BSY Q1 2025: ARR up 12% YoY, 110% net retention underpins growth
- Asset Analytics Expansion: The management highlighted strong progress in its asset analytics business with key wins—such as securing deals with the Florida and Michigan DOTs—and emphasized the growing partnership with Google to integrate Street View imagery and Vertex AI, which expands market potential and enhances win rates.
- Favorable Infrastructure Spending Tailwinds: Executives noted robust infrastructure investment at both federal and state levels—with anticipated permitting reforms and increased funding toward roads, grid expansions, and mining—that are expected to boost demand across their key segments, especially benefiting businesses like Power Line Systems.
- Strong Recurring Revenue Foundation: The discussion underscored the strength of multi-year contractual arrangements and high net revenue retention (at 110%), pointing to predictable, recurring revenue streams and resilience amid macro uncertainties.
- Cyclical Exposure to Macroeconomic Shifts: BSY’s revenues in sectors like commercial facilities and industrial remain highly sensitive to demand and interest rate fluctuations, which could amplify macroeconomic downturns (e.g., Q&A discussion highlighting these sensitivities).
- Latency in Permitting Reform Benefits: Although permitting reforms might eventually boost infrastructure projects, the inherent delays in obtaining permits mean that the positive impact on revenue—especially from acquisitions like Power Line Systems—could take longer to materialize (as noted in the discussion on permitting reform).
- Geopolitical and Regional Uncertainties: BSY’s exposure in regions such as India, amid ongoing geopolitical tensions (e.g., between India and Pakistan), could lead to budget volatility and delayed infrastructure investments, potentially slowing ARR growth (as mentioned in the dialogue on ARR exposure).
| Metric | YoY Change | Reason |
|---|---|---|
Total Revenue | +9.7% | Total Revenue increased from $337.8M in Q1 2024 to $370.542M in Q1 2025, driven mainly by the strong 11.5% rise in subscriptions revenue that built on prior gains; this growth helped offset a decline in services revenue, reinforcing the company's focus on recurrent revenue streams. |
Subscriptions Revenue | +11.5% | Subscriptions revenue climbed from $307.1M to $342.318M, reflecting robust expansion from existing accounts and incremental new account acquisitions—a continuation of trends seen in previous periods that prioritized recurring, high-margin revenue. |
Services Revenue | –17.8% | Services revenue fell from $21.2M in Q1 2024 to $17.432M in Q1 2025, continuing the downward trend observed in earlier periods due to persistent challenges in the service offerings, which have not yet been counterbalanced by gains in other areas. |
Americas Revenue | +8.0% | The Americas segment grew from $184.193M to $198.975M, driven largely by the expansion of subscription revenues in the U.S.—consistent with previous performance improvements—even as services revenues experienced some decline. |
Net Income | +29% | Net Income surged from $70,310K to $91,338K as a result of higher total revenues, improved operating efficiencies, and effective cost management, building on earlier performance improvements that enhanced profitability in Q1 2025. |
Basic EPS | +32% | Basic EPS rose from $0.22 to $0.29, largely due to the substantial increase in net income and modest share dilution, reflecting an overall improved earnings profile relative to Q1 2024. |
Operating Cash Flow | +7% (approx.) | Operating cash flow improved from $204,969K to $219,415K driven by higher net income and favorable changes in working capital dynamics—continuing the momentum seen in the previous quarter and supporting enhanced liquidity. |
Cash and Cash Equivalents | Increased from $64,009K to $83,637K | The balance grew by $19,628K in Q1 2025, bolstered by robust operating cash generation and favorable exchange rate impacts, marking a notable liquidity improvement over the Q4 2024 figure. |
Long-term Debt | –$143,780K | Long-term debt decreased from $1,388,088K to $1,244,308K, primarily due to the repurchase of $10,000K aggregate principal amount of the 2026 Notes and refinancing actions under the credit facility, reflecting continued efforts to optimize the capital structure seen in prior periods. |
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
ARR Growth | FY 2025 | 10.5% to 12.5% on constant currency | 12% YoY; 12.5% excluding China | no change |
Seasonality of ARR Growth | FY 2025 | Sequential ARR and revenue growth seasonality expected to be back‐half loaded | Quarterly sequential ARR growth expected to be back‐half loaded | no change |
Margin Expansion | FY 2025 | no prior guidance | Adjusted operating income less SBC margin for Q1 2025: 34.1%, up 80 bps YoY | no prior guidance |
Free Cash Flow | FY 2025 | no prior guidance | Free cash flow for Q1 2025: $216 million, up 7% YoY | no prior guidance |
Revenue Impact from Foreign Exchange | FY 2025 | no prior guidance | Approximately $20 million positive impact on GAAP revenues for Q2–Q4 2025 | no prior guidance |
Impact of Convertible Debt Maturity | FY 2025 | no prior guidance | $678 million in outstanding convertible debt due January 2026 | no prior guidance |
| Metric | Period | Guidance | Actual | Performance |
|---|---|---|---|---|
