Bentley (NASDAQ:BSY) Exceeds Q1 Expectations

Petr Huřťák /
2023/05/09 7:08 am EDT

Infrastructure design software provider Bentley Systems (NASDAQ:BSY) reported Q1 FY2023 results that beat analyst expectations, with revenue up 14.1% year on year to $314.4 million. Bentley made a GAAP profit of $45.5 million, down on its profit of $56.4 million, in the same quarter last year.

Is now the time to buy Bentley? Access our full analysis of the earnings results here, it's free.

Bentley (BSY) Q1 FY2023 Highlights:

  • Revenue: $314.4 million vs analyst estimates of $298.7 million (5.28% beat)
  • EPS: $0.14 vs analyst estimates of $0.14 (1.82% beat)
  • Free cash flow of $171.9 million, up from $30.6 million in previous quarter
  • Net Revenue Retention Rate: 110%, in line with previous quarter
  • Gross Margin (GAAP): 78.6%, down from 79.8% same quarter last year

CEO Greg Bentley said, “Our robust operating results for 23Q1 continue to demonstrate the resilience of our end-markets, the predictability of our accretive business model, and the consistency of our execution. Most notably, ARR growth (year-over-year business performance, in constant currency) accelerated to 13%. Among infrastructure sectors, the trends were consistent with the previous quarter, with very strong growth in resources, strong growth in public works / utilities, solid growth in industrial, and commercial / facilities flat. Application consumption seasonally regained growth momentum, and our E365 and Virtuosity initiatives continue their upward inflection.

Founded by brothers Keith and Barry Bentley, Bentley Systems (NASDAQ:BSY) offers a software-as-a-service platform that addresses the lifecycle of infrastructure projects such as road networks, tunnel systems, and wastewater facilities.

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Sales Growth

As you can see below, Bentley's revenue growth has been mediocre over the last two years, growing from quarterly revenue of $222 million in Q1 FY2021, to $314.4 million.

Bentley Total Revenue

This quarter, Bentley's quarterly revenue was once again up 14.1% year on year. We can see that the company increased revenue by $27.5 million quarter on quarter. That's a solid improvement on the $18.6 million increase in Q4 2022, so shareholders should appreciate the re-acceleration of growth.

Ahead of the earnings results the analysts covering the company were estimating sales to grow 10.2% over the next twelve months.

In volatile times like these we look for robust businesses with strong pricing power. Unknown to most investors, this company is one of the highest-quality software companies in the world, and their software products have been the default standard in critical industries for decades. The result is an impressive business that is up an incredible 18,152% since the IPO. You can find it on our platform for free.

Product Success

One of the best things about software as a service businesses (and a reason why they trade at such high multiples) is that customers tend to spend more with the company over time.

Bentley Net Revenue Retention Rate

Bentley's net revenue retention rate, an important measure of how much customers from a year ago were spending at the end of the quarter, was at 110% in Q1. That means even if they didn't win any new customers, Bentley would have grown its revenue 10% year on year. That is a decent retention rate and it shows us that not only Bentley's customers stick around but at least some of them get increasing value from its software over time.

Key Takeaways from Bentley's Q1 Results

With a market capitalization of $13.2 billion, more than $93.6 million in cash and with free cash flow over the last twelve months being positive, the company is in a very strong position to invest in growth.

We liked to see that Bentley beat analysts’ revenue expectations pretty strongly this quarter. And we liked the strong free cash flow. On the other hand, there was a slight deterioration in gross margin. Overall, we think this was a strong quarter, that should leave shareholders feeling very positive. The company is flat on the results and currently trades at $42.07 per share.

Should you invest in Bentley right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our actionable report which you can read here, it's free.

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The author has no position in any of the stocks mentioned.