Bentley Systems, Class B ((BSY)) has held its Q4 earnings call. Read on for the main highlights of the call.
Bentley Systems’ recent earnings call reflected a strong performance, marked by significant progress in subscription revenue growth, strategic acquisitions, and organizational enhancements aimed at accelerating innovation. However, the company faces challenges in China and a decline in service revenue, indicating mixed macroeconomic conditions.
Subscription Revenue Growth
Subscriptions have become a cornerstone of Bentley Systems’ revenue, now accounting for 90% of total revenues. The company reported an impressive annual growth rate of 16.3% in constant currency, which adds quality and consistency to its revenue stream.
Acquisition of Cesium
The strategic acquisition of Cesium in 2024 has broadened Bentley Systems’ platform ecosystem for geospatial digital twin developments. This move enhances the company’s capabilities and offerings, positioning it strongly in the market.
ARR and Free Cash Flow Improvement
Bentley Systems experienced a 12% year-over-year growth in ARR, with a net revenue retention rate reaching a high watermark of 110%. Additionally, free cash flow, net of stock-based compensation, has compounded at an annual growth rate of 18.5%.
Organizational Changes to Accelerate Innovation
To streamline product development and boost innovation, particularly in AI and asset analytics, Bentley Systems has appointed a new COO and undergone a structural reorganization.
Global Demand Environment
The company is witnessing strong demand across most sectors and geographies, with significant growth drivers in public works utilities and robust infrastructure spending globally.
Challenges in China
Bentley Systems faces substantial challenges in China, where ARR has declined due to soft economic conditions and a shift in preferences for local software. China now represents less than 2.5% of total ARR.
Impact of Macroeconomic Factors
Continued softness in new mine investments and uncertainties about federal spending in the U.S. could potentially impact Bentley Systems’ future growth.
Service Revenue Decline
Service revenues have declined by 21% for the quarter and 18% for the year, primarily due to reduced work within digital integrator cohesive.
Forward-Looking Guidance
Looking ahead, Bentley Systems provided a comprehensive overview of its financial accomplishments and strategic positioning. For fiscal year 2024, the company achieved a 16.3% compound annual growth rate in constant currency subscription revenues and ARR. It forecasts a consistent outlook for 2025, targeting low double-digit ARR growth and a 100 basis point margin expansion. Despite challenges in China, Bentley Systems remains optimistic about its global demand environment, driven by infrastructure investments, AI initiatives, and strategic acquisitions like Cesium.
In conclusion, Bentley Systems’ earnings call highlighted a strong performance with significant progress in subscription revenue growth and strategic acquisitions. While challenges persist in China and service revenue declines, the company remains optimistic about its future prospects, driven by global demand and innovation initiatives.