Total GAAP Revenue | Q1 2025 | $1.461B – $1.490B for FY 2025 | $370.542M | Met |
Subscription YoY Growth | Q1 2025 | 10.5% – 12.5% | 11.5% ((342,318 – 307,089) ÷ 307,089) | Met |
Free Cash Flow (FCF) | Q1 2025 | $450M – $455M for FY 2025 | $216M (219,415 – 3,044) | Met |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Asset Analytics & AI Integration | Earlier calls (Q2, Q3 2024) discussed asset analytics traction and early AI initiatives. Q3 2024 highlighted integration with Google and the use of Cesium for 3D geospatial visualization, while Q4 2024 focused on asset analytics expansion with less mention of external partnerships. | In Q1 2025 the focus is on a robust expansion of asset analytics with detailed integration of Google Street View imagery and Vertex AI, alongside accelerated progress in solutions like Blyncsy and TowerIQ. | Increased emphasis on AI integration and strategic external partnerships—the company has shifted from early-stage initiatives toward a more mature, partnership-driven model that is expected to drive significant growth. |
Infrastructure Spending & Permitting Reform Dynamics | Q2–Q4 2024 consistently noted robust global infrastructure spending, with emphasis on bipartisan support, visible IIJA funding, and early-stage permitting reform discussions. | Q1 2025 highlighted continued U.S. infrastructure spending driven by the IIJA and emphasized how permitting reform will benefit critical sectors (e.g., Power Line Systems), with expanded spending in the U.S., Europe, and India. | Consistent and optimistic sentiment—while the fundamentals remain stable, there is now a more detailed focus on how permitting reforms are expected to accelerate infrastructure projects and drive growth in key sectors. |
Recurring Revenue & ARR Growth Strategy | Q2–Q4 2024 calls stressed a strong shift to recurring revenue models with ARR growth driven by subscription initiatives like E365 and SMB acquisitions; subscription revenues were in the 90% range with flattening professional services revenues. | Q1 2025 reported recurring revenues at 92% of total revenues and highlighted robust ARR growth outcomes, with the E365 program playing a pivotal role in driving predictable growth, including strong new logo contributions and geographic diversification. | Steady improvement and continued focus on subscription transformation—the strategy remains intact with minor enhancements, indicating stability and improved predictability in long-term revenue streams. |
Geopolitical & Regional Uncertainties | Q2–Q4 2024 often concentrated on explicit China headwinds due to geopolitical tensions and soft economic conditions, while also mentioning other regional dynamics including mixed performance in Europe and modest caution about India. | Q1 2025 shifted focus away from China (now less than 2.5% of ARR) and highlighted stronger performance in India along with balanced regional revenue distribution, emphasizing that diversification is mitigating risks. | Shift from China-centric concerns to broader diversification—there is less negative emphasis on China as its exposure has been reduced, with a clearer focus on leveraging growth in other regions such as India for stability. |
Macroeconomic Cyclical Exposure & Interest Rate Sensitivity | Q2 and Q3 2024 provided detailed commentary on low cyclical exposure due to the public spending mix and noted protective measures like low fixed-rate debt and interest rate swaps. | Q1 2025 reiterated resilience by emphasizing the diversified revenue mix and the low cyclical sensitivity of sectors like public works and utilities. The discussion highlighted continued risk management through strategic debt protection measures. | Stable risk management sentiment—the company continues to manage macro risks effectively, with no significant changes in its approach to mitigating interest rate sensitivity or exposure to economic cycles. |
Extended Sales Cycles & Delayed Monetization Risks | Q2 and Q4 2024 mentioned challenges in monetizing new AI/digital twin initiatives, such as delayed revenue from early-access products (e.g., OpenSite Plus) and complexities in transitioning construction-to-operations revenue streams. | Q1 2025 did not explicitly discuss these risks; there was no mention of extended sales cycles or concerns over delayed monetization for AI/digital twin initiatives. | Reduced emphasis on delayed monetization risks—the lack of explicit mention in Q1 2025 suggests either progress toward overcoming earlier concerns or a strategic decision to focus on mature revenue drivers. |
Acquisitions & Integration Challenges | Q2 2024 mentioned strong growth in Power Line Systems ahead of permitting reforms; Q3 2024 focused on the strategic acquisition of Cesium, detailing its integration and early-stage ARR contribution; Q4 2024 highlighted smooth integration of acquisitions like Cesium and Power Line Systems, with minimal reported challenges. | Q1 2025 expanded on acquisitions with additional updates on Seequent and Power Line Systems, emphasizing that integrations are delivering growth and contributing positively to strategic market positions. | Effective integration with enhanced strategic emphasis—while earlier calls flagged integration as a work-in-progress, Q1 2025 reflects confidence with acquisitions now playing a significant role in overall growth, and integration challenges seem to be well managed. |
