Mining lull slows Bentley pacesetter

Richard Roberts

'The mining market had a significant change this quarter'

One of the world’s biggest engineering and infrastructure software companies, US-based Bentley Systems, says star performer Seequent has come off its “extraordinary global pacesetting” growth rate within the business and a softer mining market is not the only factor in the slowdown.

Bentley paid more than US$1 billion for New Zealand-based Seequent two years ago and has been lauding the contribution of the mining-focused software firm since its integration.

It flagged early on the potential to expand Seequent’s subsurface 3D modelling market leadership beyond mining, in adjacent markets such as civil construction and water. In pursuing these other verticals, though, it may have given mining competitors the chance to close the gap Seequent’s flagship Leapfrog geomodelling software had established in the market.

It would not be the first time a mining software leader has come back to the chasing pack after becoming part of a much larger IT group.

“Seequent has doubled in scale [in two years],” Bentley CEO Greg Bentley said on the company’s Q2 financial results call.

“It’s taken on attention to the broader civil market, which is good for incorporating subsurface modelling to de-risk infrastructure projects in general.

“It’s good to balance and spread out what Seequent does.

“That has taken away some of the mining focus.

“But the mining market also had a significant change this quarter.”

Bentley said efforts to bring Seequent “an environmental modelling counterbalance to their historical concentration in mining” and other “maturing and integration factors” had contributed to convergence in the growth of the resources unit and the rest of the company.

“It’s because I’m on record saying their growth is twice as fast as the company as a whole that I wanted to report when that was no longer quite the case,” he said this week, noting Seequent was still “growing considerably faster than [Bentley] otherwise, following only our other platform acquisition Power Line Systems”.

Bentley Systems remains bullish on a long-term upward trend in mining industry investment, calling it a super-cycle. The CEO said: “Mining is going to go through some fluctuations on this super-cycle, we think. And we’re in one of them now.

“I don’t think there’s much doubt anywhere that the economic and environmental factors driving the current mining super-cycle are still long-lived, but the momentum won’t be consistently sustained at the maximum. Most recently, the mining majors are confronting pricing fluctuations, and are thus acting more cautiously in their procurements, and the mining juniors are considerably fettered by tighter equity markets, higher interest rates, and inflation.

“These factors mainly impact capex for new mines and major extensions, rather than the opex for throughput of existing mines, which accounts for most of the volume and growth for Seequent.

“But Seequent’s subsurface modelling is also used as a precursor to new mine development, so on the margin, these factors are impinging upon what have been Seequent’s consistently very high growth rates.”

NASDAQ-listed Bentley Systems, which has a current market value around US$14.9 billion, booked revenues for the first half of 2023 of $611.2 million, up 12.4% year-on-year, with June-quarter revenues 10.6% higher yoy at $296.7m.

It had annual recurring revenue (ARR) of $1.1 billion at the end of June, compared with $971.9m a year earlier.

Bentley’s EBIT margin was 18% for Q2, compared with 20.8% in Q2 last year.

Cash flow from operations was $80.6m versus $67m for the same period last year.

China has been a well-documented growth dampener for Bentley Systems for the past year at least. On the plus-side, India was said to be finally showing more than just promise, and generating domestic demand beyond the provision of engineering capacity for international markets.

“It’s much better than China,” Greg Bentley said.

“The domestic programs in India and of course their need for infrastructure is greater than any other country in the world. At the same time, they have this greater source of capacity with students and universities and so forth coming into the engineering professions.

“We have studied it closely. The bulk of the faster growth in India these past couple of years is domestic, to do with the programs there. It’s our impression that the programs there have been very well received by the population in India and we hope are likely — even though they’re reaching, in a year or two, their stated expiration, we like to think there will be successor programs.”


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