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Infrastructure design software provider Bentley Systems (NASDAQ:BSY) reported results ahead of analysts' expectations in Q2 CY2024, with revenue up 11.3% year on year to $330.3 million. It made a non-GAAP profit of $0.31 per share, improving from its profit of $0.24 per share in the same quarter last year.
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Bentley (BSY) Q2 CY2024 Highlights:
- Revenue: $330.3 million vs analyst estimates of $325.1 million (1.6% beat)
- Adjusted Operating Income: $117.1 million vs analyst estimates of $101.1 million (15.9% beat)
- EPS (non-GAAP): $0.31 vs analyst estimates of $0.23 (33.2% beat)
- Gross Margin (GAAP): 80.9%, up from 77.6% in the same quarter last year
- Free Cash Flow of $59.5 million, down 70.5% from the previous quarter
- Annual Recurring Revenue: $1.22 billion at quarter end, up 9.9% year on year
- Net Revenue Retention Rate: 108%, in line with the previous quarter
- Billings: $324.7 million at quarter end, up 10.5% year on year
- Market Capitalization: $14.19 billion
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.
Vertical SoftwareSoftware is eating the world, and while a large number of solutions such as project management or video conferencing software can be useful to a wide array of industries, some have very specific needs. As a result, vertical software, which addresses industry-specific workflows, is growing and fueled by the pressures to improve productivity, whether it be for a life sciences, education, or banking company.
Sales GrowthAs you can see below, Bentley's revenue growth has been sluggish over the last three years, growing from $223.9 million in Q2 2021 to $330.3 million this quarter.
This quarter, Bentley's quarterly revenue was once again up 11.3% year on year. However, the company's revenue actually decreased by $7.43 million in Q2 compared to the $27.12 million increase in Q1 CY2024. This situation is worth monitoring as Bentley's sales have historically followed a seasonal pattern but management is guiding for a further revenue drop in the next quarter.
Looking ahead, analysts covering the company were expecting sales to grow 11.5% over the next 12 months before the earnings results announcement.
Product SuccessOne of the best parts about the software-as-a-service business model (and a reason why SaaS companies trade at such high valuation multiples) 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 measuring how much money existing customers from a year ago are spending today, was 108% in Q2. This means that even if Bentley didn't win any new customers over the last 12 months, it would've grown its revenue by 8%.
Bentley has a decent net retention rate, showing us that its customers not only tend to stick around but also get increasing value from its software over time.
Key Takeaways from Bentley's Q2 Results It was encouraging to see Bentley narrowly top analysts' revenue expectations this quarter, driven by better-than-anticipated billings. We were also happy its adjusted operating income and EPS outperformed Wall Street's estimates. On the other hand, its ARR (annual recurring revenue, a leading indicator) fell short and its gross margin decreased. Zooming out, we think this was still a decent, albeit mixed, quarter, showing the company is staying on track. The stock remained flat at $44.50 immediately following the results.
