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BS

BENTLEY SYSTEMS INC (BSY)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 2025 delivered solid execution: revenue $375.5M (+12% YoY), subscriptions $344.3M (+13.5% YoY), ARR $1,405.2M (+10.5% constant currency), and AOI less SBC margin 27.7% (+100bps YoY), positioning BSY to finish within its full-year outlook ranges .
  • Versus Wall Street: revenue beat consensus by ~$5.9M; adjusted EPS was essentially in line; management highlighted FX tailwinds that could add ~$8M to Q4 revenue at end‑October rates, a positive surprise for near-term prints (S&P Global data; see Estimates Context) .
  • Guidance and outlook: reaffirmed full‑year AOI less SBC margin target ~28.5% and free cash flow $430–$470M; Q4 ARR growth expected to be stronger than Q3, aided by renewals and potential asset analytics deals .
  • Catalysts: Infrastructure AI product momentum (Bentley Infrastructure Cloud Connect GA in December), API commercialization, asset analytics deal pipeline, and a standout Power Line Systems/Seequent positioning amid grid expansion and energy/minerals permitting reforms .

What Went Well and What Went Wrong

What Went Well

  • Strong top-line and recurring metrics: total revenue +12% YoY to $375.5M; subscriptions +13.5% YoY; ARR +10.5% constant currency; net revenue retention 109% .
  • Durable profitability and cash generation: AOI less SBC $104.0M (+16% YoY) with 27.7% margin (+100bps YoY); free cash flow $110.7M in Q3 and $384.0M YTD; senior debt fully repaid; net leverage 2.2x adjusted EBITDA including converts .
  • Commercial engines performing: E365 steady; 300bps ARR growth from new logos; ≥600 SMB logos added for the 15th consecutive quarter; PLS remained a standout performer .

Management quotes:

  • “Total revenues for the third quarter were $376 million, up 12% YoY… Subscription revenues grew 14% YoY” .
  • “Adjusted operating income less SPC expense was $104 million… margin of 27.7%… We remain confident about delivering our full‑year… ~28.5%” .
  • “For the 15th consecutive quarter, we added at least 600 new SMB logos… retention… remains high” .

What Went Wrong

  • Sequential ARR growth moderated: CC ARR +2.2% QoQ vs +3.2% in 2024 Q3, timing of programmatic acquisitions and asset analytics deals cited .
  • Professional services softness: Q3 services revenue declined 2% YoY reported; full-year PS revenues now expected about $5M below original plan (IBM Maximo work remains largest portion) .
  • Geographic/sector crosswinds: China (≈2% of ARR) remained pressured; Australia transportation spend slowed; industrial growth modest; capacity constraints persist industrywide .

Financial Results

Quarterly performance vs prior periods

MetricQ1 2025Q2 2025Q3 2025
Total Revenues ($M)$370.5 $364.1 $375.5
Subscriptions Revenues ($M)$342.3 $333.5 $344.3
Net Income Diluted EPS ($)$0.28 $0.22 $0.18
Adjusted EPS ($)$0.35 $0.32 $0.27
Operating Income Margin (%)31.1% 23.2% 22.5%
AOI less SBC Margin (%)34.1% 28.9% 27.7%
Cash from Operations ($M)$219.4 $61.1 $116.4
Free Cash Flow ($M)$216.4 $57.0 $110.7
ARR ($M)$1,319.3 $1,379.2 $1,405.2
LTM Net Retention (%)110% 109% 109%

Q3 revenue mix

MetricQ3 2025
Subscriptions Revenues ($M)$344.3
Perpetual Licenses ($M)$10.9
Services Revenues ($M)$20.3
Subscriptions as % of Total92%

Q3 vs Wall Street consensus (S&P Global)

MetricConsensus*Actual
Revenue ($M)$369.6*$375.5
Adjusted EPS ($)$0.273*$0.27

Values retrieved from S&P Global.*

KPIs and execution highlights

KPIQ3 2025
ARR Constant Currency YoY Growth (%)10.5%
Sequential ARR Constant Currency Growth (%)2.2%
LTM Account Retention (%)99%
LTM Dollar-Based Net Retention (%)109%
New SMB Logos (quarter)≥600
E365 performanceSolid

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
ARR YoY GrowthQ4 2025Q3 expected as low point Q4 higher than Q3 Raised (trajectory)
AOI less SBC Margin (%)FY 2025~28.5% (prior target)~28.5% reaffirmed Maintained
Free Cash Flow ($M)FY 2025$430–$470 (prior range)$430–$470 reaffirmed Maintained
FX impact on GAAP Revenue ($M)Q4 2025Not previously quantified~+$8M tailwind at end‑Oct rates Raised (positive FX)
Professional Services Revenue ($M)FY 2025Original plan baseline~$5M lower than plan Lowered

