, even as Adjusted EBITDA margin fell to 33.6% from 36.2%.
Recurring revenue continues to carry the business. Annualized Recurring Revenue was $903.8 million as of September 30, 2021, a constant currency growth rate of 26% from September 30, 2020. Last twelve-month recurring revenues were $786.1 million, up 15.1%, and the Seequent acquisition added 13 percentage points to the ARR growth rate for that twelve-month period. The last twelve-month account retention rate held at 98%. The recurring revenues dollar-based net retention rate was 106% under Topic 606, against 110% under Topic 605 a year earlier. Deferred revenue, which the company also reports as remaining performance obligations, was $196.3 million, up 9.1%.
Cash generation improved. Operating cash flow was $58.4 million for the quarter, up from $39.8 million, and $207.4 million for the nine months, up 17.8% from $176.0 million. Capital expenditures were $6.4 million in the quarter, up 79.7%, while the nine-month figure of $11.2 million was down 17.6%. Across the first nine months, revenue was $693.4 million, up 19.1%, operating income was $47.4 million versus $95.9 million, net income was $51.8 million versus $74.6 million, and diluted EPS was $0.16 versus $0.25.
Management said the quarter tracked consistently with the expectations for full-year 2021 laid out a quarter earlier. CEO Greg Bentley pointed to the User Success organization, now about 600 colleagues, and the Virtuosity inside-sales group, now over 200 colleagues focused on SMB new business, as drivers of underlying growth. He also called the industrial resources capital expenditure downturn an enduring headwind globally, while noting signs of new business improvement in energy-dependent regions. Foreign currency is a live variable, since 43% of 2020 revenues were denominated in currencies other than the U.S. dollar and the company does not hedge that exposure beyond matching revenue and costs in the same currencies. COVID-19 still delays some professional services projects and weighs on usage in shorter-reset contracts.
Forecast
No forward guidance in this quarter's filings.
Reported figures
GAAP, from SEC filings| Metric | Q3 FY2021 | Q2 FY2021 | QoQ | Q3 FY2020 | YoY |
|---|---|---|---|---|---|
| Revenue | $248.5M | $222.9M | +11.5% | $203.0M | +22.4% |
| Gross profit | $194.2M | $169.5M | +14.6% | $160.4M | +21.1% |
| Gross margin | 78.2% | 76.0% | +2.2 pp | 79.0% | -0.8 pp |
| Research & development | $57.3M | $52.8M | +8.6% | $50.2M | +14.2% |
| Sales & marketing | $44.4M | $38.0M | +16.8% | $41.8M | +6.1% |
| General & administrative | $35.3M | $41.9M | -15.6% | $33.0M | +7.0% |
| Total operating expenses | $234.7M | $137.3M | +71.0% | $155.0M | +51.4% |
| Operating income (loss) | -$40.4M | $32.2M | -225.5% | $5.3M | -859.9% |
| Operating margin | -16.3% | 14.4% | -30.7 pp | 2.6% | -18.9 pp |
| Net income (loss) | -$50.1M | $44.9M | -211.6% | $5.8M | -957.8% |
| Net margin | -20.2% | 20.1% | -40.3 pp | 2.9% | -23.1 pp |
| Diluted EPS | -$0.16 | $0.14 | -$0.30 | $0.02 | -$0.18 |
| Net retention rate | 106.0% | 106.0% | ±0.0 pp | 110.0% | -4.0 pp |
Risks
The August 2021 amendment to the Deferred Compensation Plan let certain executives reallocate phantom Class B shares into cash-settled investments, producing a one-time $90,721 compensation charge and converting those liabilities to cash settlement that is marked to market each period. This charge drove the GAAP swing to an operating loss of $40.45 million in FY2021 Q3, down 859.9% from operating income of $5.32 million in FY2020 Q3, and a net loss of $50.13 million versus net income of $5.84 million a year earlier.
The company completed 12 acquisitions in the nine months ended September 30, 2021 versus four in the prior-year period, including Seequent for approximately $910,997 in cash, net of cash acquired, plus 3,141,342 Class B shares, with $16,285 of related acquisition expenses. Amortization of purchased intangibles rose 124.2% in the quarter and 52.1% year to date, and acquisition/integration costs added roughly $15,400 to general and administrative expense year to date.
The push to migrate ELS subscribers to the E365 usage-based offering moves revenue recognition to quarterly consumption rather than substantially upfront, introducing period-to-period variability; ARR from contracts with consumption measurement durations under one year was 37% of total ARR at September 30, 2021, with E365 daily consumption representing 28%. MD&A notes that usage declines in shorter-reset recurring contracts, notably E365, have modestly impacted revenues.
In 2020, 43% of revenues and 47% of operating expenses were denominated in foreign currencies, and the company states it does not currently hedge foreign currency exposure beyond the natural hedge of matching revenues and expenses in the same currencies. FY2021 Q3 other expense, net included $2,446 of foreign exchange losses versus $12,830 of gains in FY2020 Q3.
The company issued $690,000 of 0.125% convertible senior notes due 2026 and $575,000 of 0.375% convertible senior notes due 2027, raising interest expense, net to $8,608 for the nine months ended September 30, 2021 from $4,450 a year earlier. Convertible settlement in cash, stock, or a combination could dilute stockholders or require cash outlays, and the Credit Facility and notes carry covenants and default provisions.
As of September 30, 2021, 94% of total cash and cash equivalents was held outside the United States and is intended to remain permanently reinvested, leaving domestic liquidity dependent on operating cash flow or external borrowings. The company states it may need additional equity or debt financing if current sources are insufficient, which could dilute holders or introduce restrictive covenants.
MD&A attributes part of the decline in perpetual licenses revenue, which fell 7.5% in FY2021 Q3 and 7.3% year to date, to accounts delaying purchase decisions due to COVID-19 or shifting spend to subscriptions. Professional services revenues also continue to be affected by COVID-19 related delays in new projects, and cost savings from 2020 spending actions are described as unlikely to be fully sustainable.
SaaS KPIs
All quarters →ARR
Adjusted EBITDA
ARR growth rate (constant currency)
Adjusted EBITDA margin
Last Twelve-Month Recurring Revenues Dollar-Based Net Retention Rate
Last Twelve-Month Recurring Revenues
Summary, forecast, risks and KPIs are extracted from BENTLEY SYSTEMS INC's SEC filings for Q3 FY2021 (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.