Bentley grows despite headwinds

“Counter globalism” business impacts and suspension of activity in Russia haven’t stopped US software company Bentley Systems from posting Q1 revenues of US$275.5 million, up 24.1% on the same time last year, and 17.6% higher EBITDA of $97.6m.

Russia accounts for about 1% of Bentley’s annual recurring revenue ($962.6m as at the end of March this year). The company has paused marketing and sales in Russia in light of the war in Ukraine, “effectively halting our new business” there.

The bigger problem is China, which reached 5% of Bentley’s business, where the company has formed new joint ventures with local firms to try to head off Chinese efforts to restrict foreign supply lines.

“When we talk about counter globalism, I’m not describing something endemic in the world,” said Bentley CEO Greg Bentley on a call with analysts. “It’s between the US and China. And it’s not only on the Chinese side, of course, it’s on the US side that we’re discouraging bilateral trade, I’m afraid.

“We’re just announcing these joint ventures that we’ve been incubating for a while. But unfortunately, they will take considerable time to come to market because they’re just being formed. The … deterioration can come faster than the remedy.”

Bentley CFO David Hollister said: “While greater China still represents less than 5% of our revenues, until recently, our growth rate in China has been a positive outlier for us.

“That star has lost a bit of shine.

“In fact, our revenue in China actually declined in the first quarter of 2022, relative to the same quarter last year. That said, we remain considerably invested and interested in infrastructure opportunities in China.”

Greg Bentley said net of the disruptions the company achieved constant currency organic ARR growth, “plus 15% from platform acquisitions”. Greater income diversity, along with diverging segment growth rates, “and especially our platform acquisitions of Seequent and PLS (for $696m), have considerably improved our own cyclical resilience”.

“In light of this resilience … we haven’t changed our general expectations since, in March, we provided our financial outlook for the full year 2022.”

Bentley Systems chief accounting officer Werner Andre said “notable” contributions to growth came from the “platform acquisition” Seequent, and PLS, which “for the first two months since acquisition, are showing very strong business momentum and growth rates, with solid contributions in new business”.

Greg Bentley said the company’s new ‘Resources’ business segment (circa 20% of ARR) underpinned by Seequent was focused on mining, renewable energy and the subsurface environment. The Seequent mining and resource footprint had “contributed diversification by being concentrated in relatively undeveloped mineral-intensive areas—Latin America, Western Canada, Africa, Australia, New Zealand—balancing infrastructure intensity in cities”.

Bentley’s share price is down about 36% year-to-date and has plummeted more than 25% this month, capitalising the company at $8.84 billion.

 

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