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BS

BENTLEY SYSTEMS INC (BSY)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 delivered solid topline and profitability: revenues $364.1M (+10.2% YoY, +9.2% constant currency), Adjusted EPS $0.32 (+$0.01 YoY), AOI less SBC margin 28.9% (+10 bps YoY), and Adjusted EBITDA $129.3M. Management characterized performance as “in-line” and consistent with the full‑year outlook .
  • Consensus comparison: revenue essentially in‑line ($363.6M* vs $364.1M actual), and a clear beat on EPS ($0.286* vs $0.32 actual); Adjusted EBITDA was broadly consistent with consensus definitions but note comparability caveats ($128.6M* vs $129.3M reported Adjusted EBITDA) . Values retrieved from S&P Global*.
  • Guidance: management raised FY 2025 free cash flow outlook to $430–$470M (from $415–$455M) due to US R&D tax deductibility benefits, while reaffirming ranges for ARR growth, revenues, and margin expansion; FX could add ~$17M to H2 GAAP revenues if July rates persist .
  • Strategic narrative: secular infrastructure investment and engineering capacity constraints support durable demand; SMB momentum (>600 new logos for the 14th straight quarter) and E365 collars (higher floors/ceilings) underscore confidence; China now ~2% of ARR and a manageable headwind .
  • Near-term catalysts: raised FCF guidance, FX tailwinds, expanding AI initiatives (OpenSite+; Cesium/iTwin integration), and asset analytics opportunity set (though “lumpy”) are likely drivers of estimate and multiple revisions .

What Went Well and What Went Wrong

What Went Well

  • ARR grew 11.5% constant currency YoY to $1,379.2M; NRR remained robust at 109%, driven by E365 accretion. “We delivered another strong quarter… driven by secular infrastructure investment.” — CEO Nicholas Cumins .
  • Margin and cash generation: AOI less SBC margin 28.9% (+10 bps YoY); Adjusted EBITDA $129.3M; YTD FCF $273.4M; FY FCF guide raised to $430–$470M on R&D tax changes .
  • Commercial execution: 300 bps ARR growth from new logos; SMB strength with >600 new logos for the 14th consecutive quarter; higher E365 floors/ceilings signaling customer confidence .

What Went Wrong

  • Sequential moderation: revenues down from Q1’s seasonally strong $370.5M; management flagged Q3 as the seasonal low quarter for ARR growth due to timing of acquisitions and asset analytics deals .
  • Services softness and licenses mix: professional services declined 7% YoY in Q2 (and 9% constant) and perpetual licenses remain ~3% of revenue and trending small; services are less predictable and largely IBM Maximo-related .
  • China remains a headwind (now ~2% of ARR) and contributed to NRR rounding down to 109% from 110% (mix and two‑year lookback effects) .

Financial Results

MetricQ4 2024Q1 2025Q2 2025
Revenue ($USD Millions)$349.8 $370.5 $364.1
Diluted EPS ($USD)$0.16 $0.28 $0.22
Adjusted EPS ($USD)$0.21 $0.35 $0.32
Operating Income Margin %17.6% 31.1% 23.2%
AOI less SBC Margin %21.5% 34.1% 28.9%
Adjusted EBITDA ($USD Millions)$97.9 $148.1 $129.3

Consensus vs Actual (Q2 2025):

MetricConsensusActual
Revenue ($USD Millions)$363.6*$364.1
Adjusted EPS ($USD)$0.286*$0.32
Adjusted EBITDA ($USD Millions)$128.6*$129.3
Values retrieved from S&P Global*. Note: Consensus EBITDA definitions may differ from company-reported Adjusted EBITDA.

KPIs and Mix:

KPIQ2 2024Q1 2025Q2 2025
ARR ($USD Millions)$1,215.9 $1,319.3 $1,379.2
Dollar-based NRR (LTM)108% 110% 109%
Recurring Revenues (% LTM Total)90%+ (services 6% Q4 mix context) 92% 92%
China Share of ARR (%)——~2%
SMB new logos (#)—>600 (quarter) >600 (quarter)

Sector Performance (qualitative):

