Bentley (NASDAQ:BSY) Misses Q1 Revenue Estimates

Infrastructure design software provider Bentley Systems (NASDAQ:BSY) fell short of analysts’ expectations in Q1 CY2024, with revenue up 7.4% year on year to $337.8 million. It made a non-GAAP profit of $0.31 per share, improving from its profit of $0.25 per share in the same quarter last year.

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Bentley (BSY) Q1 CY2024 Highlights:

• Revenue: $337.8 million vs analyst estimates of $340.1 million (small miss)
• EPS (non-GAAP): $0.31 vs analyst estimates of $0.26 (18.4% beat)
• Gross Margin (GAAP): 81.7%, up from 78.6% in the same quarter last year
• Free Cash Flow of $201.4 million, up 149% from the previous quarter
• Annual Recurring Revenue: $1.19 billion at quarter end, up 10.8% year on year
• Net Revenue Retention Rate: 108%, in line with the previous quarter
• Market Capitalization: $16.99 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 Software
Software 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 mediocre over the last three years, growing from $222 million in Q1 2021 to $337.8 million this quarter.

Bentley’s quarterly revenue was only up 7.4% year on year, which might disappoint some shareholders. However, we can see that the company’s revenue grew by $27.12 million quarter on quarter, accelerating from $4.03 million in Q4 CY2023.

Looking ahead, analysts covering the company were expecting sales to grow 11.6% 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 Q1. 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 Q1 Results
We were impressed by how significantly Bentley blew past analysts’ EPS estimates this quarter, driven partly by its gross margin improvement. On the other hand, its revenue slightly missed Wall Street’s expectations. Looking ahead, COO Nicholas Cumins will assume the CEO role on July 1st after current CEO Greg Bentley steps into the Executive Chair role. Overall, this was a decent quarter for Bentley. The stock is flat after reporting and currently trades at $53.54 per share.