Stock story –
Infrastructure design software provider Bentley Systems (NASDAQ:) missed Wall Street’s third-quarter 2024 revenue expectations, but revenue rose 9.3% year over year to $335.2 million. Non-GAAP earnings of $0.24 per share were also 1.9% below analyst consensus estimates.
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Bentley (BSY) Third Quarter 2024 Highlights:
- Gain: $335.2 million vs. analyst estimates of $341.1 million (1.7% wrong)
- Custom EPS: $0.24 vs. analyst expectations of $0.24 (1.9% miss)
- EVENTS: $110 million vs. analyst estimates of $110.2 million (slight miss)
- Gross margin (GAAP): 80.7%, compared to 78.9% in the same quarter last year
- Operating margin: 20.5%, compared to 24% in the same quarter last year
- EBITDA margin: 32.8%, compared to 35.6% in the same quarter last year
- Free cash flow margin: 25.1%, compared to 18% in the previous quarter
- Annual recurring turnover: $1.27 billion at the end of the quarter, up 13% year over year
- Net Income Retention Rate: 109%, compared to 108% in the previous quarter
- Invoices: $318.5 million at quarter end, up 11.4% year over year
- Market capitalization: $15.84 billion
CEO Nicholas Cumins said: “During my first 100 days as CEO, we have unveiled ambitious strategic steps that will help drive our future growth: the acquisition of 3D geospatial company Cesium; a strategic partnership with Google (NASDAQ:) to integrate their geospatial content; a new asset analytics product portfolio and a new generation of engineering applications, both of which leverage AI and digital twin technologies to improve the way infrastructure is designed, built and operated. At the same time, we delivered strong quarterly business results. Our annual constant currency ARR growth accelerated to 12% in 24Q3 (12.5% excluding China). Strength was broadly spread across all geographies and sectors as we continued to operate at a high level of performance, with favorable end market conditions for the foreseeable future.”
Company Overview Bentley Systems (NASDAQ:BSY), founded by brothers Keith and Barry Bentley, offers a software-as-a-service platform that focuses on the lifecycle of infrastructure projects such as road networks, tunnel systems and wastewater facilities.
Vertical Software (ETR:)
Software is eating the world, and while a wide range of solutions, such as project management or videoconferencing software, can be useful for a wide range of industries, some have very specific needs. As a result, the software vertical, which addresses industry-specific workflows, is growing, fueled by pressure to improve productivity, whether in a life sciences, education or banking company.
Sales growth
Assessing a company’s long-term performance can provide insight into business quality. Any company can achieve short-term success, but a top company can continue to grow for years. Unfortunately, Bentley’s sales grew at a slow annual rate of 12.7% over the past three years. This shows that growth has not succeeded in any major way, a rough starting point for our analysis.
This quarter, Bentley’s revenue grew 9.3% year over year to $335.2 million, missing Wall Street estimates.
Looking ahead, sell-side analysts expect revenue to grow 11.9% over the next twelve months, similar to the three-year rate. This projection is above the industry average and shows that the market believes its newer products and services will help maintain historical revenue performance.
Annual recurring turnover
Investors interested in Bentley should track annual recurring revenue (ARR) in addition to reported revenue. While reported revenue for a SaaS company may include low-margin items such as implementation costs, the ARR is a sum of the next twelve months of contracted revenue purely from software subscriptions, or the predictable, high-margin revenue streams that make SaaS companies so valuable. to make.
Over the past year, Bentley’s ARR growth has been slightly faster than the industry, with an average increase of 11.8% year-over-year and an increase of $1.27 billion in the last quarter. This alternative revenue measure has been growing faster than revenue, which likely means the recurring parts of the business are growing faster than less predictable, choppier parts like implementation costs. That could be a good sign for future revenue growth.
Customer retention
One of the best parts of the software-as-a-service business model (and one reason they trade at high valuations) is that customers typically spend more on a company’s products and services over time.
Bentley’s net revenue retention rate, a key performance metric that measures how much money existing customers from a year ago are spending today, was 109% in the third quarter. This means that even if Bentley had not won any new customers in the last twelve months, sales would have increased by 8.5%.
Bentley has a decent net retention rate, which shows us that its customers not only tend to stick around, but also get more and more value from its software over time.
Key takeaways from Bentley’s third quarter results
It was good to see that Bentley exceeded analysts’ ARR expectations this quarter. On the other hand, revenue, billing, earnings per share and EBITDA fell short of analyst expectations. Overall, this quarter could have been better. The stock fell 2.2% to $48.80 immediately after the report.