SMB & Digital Engagement Growth and Volatility | Q2–Q4 2024 consistently underscored strong SMB growth with over 600 new logos per quarter via digital channels and highlighted a digital, self-service approach (Virtuosity) despite some volatility in professional services. | Q1 2025 maintained the narrative of robust SMB growth with over 600 new new logos for the 13th consecutive quarter and a record number of smaller accounts (over 39,500), driven by investments in digital go-to-market strategies that continue to reduce revenue volatility. | Consistent and robust growth with stronger digital engagement—the company is successfully leveraging digital channels to attract and retain SMBs, thereby improving growth consistency and managing volatility over time. |
Competitive Positioning | Q4 2024 emphasized Bentley’s unique focus on infrastructure, loyal customer base, and superior product portfolio compared to competitors that are lowering prices as a desperate measure. | Q1 2025 did not provide explicit commentary on competitive positioning, indicating a reduced emphasis on this topic as the market seems to have accepted Bentley’s established position. | Decreased emphasis on competitive positioning—while earlier periods used competitive positioning to differentiate the company, the focus in Q1 2025 has shifted to operational and strategic growth metrics, reflecting confidence in its market position. |
China Market Headwinds | Q2–Q4 2024 discussed significant challenges in China due to economic softness, geopolitical tensions, and a shift by state-owned enterprises towards local software; ARR contribution from China had fallen from 5% to around 2.5%, and negative sentiment was prominent. | Q1 2025 noted that China now represents less than 2.5% of total ARR and performed as expected, with a reduced focus on this region and a strategic pivot toward growth in other areas; the tone was more neutral with less explicit negative emphasis. | Continued challenges with reduced exposure and emphasis—the headwinds persist, but their impact is now minimized by strategic diversification, reducing reliance on the Chinese market while managing expectations with a neutral tone. |
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ARR Growth
Q: Is ARR growth linear this quarter?
A: Management reported that constant currency ARR grew 12% year-over-year with quarterly sequential growth of roughly 2.1%, noting seasonality with lower growth in Q1 and Q3 and higher in Q2 and Q4. -
Federal Spending
Q: How is your federal versus state funding mix evolving?
A: The company indicated a slightly higher dependence on federal funding—with states amplifying funding—and expects the mix to shift, favoring areas like roads over rail due to evolving policy priorities. -
Permitting Reform
Q: When will permitting reform benefit your business?
A: Management expects permit reform to yield multi-year tailwinds, particularly boosting the Power Line Systems segment, which could eventually grow by an integer multiple as renewals and grid expansion projects mature. -
Pipeline Trends
Q: What’s the outlook on multi-solution deal pipelines?
A: The executives stressed that their accounts remain confident, entering multi-year escalations, with a healthy balance between new infrastructure projects and asset operations, reinforcing recurring revenues. -
Macro Sectors
Q: Any signs of macro pressure in sensitive sectors?
A: While commercial facilities and industrial segments are traditionally cyclic, management observed modest pressure in commercial facilities alongside a more positive sentiment in industrial due to renewed domestic manufacturing initiatives. -
European Outlook
Q: How are European trends affecting your business?
A: The company noted solid growth in Europe driven by major defense and infrastructure stimulus measures, with ongoing investments under next-generation EU plans and significant infrastructure upgrade initiatives. -
Geographic Exposure
Q: What is your ARR exposure to India and Pakistan?
A: Management clarified that while Pakistan remains a minor market, India—accounting for mid-single digit percentages of ARR—is a significant growth driver due to robust local infrastructure investments. -
Asset Analytics
Q: How is asset analytics progressing with recent integrations?
A: They highlighted steady progress in adopting Cesium’s 3D geospatial technology and integrating Google Street View into their Blyncsy solution, which recently landed DOT wins, enhancing capability and market reach. -
AI Productivity
Q: How is AI boosting engineering productivity?
A: Management is leveraging AI to automate mundane drafting tasks and improve code efficiency, potentially saving engineers 10–20% of their time while using customer data only when explicitly allowed. -
DOGE Impact
Q: Does DOGE affect infrastructure budgets?
A: There has been no reported impact from DOGE on budgets; management remains confident that bipartisan infrastructure spending continues to drive sustained demand. -
Imaging Innovation
Q: How is imaging converging with analytics for new innovation?
A: The integration of Google Street View data with dashcam-sourced inputs now enables continuous digital twin updates, streamlining asset condition assessments and enhancing operational efficiency.
Research analysts covering BENTLEY SYSTEMS.