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 & Q1)Current Period (Q3)Trend
Infrastructure AI productizationConsistent messaging on AI opportunity and resilience drivers Launch of Bentley Infrastructure Cloud Connect; AI copilots in next‑gen apps; co‑innovation initiative; data governance registry Accelerating
API monetizationFraming opportunityNot yet monetizing API consumption; expected hybrid pricing with computing intensity over time Emerging
Asset analytics dealsBuilding pipelineLarger, lumpy 7–8 figure deals; more weighted to year‑end Lumpy but building
Government shutdown impactMacro resilientMinimal direct impact; IIJA funds continued; watch renewals expectations if prolonged Limited near‑term headwind
Permitting reforms (US/EU)Strategic tailwindMovement in EU; US FAST‑41 for mining; grid expansion tailwind for PLS & Seequent Improving
GeographyBroad strengthAPAC strongest; Americas solid; EMEA led by Middle East; China ~2% ARR with expected headwinds; ANZ softer on transport Mixed by sub‑region
SMB/E365Consistent growth≥600 SMB logos; E365 steady; 300bps ARR from new logos Durable

Management Commentary

  • “Our year‑to‑date results position us well to finish within our outlook ranges for the full year: low double‑digit ARR growth, ~100bps margin expansion, and robust free cash flow” .
  • “Adjusted operating income less SPC expense was $104M… margin of 27.7%… we remain confident about delivering our full‑year… approximately 28.5%” .
  • “We are not yet monetizing API consumption… expect floor and ceiling escalations ~10% per renewal year as mix evolves” .
  • “Bentley Infrastructure Cloud Connect will be generally available in December” .
  • “Power Line Systems remained a standout performer… global demand for grid resilience” .

Q&A Highlights

  • Q4 setup: ARR growth expected to be stronger than Q3 driven by renewals; upside from asset analytics and programmatic M&A (Q3 ARR was as expected; Q3 the year’s low point) .
  • Government shutdown: minimal direct revenue exposure (<1% US federal); IIJA funding flows continued; could modestly affect forward consumption expectations if prolonged .
  • Energy/grid and mining tailwinds: permitting acceleration (US FAST‑41, Canada); clear need to expand grid capacity supports PLS/Seequent growth .
  • AI commercialization and data stewardship: early days for discrete AI RFPs; users prioritize data access and explicit consent for training; Bentley reaffirms governance and registry transparency .
  • Capital allocation and balance sheet: undrawn $1.3B revolver; convert maturity $678M (Jan 2026); net debt leverage 2.2x adj. EBITDA; sufficient flexibility to fund dividend/repurchases/growth .

Estimates Context

  • Q3 revenue beat: $375.5M actual vs $369.6M consensus*; adjusted EPS $0.27 vs $0.273 consensus* (essentially in line). Management also flagged ~$8M FX tailwind for Q4 revenue at end‑October rates .
  • Q4 preview: consensus revenue ~$379.7M* and EPS ~$0.259*; management expects stronger ARR growth YoY in Q4 and reaffirmed FY AOI less SBC margin ~28.5% and FCF $430–$470M .

Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Revenue quality improving: subscriptions now 92% of total (up 2ppt YoY), enhancing visibility and margin accretion; AOI less SBC margin expansion on track for ~100bps in FY 2025 .
  • Near-term setup favorable: big renewal quarter plus FX tailwind and potential asset analytics closings point to a stronger Q4 ARR print; watch for lumpy deal timing .
  • Infrastructure AI is a multi‑year catalyst: Connect GA in December, API commercialization, and asset analytics scale could re‑rate growth durability and monetization per compute intensity .
  • Grid/minerals cycle supports segment outperformance: PLS and Seequent positioned for demand tied to data centers/power and critical minerals; EU/US permitting reforms provide incremental tailwinds .
  • Balanced capital framework: debt fully paid down; revolver capacity and low coupons on converts underpin flexibility to fund repurchases, dividend, and programmatic M&A without compromising growth .
  • Watch risks: PS revenue ~-$5M vs plan, China remains ~2% ARR with headwinds, and capacity constraints/labor availability can affect delivery; nonetheless, retention and SMB momentum remain robust .

Additional Context: Q3 Press Releases and Product Updates

  • Strategic partnership: EARTHBRAIN to incorporate Bentley’s AI‑powered digital twin tech into Smart Construction, expanding integrated workflows from design through earthworks; initial availability in Japan .
  • Product launch: Bentley Infrastructure Cloud Connect—foundational layer delivering a unified, geospatial, connected data environment across design, construction, and asset operations; GA in December .