SectorQ2 2025 Commentary
ResourcesFastest growing; Seequent strong; mining outpaced civil for first time in 6 quarters (early signs, too soon to call recovery) .
Public Works & UtilitiesSolid and in line with company overall; grid resilience benefits Power Line Systems .
IndustrialModest growth .
Commercial FacilitiesFlat .
RegionsAmericas solid (LATAM standout; US permitting momentum); EMEA solid (Middle East leading, UK strong); APAC steady (India strong; ANZ softer; China aligned with expectations) .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Free Cash Flow ($USD)FY 2025$415–$455M $430–$470M (R&D tax benefit; normalized annual benefit >$15M over time) Raised
Total Revenues ($USD)FY 2025$1,461–$1,490M GAAP; $1,481–$1,510M constant currency Maintained ranges; FX tailwind could add ~$17M to H2 if July rates persist Maintained (FX positive)
Constant-Currency ARR GrowthFY 202510.5%–12.5% Maintained (tracking to range) Maintained
Adjusted OI w/SBC MarginFY 2025~28.5% (+100 bps YoY) Maintained (on track) Maintained
Effective Tax RateFY 2025~21% No change discussed; outlook otherwise reaffirmed Maintained
CapexFY 2025~$20M No change discussed Maintained
DividendOngoing$0.07 per quarter declared in Q1 2025 Maintain dividend (capital allocation priorities reaffirmed) Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024, Q1 2025)Current Period (Q2 2025)Trend
AI/product innovationGenerative AI announced in civil site design; strong tech leadership; 2025 outlook set . Q1: strong execution; cautious optimism amid tariff noise .OpenSite+ early access progressing; MicroStation 2025 released; Cesium+iTwin integration advancing; AI-based feature detection; partner adoption (EarthBrain) .Accelerating adoption and productization.
Permitting/macroEntered 2025 aligned; steady demand across sectors . Q1: accounts cautiously optimistic; tariff noise but funding prioritization .US permitting reform momentum; UK ten‑year strategy (£725B), EC long-term €1.8T budget proposal supporting infra .Improving policy tailwinds.
SMB growth/new logosSustained execution .>600 SMB new logos for 14th straight quarter; 300 bps ARR growth from new logos .Strong and durable.
E365 collars/pricingConsistent escalations mid‑single digits historically .Higher floors/ceilings at renewals reflecting confidence; pricing evolution ahead for AI workloads .Strengthening collars; evolving pricing metrics.
Regional trendsBroad resilience . Q1: diversified footprint softens macro impacts .Americas solid (LATAM standout; US grid priority); EMEA solid (Middle East, UK); APAC mixed (India strong; ANZ softer; China ~2% ARR) .Mixed by region; overall constructive.
Asset analyticsCohesive/Maximo services down; recurring quality improved .Large, lumpy deals; focus on owner/operators to reduce volatility; road monitoring (Blyncsy) and cell towers use cases scaling .Building pipeline; expect volatility to moderate over time.

Management Commentary

  • “We delivered another strong quarter despite ongoing global uncertainties… driven by secular infrastructure investment.” — CEO Nicholas Cumins .
  • “Q2 financial performance was in-line with our expectations… constant-currency ARR growth of 11.5%, and strong profitability and free cash flow.” — CFO Werner Andre .
  • “We are raising our 2025 free cash flow outlook to $430–$470M… primarily attributable to restoring immediate US tax deductions for domestic R&D expenses.” — CFO Werner Andre .
  • “The needed focus on grid resilience is particularly benefiting Power Line Systems.” — CEO Nicholas Cumins .
  • “China… now represents only about 2% of total ARR.” — CFO Werner Andre .
  • “Attendees learned how we are bringing iTwin capabilities to Cesium, including reality modeling and AI-based feature detection.” — CEO Nicholas Cumins .

Q&A Highlights

  • Macro and SMB demand: Environment remains “very consistent” with strong SMB confidence given infrastructure backlogs; constraint is engineering capacity, not demand .
  • Portfolio reach and pricing: MicroStation as entry point enables upsell/cross‑sell; premium positioning supported by functionality and go‑to‑market breadth .
  • Data center TAM: Opportunity spans mini‑city ecosystems (roads, power, water); structural analysis plus Synchro used systematically by hyperscalers for construction modeling .
  • Free cash flow raise mechanics: ~$15M initial benefit in 2025 (prepayments considered), with multi‑year tailwind; no accelerated adoption assumed .
  • Asset analytics and NRR dynamics: Analytics deals are large and lumpy; pivot to owners/operators to reduce volatility; NRR at ~9.45% rounded down to 9% (still solid), with China mix a factor in two‑year lookback .
  • AI and pricing evolution: Agentic AI expected to drive step‑function productivity; pricing likely to evolve beyond application‑days toward blended subscription plus AI usage components .

Estimates Context

  • Q2 2025: revenue $363.6M* consensus vs $364.1M actual (in‑line); EPS $0.286* consensus vs $0.32 actual (beat); EBITDA $128.6M* consensus vs $129.3M company-reported Adjusted EBITDA (in‑line, note definitional differences) . Values retrieved from S&P Global*.
  • FY 2025 consensus (context): revenue $1.491B*, EPS $1.185*, EBITDA $527.3M*; FCF guidance raise may drive positive estimate revisions on cash flow, with FX potentially nudging revenue higher in H2 . Values retrieved from S&P Global*.

Key Takeaways for Investors

  • Quality beat: Adjusted EPS beat with revenue in‑line; margins and cash generation remain resilient, supporting the long‑term compounding framework .
  • Guidance upgrade: FY 2025 FCF raised to $430–$470M, adding cash flow support for buybacks, dividend, and potential acquisitions; FX provides incremental H2 revenue tailwind .
  • Durable demand drivers: Infrastructure investment and engineering capacity constraints underpin ARR growth and E365 consumption; SMB engine continues to add >600 logos per quarter .
  • Mix evolution: Subscriptions now ~92% of revenues, with services less predictable; asset analytics offers upside but introduces “lumpy” timing—watch Q3 seasonality .
  • China headwind manageable: ARR exposure ~2%, with pressure fading as mix normalizes; NRR solidly within 9–10% range .
  • AI/product momentum: OpenSite+ progress, MicroStation 2025, and Cesium/iTwin integration broaden moat; pricing models likely to evolve alongside agentic AI adoption .
  • Trading lens: Near‑term catalysts include the FCF raise and FX tailwinds; medium‑term thesis centers on ARR durability, AI‑led product innovation, and asset analytics proof points, balanced against services softness and seasonality .

Notes: Values retrieved from S&P Global* where indicated.